This article was originally published in Luxury Lifestyle Magazine and can be accessed here

CEO Quentin Bargate and Associate Dominic Bulfin 

Considerations when buying your dream yacht

Picture yourself waking up metres from the Caribbean’s most beautiful beaches in a luxury yacht of your very own. Dock up and dine in some delectable waterside restaurants, head to some boutique stores and return to your private space, where you could happily combine work and leisure within ever-changing seascapes.

If the time has come for you to take the leap and purchase the yacht you have always dreamed of then this is certainly an exciting moment, and we are here to guide you into making the right choices for yourself. Buying a yacht might start as a dream but it can have its issues unless you know what you are doing, and the experience will be all the more enjoyable if you go into it knowing the whole picture and with the right team around you.

You will probably already have a handle on some of the variables, depending on your budget – choice of builder, size, exterior design, fit-out, how the yacht will be used, where it will be located and so on. There are, however, concerns that can add to or detract from your yachting experience, so we’ve highlighted a few aspects of yacht-buying you’ll want to consider before taking the plunge.

Environmental concerns

Remember Greta Thunberg, the young environmental activist who threw global warming into sharp relief at her UN speech in September? She proved that we live in a world where concern for our environment has never been greater. Yacht owners are potential targets for unwanted attention and while no commentator in their right mind would try to argue that the construction of superyachts is a ‘green’ activity, to stop yourself becoming a target of protesters, there is a lot you can do to help the environment, deflect attention and ease your conscience too.

If you own a yacht, consider joining The International Seakeepers Society and when building a yacht, it is certainly advisable to take advantage of the latest green technologies. From a standing start five years ago, there are said to now be more than 250 all-electric or hybrid vessels either in operation or under construction.

Builders such as Oceanco appear to be making good progress with the arrival in 2018 of their LIFE (lengthened, innovative, fuel-efficient, eco-friendly) design and the announcement that the Black Pearl is capable of crossing the Atlantic without burning a drop of fuel, instead using a combination of sail power and propeller-generated electricity.

How do you want to use your new yacht?

Knowing in advance how you intend to use your new yacht is vital for fiscal planning.

Whether you intend to use your yacht purely privately, wholly commercially or somewhere in-between will impact every facet of your ownership. It is important, therefore, to plan ahead so that you can ensure the level of access to the yacht you want, and make sure you pay the correct amount of VAT on the hull, future supplies and works.

While historically there was a degree of leniency exercised by customs authorities, we are seeing an increase in the stringency with which customs authorities (particularly in France) are enforcing regulations. We have even had it suggested to us that customs officers have been given financial targets, a bit like some London parking attendants. If you are found to have been using a commercially registered yacht for purely private purposes you might, in extreme cases, find yourself ordered to pay the local authorities an amount in respect of VAT on the hull value plus a penalty of up to 100% of the VAT amount. 

Where do you want to use your new yacht?

When you are spending large sums of money on your dream yacht you want to make sure you can use it where and when you want to, and understandably so. Not only do you need to ensure that you have the correct customs clearance for the area in which you want to cruise, but there are also a number of practical considerations too. Many of these seem obvious, but they are often overlooked.

Does your preferred marina have a berth big enough for you? Whilst the battle of the 2000s to own the world’s largest yacht has subsided in recent times, what remains is a re-imagining of what a big yacht is. Where once upon a time a 30m yacht was considered big, we live in an era where yachts in excess of 60m are commonplace and new builds exceeding 80m are on the rise. But has the marina infrastructure around the world kept pace?

Is the location that you had in mind fully equipped to house your new yacht? Prime berths for the world’s largest yachts are in short supply and once an owner has one, they are unlikely to give it up lightly, or cheaply. For this reason, it is well worth considering where you would like to keep your yacht and making formal enquiries as to berth availability well in advance of buying your dream yacht. This avoids landing yourself with an expensive asset, which you can’t keep in your ideal location.

It is worth noting that if your new yacht is kept in a berth owned by the previous owner, whilst they may be willing to sell it to you, this too can unintentionally affect your overall tax exposure, so expert advice should be sought before making any decisions of this sort.

How will your yacht be managed?

The larger the yacht, the more support you will need. The market is full of excellent yacht managers, tax advisers, lawyers and other service providers, and also a few rascals who you should avoid – but how do you choose the right team for you?

There is no one-size-fits-all approach to yacht ownership. Time should be spent investigating different service providers to establish which offer the right package for you – of course word of mouth is a great tool and many first-time owners are coming into the market having enjoyed time on someone else’s boat first.

Employing the right specialists for you will pay dividends in the years to come. They will take care of periodic maintenance, scheduling, record keeping, provisioning, crew employment and risk management (among other things) in the background so you can focus on enjoying life on the water.

Local and other Unexpected Taxes

Assessing whether or how much tax will be payable in respect of the purchase of any vessel is always difficult at the outset of the deal. This is because the exact location of delivery may not be fixed until the final weeks before closing and there are a multitude of fiscal variables specific to every buyer. Buyers and sellers alike often have their own reasons for choosing a certain delivery location, but whether or to what extent they are signing up to a potentially significant fiscal liability is rarely at the forefront of many buyers’ minds early in a transaction.

Local tax advice should be sought in each instance to establish: a) whether a delivery within territorial waters of a given country will give rise to a tax liability; b) which taxes are applicable upon delivery or going forward – is VAT payable or another local tax such as Spanish matriculation tax relevant; and c) where taxes are payable, what tariff will apply and how and when are the taxes to be paid? With the value of modern superyachts on the rise, a buyer can find themselves facing a tax liability in the tens of millions which can come as quite a shock if not budgeted or planned for in advance.

In addition to differing national tax regimes, parties should be aware of regional variations where there may be national as well as provincial taxes to consider. There are also taxes which reach outside their relevant jurisdiction – one such example of this would be the Russian tax on foreign income of 13%. This might be payable if a Russian national’s beneficial ownership of an asset is deemed to constitute a benefit in kind.

Having a greater understanding of the potential tax regimes can help when negotiating the purchase of your new yacht and reduce your risk of being landed with an unexpected tax bill or on-going liability.

To summarise

There has never been a better time to enter the superyacht world. The fleet continues to grow, and the secondary market is bulging with a variety of options to suit every budget, taste and requirement out there.

And the vision that you have been dreaming of for years now really can become a reality provided you plan properly, have realistic expectations and surround yourself with the right team to work behind the scenes to take the weight of the complexity of owning a modern superyacht off your shoulders.