Best country to buy and keep a sailboat in charter?

[Luca Simon]

Hi,
we are planning on buying a cruiser sailboat 52' or 60' in the Mediterranean Sea, as we live in Málaga Spain. Our plan is also to put the boat in charter, maybe for regattas? Now the question is; what is the best country/ region for putting it in charter when it comes to: 1. taxes and regulations (paperwork) 2. berth prices and running costs. We are looking for a marina with a good compromise between these two things. After my first research I came up with Algarve or Ionian (for ex. Perveza). Does anybody reading this have experience with owning a sailboat in charter? I imagine that the boat has to be registered in the same country as where the charter company is located?
Any kind of advice would be appreciated!

 

[Tranona]

Charter is a highly competitive business and there is always more boats available than customers. So the starting point is finding the location where demand is high for the boat you are interested in. In almost all countries it is impossible to operate without a local prescence - that is local operating company or at least managing agent. Each country has its own rules and despite the EU make it difficult for non nationals to operate a charter boat. So be prepared for local registration, local equipment rules and operating licence. Generally speaking, unless you have a desirable boat doing just a small amount of chartering is simply not worth it, so you have to look at it mainly as a business activity with a degree of personal use. The biggest challenges are first finding clients and second managing the actual operation of changeover and ensuring the boat is fully operational.

I went through this process 20 years ago and bought my boat through a charter management scheme where the operator had use of the boat for an agreed number of weeks a year for a fixed number of years and I could use it at other times. This limits your choice of boat but removes all the hassle and if the operator is good your boat is well looked after. There are also many operators who will manage your boat for you, find the clients and you pay them a %age of the income, but unless you commit to a large number of weeks do not expect to cover coats let alone make a profit. I had this arrangement for 2 years on a 37' boat and my annual "profit" (income minus all running costs for the year was less than 3k euros!

If you are buying a new boat then the first point of contact is the local dealer as they will know what the potential is in their market, and may even run a charter business as well. Otherwise research with charter operators and management agencies in your chosen location is the starting point - you will need to work through some sort of intermediary as explained earlier. I had my boat in Greece and you definitely have to work with a Greek company. However it is at the moment a saturated market with an excess of boats, particularly in the popular 40-50' range. This keeps prices and therefore potential profits low The market is obviously going to be flat for some time, and particularly for Greece, Croatia and Turkey because of their heavy dependence on the UK market.

Good luck with your search.

 

[sailaboutvic]

The other thing to consider is the situation with covid at the moment , possibly the season will be a lot shortly then before covid

 

[Luca Simon]

Alright thanks a lot for the insights. I'll go on with the research and speak to a few professionals.

 

[TRUNDLETRUC]

If you are seriously thinking of letting you boat be chartered I would have a look on youtube at "Expedition Evans" and Sailing Aurora". Then decide?

 

[Sailfree]

Whoever you choose sort out your reasons first.

-You want to have someone look after it and maintain it but want it lightly used.

-you want some tax advantages?

-you want to make money

- how often you want to use it yourself

Decide why and what you are doing then seek a company that best meets your aims.

Make sure the company has space/demand for your size of boat. Do the company own any of the boats themselves or just manage them. if they own a few guess which ones get chartered first!

Check what the spec should be as in my experience it was cheaper to order boat to comply with UK charter coding requirements than change it later.

Charter a boat from the company your consider for a week. Check over how well is it maintained. Look at other boats on the fleet while there.

Finally be prepared for the 1st scratch on the woodwork - it happens and in my case after charterer being told take care of new fully battened main hoisting it with one reefing line still in - ripping a complete panel of an expensive new main.

Hope this helps but my experience is limited to buying 3 new boats in UK and putting them on charter in UK.

I still own the last boat a 43 Jeanneau Deck Saloon some 16yrs later but it had lots of TLC and money spent on it bringing up to a better than a privately owned one of that age. Eg new mattresses, new leather cream upholstery, new teak and holly cabin sole boards. Trust this gives you a realistic picture.

With UK tax advantages it did not pay for itself just deferred some of the boat ownership costs.

 

[Luca Simon]

Make sure the company has space/demand for your size of boat. Do the company own any of the boats themselves or just manage them. if they own a few guess which ones get chartered first!

Check what the spec should be as in my experience it was cheaper to order boat to comply with UK charter coding requirements than change it later.

Charter a boat from the company your consider for a week. Check over how well is it maintained. Look at other boats on the fleet while there.

Hi, thank you for replying! Yes, that's a great idea, I'll speak to a few companies to find out if they'd have a space for our boat in their fleet.

 

[nortada]

Best of luck with your venture.

We have been down this road but have now retired from the charter game and live on the boat when in Portugal.

I am sure you are aware but when it comes to taxes, registration, coding, berthing dues etc. marinas and local authorities can treat a boat in charter or for commercial gain in a very different way to boats solely for pleasure by liveaboards. Matriculation tax comes to mind. If you hope to operate under the radar you will be in competition with other local commercial interests, who may have no hesitation to shop you with the authorities.

So after all of my negativity, what to do

Once you have identified an area of interest, you might do worse than talking with others in the game to get the local wrinkles.

 

[Luca Simon]

Best of luck with your venture.

We have been down this road but have now retired from the charter game and live on the boat when in Portugal.

I am sure you are aware but when it comes to taxes, registration, coding, berthing dues etc. marinas and local authorities can treat a boat in charter or for commercial gain in a very different way to boats solely for pleasure by liveaboards. Matriculation tax comes to mind. If you hope to operate under the radar you will be in competition with other local commercial interests, who may have no hesitation to shop you with the authorities.

So after all of my negativity, what to do

Once you have identified an area of interest, you might do worse than talking with other in the game to get the local wrinkles.

Yes, we are aware of the high taxes and paperwork in Portugal and Spain. That's why we are still looking for other countries as an option. Maybe a place like Isle of Man? I don't know if anyone has experience with keeping or even chartering a boat there ...

Thanks for your reply!

 

[Sailfree]

I assume your choice of boat is the size/boat that you want.

You need to reconcile that with what a charter company may suggest is charterable and ultimately what your financial aim is.

I got the VAT back on the purchase price for all the 3 boats I bought. They were being extensively chartered through a UK charter company however the VAT was progressively getting more difficult to reclaim.

Some years ago in UK HMRC had an intensive look at UK charter boats and I got reassessed as owning an asset for hire - backdated 3 yrs. Cost me £10,000.

Its not all plain sailing!

 

[Tranona]

Yes, we are aware of the high taxes and paperwork in Portugal and Spain. That's why we are still looking for other countries as an option. Maybe a place like Isle of Man? I don't know if anyone has experience with keeping or even chartering a boat there ...

Thanks for your reply!

Tax as in income tax and VAT are rather red herrings if you are looking at chartering in Europe. The former because you are highly unlikely to make any taxable profits, the second because in most states you can reclaim VAT on a new boat (or a used one bought from a VAT registered entity) if you can satisfy the tax authorities that it is a genuine business. You will then have to pay market rate for using your boat privately (at least in the UK) as otherwise it is classed as benefit in kind and you will be personally taxed on the benefit. Charter management deals such as I used include a number of weeks, usually off season as part of the deal with some able to offer them in different locations on other boats. To be honest the best you can hope as Sailfree says is to offset some of your annual running costs if you have it on charter with an agent.

No, Isle of Man not a good place to offer a charter yacht. Long way from decent sailing as well as from potential customers!

 

[Sailfree]

you can reclaim VAT on a new boat (or a used one bought from a VAT registered entity) if you can satisfy the tax authorities that it is a genuine business. You will then have to pay market rate for using your boat privately (at least in the UK) as otherwise it is classed as benefit in kind and you will be personally taxed on the benefit.

Accountant warned me after a few years of making a loss that HMRC might not consider it a genuine business if it showed no prospect of making a profit.

First thing the VAT inspector asked when I had my first VAT inspection was to show the invoices to myself for the periods when I used the boat.

 

[Luca Simon]

Tax as in income tax and VAT are rather red herrings if you are looking at chartering in Europe. The former because you are highly unlikely to make any taxable profits, the second because in most states you can reclaim VAT on a new boat (or a used one bought from a VAT registered entity) if you can satisfy the tax authorities that it is a genuine business. You will then have to pay market rate for using your boat privately (at least in the UK) as otherwise it is classed as benefit in kind and you will be personally taxed on the benefit. Charter management deals such as I used include a number of weeks, usually off season as part of the deal with some able to offer them in different locations on other boats. To be honest the best you can hope as Sailfree says is to offset some of your annual running costs if you have it on charter with an agent.

No, Isle of Man not a good place to offer a charter yacht. Long way from decent sailing as well as from potential customers!

Thanks for answering! I see that it is pretty unlikely to do any profit with chartering because of the high taxes/ VAT for this business in Europe. The more I read into it, the harder it seems to be ...

I have another question a bit off the topic ... What are regions/ marinas with good accessibility to regattas in the Med? I mean what are the usual starting points? For the Rolex cups for ex.

 

[Yngmar]

Rolex Middle sea race starts and ends in Malta, so you can keep your boat there, or over on the Sicilian south coast where it's a bit cheaper (Ragusa, Licata). Couple Rolex stickered boats here in Licata. Not much of a place for charter boats though, those are all on the north side to service the Aeolian islands.

 

[Tranona]

Thanks for answering! I see that it is pretty unlikely to do any profit with chartering because of the high taxes/ VAT for this business in Europe. The more I read into it, the harder it seems to be ...

I have another question a bit off the topic ... What are regions/ marinas with good accessibility to regattas in the Med? I mean what are the usual starting points? For the Rolex cups for ex.

The difficulty in making money out of chartering is little to do with taxes or VAT but all to do with the excess of supply over demand which means that income does not cover costs unless you can generate volume. Break even is probably in the region of 16-18 weeks a year which is difficult to achieve unless you are in the mass market end.

Regatta sailing is common all along the north Med coast, Spain, France, Italy and the Adriatic but not so much in Greece and Turkey. Not sure there is an unsatisfied demand for charter boats for this type of activity though.

 

[nortada]

The difficulty in making money out of chartering is little to do with taxes or VAT but all to do with the excess of supply over demand which means that income does not cover costs unless you can generate volume. Break even is probably in the region of 16-18 weeks a year which is difficult to achieve unless you are in the mass market end.

Regatta sailing is common all along the north Med coast, Spain, France, Italy and the Adriatic but not so much in Greece and Turkey. Not sure there is an unsatisfied demand for charter boats for this type of activity though.

So far as I know, there are no flotillas operating in or regatta sailing in Portugal.

 

[westernman]

60ft seems very big for a charter boat.
I would expect that most people wanting to charter something that big will also want a skipper with them.

I would add that you can expect a lot of wear and tear on a charter boat for which you are getting very limited financial reward in the end.

I am sure the charter company will be rigorous in maintenance, but will not stop the boats interior looking "well used" after a couple of seasons.

Also the charter market wants different boat interior layouts (to a less extent other stuff such as sail plan, sails etc) than you might. The charter market is often about cramming in the maximum number of cabins. For you own use you might just want two. One for yourselves and one for the kids or guests. A 60ft charter boat would normally be expected to have a lot more than that.

Otherwise, you need to go really up market to something much bigger. With permanent skipper, crew, hostess and engineer/maintenance guy. Then the need to cram in a lot of cabins goes away......

 

[Sailfree]

Best to enquire about insurance costs for 60' as a bareboat charter.

In my memory once over 50' its always a skipper charter in UK.

Not sure of the rules overseas.

If you see some skippers berthing a small charter boat really not sure of big ones.

On my 43' I fitted a varipitch propellor so it generates as much power astern as forwards in case the skipper misjudged approach speed. Also a bow thruster. Try to berth without it myself but its a get out of jail card in crosswinds.

For 60' I will get a sternthrister as well for charter market.

Professional skippers are not a guarantee of competence either. A few boat at the charter company I was with had accidents going aground etc!

Most charters are a way of minimising ownership costs via tax concessions VAT etc and offsetting losses against other income. Problem is always convincing authorities its a attempt at a genuine business.

Some say they get away with it on their entertainment budget come staff benifit (eg staff sailing boat) good luck with that!

Good luck.

 

[Luca Simon]

Best to enquire about insurance costs for 60' as a bareboat charter.

In my memory once over 50' its always a skipper charter in UK.

Not sure of the rules overseas.

If you see some skippers berthing a small charter boat really not sure of big ones.

On my 43' I fitted a varipitch propellor so it generates as much power astern as forwards in case the skipper misjudged approach speed. Also a bow thruster. Try to berth without it myself but its a get out of jail card in crosswinds.

For 60' I will get a sternthrister as well for charter market.

Professional skippers are not a guarantee of competence either. A few boat at the charter company I was with had accidents going aground etc!

Most charters are a way of minimising ownership costs via tax concessions VAT etc and offsetting losses against other income. Problem is always convincing authorities its a attempt at a genuine business.

Some say they get away with it on their entertainment budget come staff benifit (eg staff sailing boat) good luck with that!

Good luck.

Very helpful, thanks for sharing your experience.

 

[Luca Simon]

Hi again,

we have finally decided ourselves for a boat. Right now it has an Austrian flag. We were wondering if we should leave it registered in Austria or re register it on Malta? Because the boat is lying in Malta and we'll buy the boat on the name of our company based on Malta.

Any suggestions on what advantages/ disadvantages the different flags have?

Thanks in advance.