Financial Risk – Asset Use in Europe
As a Maritime and Aviation law firm, we are frequently called upon to advise clients who are looking to use their assets in Europe, either for personal or business use.
HNW clients are generally more mobile and of higher profile than the average person. This exposes them to increased risk. They have aircraft, yachts, and other valuable assets and understandably wish to minimize tax risk, while of course operating strictly within the law.
Recently, there has been some good news with the relaxation of Spanish matriculation tax which has been a particular concern for large yacht owners, but this relaxation will only apply, it would appear, to commercial charter vessels, and is also subject to other conditions. More generally, HNW clients who wish to bring their assets in to the the European Union face a range of decisions that will impact their tax exposure.
First, they need to determine their personal tax residency. If within the EU, then they will not be able to avail themselves of the Temporary Admission Regime that allows non-EU residents to enjoy their assets in the EU on a temporary basis, and on the understanding they will be re-exported after the relevant period (18 months for yachts, for example).
Second, they will need to decide whether the asset is purely personal or intended to be used as part of a business. In the latter case, the relevant asset should be in free circulation, that is, VAT imported, and there are a number of cost effective ways to achieve this. There are also potential ways to achieve a similar objective for EU residents.
Some solutions operate to the equal advantage of EU and non-EU residents. One example is a Maltese lease-back arrangement for yachts which can be tax efficient and is not contingent upon the vessel being chartered to third parties.
A health warning: local fiscal authorities may be keen to challenge over ambitious arrangement and no solution is necessarily 100% risk free if the end result is saving tax.
However, many arrangements have been tried and tested and are generally regarded as low risk as a matter of law. One thing is certain – advice from competent professionals should always be taken at the outset and this is an area where Bargate Murray have experience in assisting clients, where necessary project managing the process and coordinating advice with local lawyers and tax advisers in the relevant jurisdictions where required.
If this article is of interest, please get in touch. In any event, no action should be taken without first taking advice tailored to your or your client’s needs.