Listed below are some of the most frequently asked questions about buying a luxury yacht.
Is the MOA the only important document associated with existing yachts?
There are two other critical documents worth mentioning, including the Bill of Sale and the Protocol of Delivery and Acceptance. The Bill of Sale formally records the transfer of legal title from buyer to seller, while the Protocol of Delivery & Acceptance outlines the specific time and date of the transfer for ensuring insurance cover is seamless.
- What about Value Added Tax (VAT)?
- Who is responsible for paying the yacht broker?
- How much can I expect to pay for insurance?
- What costs should I expect post-purchase?
What about Value Added Tax (VAT)?
Whether you will have to pay VAT on your superyacht purchase depends largely on where it is to be kept. A boat belonging to a European Union (EU) citizen or with an EU country flag must have Value Added Tax paid. If you have a non-EU vessel, and would like to keep the yacht in European Union waters, a Value Added Tax may still be applicable. This depends on the length of time that the yacht is kept in EU waters. VAT rates range from 15% to 25% of the superyacht’s value depending on the country. Once it is paid in one country however, this should suffice for all other tax authorities. Therefore it is possible to bring the superyacht through a country with a lower VAT rate, such as Cyprus, Madeira or Malta. Take note that removal of the superyacht from the EU for a specific period of time may mean VAT must be paid again. Always have the correct paperwork onboard to prove VAT status. Those exempt from VAT include those built and moored in the EU before a certain past date (often difficult to prove), and those registered outside the EU, owned by a non-EU resident and used only briefly in the EU. If the superyacht is to be chartered, establishing a company as purchaser in the Isle of Man can also neutralise VAT payments.
Who is responsible for paying the yacht broker?
Any costs accumulated by the use of a yacht broker are payable by the seller.
How much can I expect to pay for insurance?
This value will vary dramatically depending on a number of factors including the owner’s boating experience, the current navigational equipment onboard, where the superyacht will be sailed, the value of the vessel and weather it will be used as a live-aboard or for cruising offshore.
What costs should I expect post-purchase?
After purchasing your superyacht, there are other financial factors which need to be considered. Maintenance costs are estimated at 10% of the purchase price annually, and include things such as crew, fuel, insurance and mooring.
- Will my superyacht by covered by warranty?
- What happens if the building process is delayed?
- What happens if a dispute occurs?
- How is the governing law decided?
- Why are some yachts “not for sale to US residents while in US waters”?
Will my superyacht by covered by warranty?
Materials and workmanship are generally guaranteed for a certain warranty period after delivery, as not all systems and equipment will be used and tested immediately. Often this financial security, provided by the builder, will be offered in the form of a bank guarantee or by the final payment instalment not being paid until the end of the warranty period.
What happens if the building process is delayed?
Unfortunately, delays are often a common part of the yacht building process, so it is often beneficial to agree with the shipyard how much time is reasonable and how much money should be deducted from the instalments if delays continue.
What happens if a dispute occurs?
Like most aspects of the buying process, it is always much easier to agree how any problems will be resolved before they appear. Often it is advisable to agree that small technical issues be referred to an independent surveyor, while larger more critical issues go to arbitration. This way, disputes can be solved in privacy.
How is the governing law decided?
In most cases, the parties involved can choose which country will govern the purchasing process. Many buyers choose to select the law of a country where neither builder or seller are based, and in fact, the most common choice is English law, even when there is no connection to England with any of the parties.
Why are some yachts “not for sale to US residents while in US waters”?
You will see this term next to many yachts advertised for sale or charter. Any non-USA built vessel which has never paid USA Customs duty, or a USA built vessel that has been exported and is currently foreign flagged, can not be offered for sale or charter to US citizens while in USA waters until making a formal USA entry. USA duty, assessed at 1.5% of the appraised value, is a one time taxable event. A duty free formal entry can be made if duty had previously been paid and can be proven with a receipt or a returning USA built vessel.
Do I need a manager?
International safety regulations dictate that superyachts over a certain size must have onshore management, although most owners choose to use their services for protection from fines and criminal liability when regulations have been breached.
What steps do I need to take with the crew?
The crew will require formal contracts outlining hours of work, benefits and travelling expenses. These can either be handled by the owner or manager often depending on what the crew is accustomed to. Standards of crew training, language and medical fitness must also be inline with the requirements of the superyacht’s flag state.