Yacht ownership is no casual expenditure. The combination of high initial outlays of yacht purchase, high running costs and depreciating value can be off-putting even to the world’s wealthiest elite; indeed, only a small fraction of UHNWIs who can actually afford to purchase a yacht do end up splashing out. This may in part be due to the failings of yacht marketeers, personal choice, or more likely a combination of various factors. Regardless, there will be no faulting the prudent prospective yacht Owner for looking to alternative and lesser-known models of ownership. One which enjoys all of the benefits and flexibility of ownership, but with the added extras of caution, security and confidence.
Purchasing a yacht outright is the most common path to yacht ownership. This is most often done in the name of a special vehicle company, many of which are set up in an offshore jurisdiction. This way, Owners are able to offset the cost of the yacht as well as enjoy reduced corporation tax as a result of decreased profit. But is this really the best way to own a yacht? We delve into this question, with the help of Vistra’s wealth of financial expertise.
Based in Malta, Vistra’s Managing Director Anthony Galea has dedicated a career to pursuing the best financial outcomes for his clients. He tells Superyachts.com that most of his clients presently are either EU residents or UHNWIs who wish to keep their yachts predominately stationed in the EU. To do this, Owners must follow an EU-compatible ownership model. Anthony is keen to promote the benefits of a new leasing model which is rising to the forefront of Malta’s financial landscape as an alternative to outright purchase. ‘It’s ultimately an accounting and cashflow decision,’ he explains. ‘We saw the model is already very popular in the supercar and business jet sectors, so we asked ourselves why it should not work in the yachting industry also.’
And why has Malta’s new leasing model not yet taken hold in yachting? To put it bluntly, people don’t know much about it yet. The new model was introduced just last year in response to an EU decision to question alternative methods previously adopted by various EU member states. The vacuum created in response has given rise to new ideas and opportunities, Anthony explains.
So how does the new model work? Simply explained, the lessee (person looking to use the yacht) takes out a lease with the Owner of the yacht (the lessor) to use and enjoy the yacht over a fixed period. The lessee then pays VAT on the lease fee agreed - in Malta’s case, at a rate of 18%.
‘Many potential Owners and advisers we spoke to of recent were sceptical of such a simple set-up,’ Anthony went on. ‘This is exactly the novelty and beauty of this solution.’ In allowing for multiple variances, Owners’ advisors are at liberty to model the agreements in the ways which best suit their clients and circumstances. Always adhering to the law of course!
The VAT aspect is also important to all potential new yacht Owners. The new leasing model allows the payment of VAT over time, not dissimilar to a ‘pay per use’ scenario. With the leasing model, VAT is paid on the use, and a variance of this model can be adopted where use of the yacht takes place partly in the EU and partly outside it. When the yacht is used outside of EU waters, since VAT is an EU tax, VAT should not apply - a principle adopted not only by Malta but also other large EU member states. It is worth noting however that the EU member states adopting this scenario have highlighted that any person invoking such a principle must provide strong evidence of use outside the EU. The lessee would need to pay the VAT in the first instance, and then ask for a refund against the yacht's use outside of the EU.
There are many financial, fiscal and legal benefits to this solution, but the primary factors of increased cash flow and avoidance of large lump sums are undoubtedly the most persuasive. For anyone wishing to move out of the lease the solution is easy, and subject to any special conditions that may exist in the lease agreement, it may be terminated by granting notice.
For any of our readers questioning how exactly this works, as well as a million other things - there is no need to worry. Financial and legal particulars are very rarely straightforward, but this is what Vistra’s team of dedicated experts are there for. Offering a flexible range of services from initial consultation and review to a much more hands-on approach, Vistra will support and advise along every step of the journey.
‘Our goal is to pursue the best financial ends for our clients,’ says Anthony. ‘The new model leaves prospective yacht Owners with the same ends as outright purchase, the ability to use and enjoy their new yacht with their friends and family, while freeing up the cash required for purchase for them to then do what they like with.’
Get in touch with Vistra for more information on this alternative ownership model, and to find out how they can help with any of your financial or legal concerns.