FINANCE
The buyer’s journey
Andrew Wilson, Head of Aviation and Marine, looks at the process for a stress free experience when purchasing a yacht
F
or decades, wealthy owners have been spotted enjoying yachts just off the coast of luxury resorts in the most desirable destinations, enjoying a lifestyle of which most people can only dream. But how do you actually buy and operate a yacht? What do you need to consider? The simple answer, seek expert advice straight away!
A persuasive broker There are a plethora of yacht brokers that will claim to be able to match your requirements with available yachts on the market, but sourcing off-market hidden gems or getting the very best deal requires a skilled and persuasive broker.
Choose just one broker and bear in mind that they receive their commission from the seller, so as a buyer, it’s important to maintain their engagement with focused decision making.
Once a suitable vessel is found and a deal agreed upon, the technical work can begin. A good broker will introduce you to valuable experts and can even bring together an entire team to get the deal over the line. It’s also important to have a very clear understanding of the post-sale and ongoing costs, not just the costs that will be incurred before and during the sale process. A typical rule of thumb is to plan for maintenance costs of around 10% of the yacht’s initial price tag on an annual basis.
A team of lawyers that brings an extra set of expertise It is crucial that maritime lawyers are engaged from the outset to handle the purchase contract. Take the time to choose wisely and the right lawyers will make the experience painless. Contracts are in a relatively standard format these days, but you will still need an expert who knows what they are doing, and the contract will need to be tailored to the specific vessel and any unique circumstances or terms. All lawyers will want to complete the purchase quickly so ask them what extra value they bring to the transaction, such as global knowledge and experience of sales taking place in international waters.
Test sail As part of the purchase process a survey out of the water and sea trial is standard practice. You will most likely want to see the yacht in action at sea before committing. Make sure you can take an expert on board with you who will uncover any technical issues which need to be rectified as well as those that may cause you problems in the future.
The right ownership and tax-compliant structure The standard contract will be assignable so buyers can sign for the purchase and form a company or ‘Special Purpose Vehicle’ which can replace the individual buyer in due course. It’s common practice for a Special Purpose Vehicle to be created to own the yacht which will give the owner the benefit of limited liability should
anything go wrong and ring fence it from any other assets. That said, planning and executing an ownership structure takes time and needs extensive knowledge and experience.
Most sales take place in international waters as it removes any confusion regarding local taxes which might be due if the yacht was sold in domestic waters. However, when the yacht sails back into domestic waters this might trigger a tax liability. Furthermore, charters are subject to tax in most EU countries. Ongoing advice and tax compliance is invaluable to avoid the enforcement powers at the disposal of local authorities.
The choice of flag registries now are quite wide and it’s not uncommon to see Cayman, Malta, Marshall Islands, UK, Isle of Man, USA, and many other flags beyond their own waters operating internationally. The flag determines who regulates and inspects the vessel where safety is top priority. The flag state may allow registrations by foreign persons, so it’s best to check before deciding on a flag.
Expert yacht management It is crucial to hire a yacht manager with a shore based dedicated team who can handle all technical aspects on a daily basis and in an emergency. The yacht manager will also have very close relationships with the crew and arrange the very best insurance coverage. In recent times crewing has become more regulated, with crew only allowed to work aboard the vessel with the correct qualifications. A good crew employer will ensure the HR aspects are carried out in accordance with the flag state and the maritime labour convention, and that payroll is faultless at month end.
Sailing the ocean green
Another long-term consideration, which is driving major change in the industry, is sustainability. Younger generations of yacht owning families are increasingly holding the family accountable for shifting to greener choices.
While the face of yachting is changing, some things remain the same. Yacht ownership – regardless of yacht type – is complex. Having the right partners on hand who can support an owner with their structuring needs is key.
The work we do at ZEDRA is highly technical, and perfection is expected from owners and the parties we work with like lawyers and bankers. Day-to-day, we look at setting up ownership structures, flag registration, VAT considerations and crew employment. For more details Tel: +44 1624 850505 or visit
www.zedra.com
ONBOARD | AUTUMN 2022 | 225
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