The ABC of charter and how to turn a private yacht into a charter yacht

To charter, or not to charter, that is the question. All superyacht owners ...

The ABC of charter and how to turn a private yacht into a charter yacht

February 08, 2021

Written by Guest Contributor

To charter, or not to charter, that is the question. All superyacht owners value the privacy that a superyacht provides, and often regard the vessel as a beloved home on the water that they would prefer to keep for themselves. But the significant costs associated with ownership can make a commercially minded position on the charter market an attractive option.

Enjoying a yacht charter

Enjoying a yacht charter

Some owners seek charter to offset the costs of running a boat, while others are keen to ensure the yacht and crew remain in good working order year-round by keeping active and maintaining standards. Chartering can cover off both areas, but, like any commercial enterprise, it doesn’t come without its stringent requirements.

Yacht chartering is a business, and to be successful, it needs to be treated as such. This includes setting up a licensed charter company that complies with industry standards, international health and safety regulations, employment law, tax requirements, and so on. Whether a novice first-timer or an experienced owner, the quickly evolving bureaucracy and rigorous measures can seem overwhelming. This is where using a dedicated company, such as Vistra Marine & Aviation Limited, that is focused on providing private clients with tailormade solutions can feel like a lifeline.

Vistra covers all facets of charter requirements – legal, fiscal and operational – from assistance with registration, asset administration, and corporate structuring to accounting, payroll, yacht financing, customs, VAT, and tax compliance services. It takes the ‘why’ out of yacht charter but keeps the owner in the driving seat.

With this closed-loop approach, no elements of the charter are left to chance. By leveraging a global network of lawyers, tax advisors and yacht brokers, the owner is privy to expert advice from across the globe, whether the charter takes place in the Caribbean, Mediterranean or Sea of China.

Vistra advocates that yachts be held in separate limited liability entities, distinct from the yacht owner, so as to protect the owner and their family from any claims linked to the charter business. Such claims may include but are not limited to, unsatisfied suppliers, crews with a grievance, or in the event of an accident.

Like all businesses, there are varying external factors that will affect how best to set up the company and these are paramount to its future success. Entities with limited liability, such as Limited Companies or Limited Liabilities Partnership, can be set up both offshore and onshore, but the residence of the owner, the planned area of charter activity, and which flag the yacht is registered under are all crucial considerations when deciding which jurisdiction to go with.

Yachting Lifestyle @ Breed Media

Yachting Lifestyle @ Breed Media

Even with a charter company in place, private yachts are forbidden to charter. To be able to offer a yacht for charter, it needs to be registered as a commercial vessel. Again, this brings a vast array of strict requirements that the yacht has to comply with, the first being Commercial Yacht Code Regulations in accordance with the chosen registry.

Commercial vessels also need to abide by the International Maritime Conventions and Regulations, which address topics, such as safety at sea and prevention of pollution. All commercial yachts must be certified for such operation in line with the Codes and Maritime Conventions and the registration be made following a survey by a recognised Government/Flag surveyor or recognised classification society. Even the most experienced of owners and captains find Commercial Yacht registration a logistical nightmare, but it is mandatory if looking to operate for charter within the EU. Proof of compliance is highly advisable if you would like to avoid unnecessary complications when under inspection from maritime and customs officials.
Of course, it’s not simply a web of red tape conjured up to complicate commercial enterprises. The adherence to maritime laws and regulations is primarily required for the safety and security of all on board. Yachts require maintenance, crew require training, and machinery, tenders and systems need regular upkeep. Failure to comply will also invalidate the yacht’s insurance, and no one wants to wind up in litigation, or worse still, in detention by Port State Control.

Another key factor for a good charter business is the crew. A strong performing crew will ensure the success of a charter yacht. The crew need to be engaged in proper contracts and hold adequate certifications. Whilst in the EU, the crew should also be paying social security contributions in their country of residence or flag state. Additionally, having crew welfare insurance in place, for when the crew are both on and off the vessel, takes the headache out of any unexpected requirement, such as personal injury, medical expenses and even repatriation.

Aerial view of two yachts ©Mike Nahlii

Aerial view of two yachts ©Mike Nahlii

Last, but certainly not least, is the adherence to taxes and particularly VAT applicable when chartering in the EU. This area is complex and multifaceted, and a solid operation not only ensures that VAT is properly paid when and where due, but that VAT is recovered or exempted when the laws allow ensuring that the charter business maintains cash flow buoyancy. One of Vistra’s strengths in this respect is the management of the APA, an area fraught with difficulties in relation to VAT. VAT is due on the amounts spent by a charter client during a charter, and it’s important that every ownership company keeps proper records, including receipts, that they can present to the taxman if he comes knocking, even up to eight years down the line.

If you plan to charter, make sure you charter to plan. The rest is plain sailing.

Contact details for VISTRA can be found on their website 

Written by Julia Zaltzman


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