FINANCE
The buyer’s journey
Andrew Wilson, Head of Aviation and Marine, looks at the important considerations if you’re planning on buying a yacht
I
t’s late winter here in Europe and the local shipyards are teeming with activity. Shipwrights, engineers, electricians, crews, and project managers are gearing up to prepare their clients’ yachts for sea. The yachting season is imminent.
As a professional aviation and marine director, I advise on yacht, helicopter, and jet transactions and ownership structures. Given my line of work, I’m often asked what I call the “James Bond” questions: What horsepower? What length? How many cabins? These are great questions and fun to entertain, but for people with a serious interest in owning a yacht, there are several financial and structural matters to carefully consider.
Budget
First, there’s the budget. There aren’t hard and fast rules, but there are guidelines. For example, a family could allocate 10 to 20% of their net wealth for a yacht purchase depending on their circumstances and how many weeks of the year they wish to use it. It’s important to have a number in mind as part of the preparation process, know how the yacht and its future maintenance will be paid for, and who will guide you through the transaction and set you up for ownership. There are many ongoing responsibilities, including monitoring and paying expenses, employing crew, setting a maintenance schedule, and tax compliance to name a few.
Ownership structure
Yacht ownership can be complex. Many yachts are owned in an limited liability company (LLC). An LLC provides certain advantages: •
Liability: reduces personal risk and protects personal assets if a suit arises. Legal claims can arise from many directions. For example, parking fines, non-payment of taxes, and non- payment of VAT, to name a few.
•
Tax planning: residency, trigger events, write-offs (depending on how the yacht is being used), potential VAT savings, and other tax-advantaged benefits depending on the registration locality.
• Continuity of ownership: provides stability and can provide an owner with the ability to transfer an interest in the business. Succession planning: The yacht owning company may form part of trust assets that smooth transition from one generation to the next.
• Chartering option
Also, you can envisage to charter your yacht, to cover some of your yacht’s operating expenses. Pros:
• Potential tax advantages
• Potential income or more commonly viewed as an offset of operating expenses
• Running the vessel is good for the boat mechanically and keeps the crew busy
• A regular maintenance routine, where safety is paramount For more details
Tel: +44 1624 850500 or visit
www.zedra.com
Cons: • •
Strangers using your space
Increased insurance and regulatory costs • Wear and tear of the interior
An experienced consultant can provide additional context and direction on how to charter your yacht.
It’s critical to keep in mind that wealth – especially when used for a yacht purchase – needs to be managed. There are strategic, tax, VAT, regulatory, operational, and business process management issues that require a professional director’s knowledge and experience. Engaging a director early in the process can help avoid costly mistakes and turn the dream of owning a yacht into a reality.
Adventure and enjoyment
Reflect on your dreams and goals for yacht ownership. Is it cruising to the Monaco Formula 1 race with friends or clients? Getting up close to marine wildlife? Off-the-beaten path adventures? Or do you plan to use the yacht primarily as a mode of transportation and/or a place to live? Also, is a jet or helicopter needed to ferry you to the yacht?
Adventure is not limited to Arctic exploration trips or the like. Some people – especially those who are newly retired – want to be “hands on” by working with boatwrights and mechanics to build their vessel from the keel up. Take the opportunity to reflect on what you want and why. Being crisp on these points will help determine the type of yacht to purchase. A professional director can help you tease out which type of vessel best suits your lifestyle and introduce you to a sales broker who specializes in the type of yacht you’re interested in.
Whether you’re a Baby Boomer headed into an active retirement, a Gen-Xer who has earned professional success and is now wanting both adventure and relaxation, or a Millennial eager for eco-touring the islands of the Seychelles or the Galápagos, realizing the dream of yacht ownership can be exciting and open you up to new worlds.
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.
ONBOARD | SPRING 2023 | 179
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