Posted: 27th January 2016 | Written by: Karen Hockney
The superyacht sector generates thousands of jobs and billions of euros for France and Monaco each year. A high percentage of the world’s superyachts pass through both jurisdictions every summer, or berth in one of the many pleasure ports all year round. The contribution this sector makes to the local economies is enormous and well documented.
This contribution could be under threat however, due to changes to the VAT rules, which were introduced in May 2015. Ken Griggs, director of Monaco-based Dominion Marine SARL, explained the impact these rules could have:
“Many of the yachts based in the Mediterranean will be affected by the new French Commercial Exemption Rules for commercial yachts.
The key point is that in order to have a commercial exemption you need to spend 70% or more of your time, when on charter, outside French territorial waters. It will affect thousands of commercial yachts which hug the coast between Monaco and St Tropez and rarely go out of the 12-mile limit. It is a popular destination for static charters too with the Cannes Film Festival, Monaco Grand Prix and other popular events.
The changes will mean that these yachts will no longer benefit from duty free fuel or supplies, yet the owners will still have to pay VAT on their own charters.”
These new rules are just the most recent VAT changes to hit the yachting industry and, according to Ken are symptomatic of how the EU currently views southern Europe. Ken told us:
“The EU is determined to harmonise VAT systems across its member states. There has been pressure exerted by the EU Commission on southern countries, such as Spain and Greece, to play by the rules. VAT is here to stay and there is a clear determination at the top to implement it properly and increase the tax take.”
The yachting industry is well versed in the implications and complications of operating across multiple EU jurisdictions and the VAT minefield is nothing new. Isle of Man based Dominion Marine Corporate Services has been providing ownership solutions and VAT planning to yacht owners for over 30 years.
We spoke to Simon Roberts, head of yachting for Dominion Marine, about the implications of yacht ownership in 2016 and what the options are. Simon explained:
“There have been different options over the years for yacht owners: pay the full rate in an EU member state, run the yacht as a fully commercial activity or use a yacht leasing structure. There have been a number of such leasing structures over the years. We ran one for some years on the Isle of Man. These structures tend to come and go and the most recent ones are located in Malta and Cyprus. In both of these structures, VAT payable is calculated on the percentage of the time the vessel sails in EU waters.”
The Dominion Marine team has developed an alternative solution, based in Monaco. It is ideal for yachts being purchased for private use, commercially registered yachts wishing to go back to private use only, and yachts currently under temporary admission and looking to be imported into the EU.
“The Monaco VAT Solution provides the perfect scenario for yachts to go private, so they are not affected by the new regulations coming in and also benefit from VAT deferral. It is most cost effective for yachts over 40m and the higher the value of the yacht, the more savings there are to the client.”
Superyacht finance expert Ken Griggs was appointed to run Dominion Marine’s Monaco office in October 2014 and was joined soon after by Xavier Lamadrid to focus on business development.
Since then Ken and Xavier have worked together with a number of key partners, including Monaco’s taxation authority, Direction des Services Fiscaux, to make sure the structure is robust and fully compliant with all EU legislation. The solution was relaunched at the Monaco Yacht Show in September 2015 and since then interest has rocketed.
Ken told us:
“Initially, as with all new products, the solution was largely ignored for sounding too good to be true. But now, finally, the industry is sitting up and taking notice.
A lot of yacht owners have had enough of being commercial for three or four weeks a year, they want to go back to being private. If they choose the Monaco solution, they may not get a VAT paid boat, but they will get VAT deferral and pay a much lower amount. This is not aggressive tax planning, there is no VAT at a discounted rate, we are simply deferring. EU law states that everybody is entitled to defer.”
Xavier Lamadrid and Ken Griggs
Ken told us that feedback has been good so far from the superyachts currently in the structure:
“They have been in for 18 months or more and have had no problems whatsoever. We have several more almost ready to join.
We have been pleased with the support we have had from the Monegasque authorities and understand that their current economic strategy includes increasing local revenue from yachting. That is great for us. This solution is Monaco based, the VAT stays in Monaco and the yachts come here to finalise documentation.”
Simon hopes this alternative solution will make yachts forget about relocating outside French and Monegasque waters. Simon told us:
“We understand yachting is very important for Monaco and the French Riviera and we believe our plan can help yachts remain here and continue contributing to the local economy.”
With a timespan of between four and six weeks to set up the individual SARL required for the structure, and agreements being signed in Monaco, it is the most time and cost effective way forward for many owners. It is much easier for most yachts to sail to Monaco rather than Malta or Cyprus.
“Over the last five or six years, Malta leasing has been very popular, however, we are able to offer our clients, and their advisers or lawyers, this attractive alternative.
Owners are currently looking at reducing their costs and Dominion Marine is the only service provider to be able to offer all the options. We are very open and transparent with our clients and will always recommend the very best solution for their requirements, whether that is Monaco, Malta or Cyprus. ”
Both Simon and Ken feel the industry reputation of Dominion Marine is a solid one and the name creates goodwill and trust. Simon commented:
“The company has grown organically since it was founded in 1984. We have a reputation for forward thinking and have a clear strategy for the future.
Our loyal and experienced staff rarely move away and many have been with us for more than 15 years. They provide a personalised service which brings consistency and familiarity for the clients. As an example, a longstanding client has gone from a 24m 10 years ago to a 100m superyacht now and has had the same dedicated manager throughout that time.”
Simon started his maritime career 16 years ago in shipping management before switching to yacht management in 2006. He joined the Isle of Man based company in 2010 and maintains that client loyalty is their lynchpin to success.
Ken is based in Monaco and has a background in superyacht finance, specialising in marine loans for superyacht owners, mostly with Ansbacher London, from 2000-2007.