Yacht Ownership Structures: The Legal Pros and Cons

If you are planning to buy a yacht, one of the most important decisions you have to make is how to structure the ownership of your vessel.

There are two main options: personal ownership or corporate ownership. Each option has its own legal pros and cons, which we will explain in this article.

owning yacht

Personal Ownership

Personal ownership entails registering the yacht in your name and nationality. It offers full control and transparency over your asset, but it comes with significant legal drawbacks:

  • Liability: Under personal ownership, you are personally liable for any damages or claims arising from the operation or use of the yacht. This could potentially jeopardize your other assets and income.
  • Taxation: You may be subject to various taxes in your country of residence and in the jurisdictions where the yacht operates or is registered, such as income tax, capital gains tax, inheritance tax, value-added tax (VAT), or import duty.
  • Privacy: Your name and details will be publicly available in the yacht registry and other databases, exposing you to unwanted attention, scrutiny, or security risks.
  • Flexibility: Traveling to certain countries or regions with your yacht may be subject to restrictions or complications based on your nationality and bilateral agreements between states. Additionally, personal ownership may limit your options for chartering or leasing the yacht, potentially affecting its profitability and usage.

yacht owner

Corporate Ownership

Corporate ownership involves setting up a company that holds the title and operates the yacht. The company can be incorporated in jurisdictions that offer favorable conditions for yacht owners.

Some of the most popular jurisdictions for yacht companies are offshore centers, such as the British Virgin Islands (BVI), Cayman Islands, Isle of Man, Jersey, or Malta. Corporate ownership offers several legal benefits:

  • Liability: The company acts as a separate legal entity, limiting your liability to the value of the shares you hold. This protects your other assets and income from claims or liabilities arising from the yacht.Taxation: The company may benefit from lower or no taxes in its jurisdiction of incorporation and leverage double taxation treaties or other incentives to reduce or eliminate taxes in other countries where the yacht operates or is registered.
  • Privacy: The company can provide anonymity, as your name and details may not be disclosed in public records. Some jurisdictions offer enhanced privacy features, such as nominee directors or shareholders, bearer shares, or trusts.
  • Flexibility: The company can choose any flag state for yacht registration to suit its needs and preferences. The flag state determines the laws and regulations that apply to the yacht, including safety standards, crew qualifications, insurance requirements, or environmental compliance.

However, corporate ownership also has some potential legal drawbacks, such as:

  • Costs: Setting up and maintaining a company involves various costs, including incorporation fees, annual fees, accounting fees, legal fees, or management fees, which may vary depending on the jurisdiction and company complexity.
  • Compliance: The company must adhere to the laws and regulations of its jurisdiction of incorporation and the flag state of the yacht. This may include filing annual returns, maintaining financial records, conducting audits, paying taxes, and reporting beneficial owners. Compliance with international standards and conventions, such as the International Maritime Organization (IMO), SOLAS, or MARPOL, may also be necessary.

Choosing between Personal and Corporate Ownership

The best way to choose between personal and corporate ownership depends on your individual circumstances and needs. Here are some factors to consider:

  • Nationality: If you are a citizen of a country with high taxes or strict asset protection laws, corporate ownership may be a good option for you.
  • Domicile: If you are resident in a country with high taxes or strict asset protection laws, corporate ownership may be a good option for you, even if you are not a citizen of that country.
  • Tax situation: If you have a complex tax situation, corporate ownership may be a good option for you, as a yacht company can be used to reduce your overall tax burden.
  • Travel plans: If you plan to travel to certain countries or regions with your yacht, corporate ownership may be a good option for you, as it can make it easier to comply with local laws and regulations.
  • Budget: Corporate ownership can be more expensive than personal ownership, due to the costs of setting up and maintaining a company.

If you are unsure which ownership structure is right for you, it is advisable to seek professional advice from a qualified tax advisor and maritime lawyer.

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