Buying a boat in the Med

[solver]

Hi everyone,

I know that this questions has been asked multiple times but I think it my case it's a bit different, so please read before you judge.

I am planning to buy a boat in the Med (ex charter probably), NON EU citizen although my wife has dual nationality and liable to EU tax, but I will buy the boat on my name. We plan to have the boat permanently in EU but hopefully not pay VAT on it. The idea is to sail the boat for 3 months during the year and the rest of the time leave it with a charter company (during high session).

My question is: If we make an agreement with a charter company to manage the boat but also give us 3 months of sailing during the period we want, would the boat be still liable to VAT as it's technically managed by the charter company? We have no problem of opening a VAT registered company in EU so the charter can pay us the money the boat makes during high session (hopefully), or my wife purchasing the boat as EU citizen through a VAT registered company. I know that we need to obey strict regulations and it's not easy to rent the boat to yourself but hopefully the charter company would manage that. If anyone has experience with Malta VAT, please advice if that would be less of a trouble.

Please let me know if anyone has been in a similar situation or where would be the best place to ask for an advice.

Thanks!

 

[Tranona]

You are making it too complicated. Such an arrangement is quite common, and in most cases the boat will need to be owned by a local company, If it is owned as a business asset then VAT is not payable. If you buy a used charter boat then the current owner will sell it to your new company which will reclaim the VAT. When you use it you will be effectively chartering it for that period. Your citizenship and residence is largely irrelevant.

Sounds like you might be talking about Greece (or maybe Croatia) where such arrangements are common. However be aware that there is oversupply of charter boats at the moment and not easy to generate enough business to support older boats.

Your best bet is to talk to charter operators who may be interested in selling a boat on such a basis. I did a similar thing over 20 years ago first with purchase/management deal, then a year just management, but could not then find an operator interested on taking on a 7 year old boat on a longer term basis. Not sure much has changed as the successful operators are still running boats less than 5 or 6 years old as it is difficult to generate good bookings at a decent price for older boats which almost by definition have higher running cost. My last year with 16 weeks usage netted me just over 3000 euros after all running costs.

You may well be better off just buying a VAT free ex charter boat and if you are non EU resident you can keep it in the EU under TA rules, nominally for 18 months renewable by leaving the EU and re-entering to start the clock again. Easy to do in Greece and I have heard that it is also possible to put the boat in bond when not being used. Remember chartering takes a lot out of a boat with scant reward and makes it difficult to sell when you want to move on.

Hope this helps.

 

[Baggywrinkle]

As Tranona said, most charter companies that offer "yacht invest" options ensure that the boat remains VAT free during the time it is in Charter.

VAT is levied based on residency, not nationality - so as long as you and your wife are not resident in the EU, you can keep a boat in the EU under Temporary Admission with no VAT paid indefinitely - you just need to ensure it leaves the EU once every 18 months to reset the TA clock. I did this for a number of years with my own boat. It is a simple procedure which you can complete in a day.

If you choose not to charter, you can still buy the boat VAT free, you just need to export it (leave EU waters) on the day you take delivery of the boat. This takes a few hours at a port of entry where you complete the export procedure and then leave EU waters. I had pre-prepared UK boat papers for my boat and changed it's identity (Name, Flag, etc.) once I had left EU waters, then I turned round and re-entered under the new identity and went through the Temporary Admission procedure.

Temporary Admission is well understood by the med countries and ports where there are large charter fleets as ex-charter boats are often sold to Australians, Americans etc. who want to cruise the med before perhaps doing the Atlantic circuit or even travelling further afield. Just be open and transparent about what you are doing and they will smile and welcome you in - especially as you will be bringing business to their marinas, restaurants, etc. etc..

My experience was in Croatia.

 

[solver]

Thank you very much guys! That was really really helpful!

I don't really want to make a business out of it and charter it for profit. As long as the marina fees are paid lets say 2k per year it should be more than enough. If we decide to setup a charter company, would we be able to charter the boat ourselves, do you know the process around that? I've read some things around regulations, certificates and checks that you need to do annually in order to have the vessel classified as a charter. There was this thing as well where you have to advertise the boat at a competitive rate and charter it to someone couple of times per year so it can be classified as charter. Not sure if that is still a thing?

Thank you again, this has confirmed my doubts and I guess it will be just easier to export/import the boat under temporary admission and suck up the marina costs when we are not using the boat, as technically we can't use it for more than 3 months per year.

 

[Baggywrinkle]

As a charter business it is only worth doing if you are guaranteed to cover your costs. These are far more than just marina fees.

The boat will need to meet all the legal and safety requirements required of the country where you charter - and they vary from country to country, it will also need people to handle the handover, cleaning, bedding, and running repairs that are inevitable when chartering. It makes keeping any personal items or equipment on the boat difficult as you would have to remove and store them when the boat is chartered out - or you accept that you will use your boat with a simple charter inventory - anything you leave on the boat will get abused (probably unintentionally) due to the nature of chartering.

Due to all this, it really makes sense to find a reliable local agent who will handle (and charge for) all these services - usually an existing charter company that is willing to add your boat to their fleet, or sell you one that is already on their fleet. They will be doing this as a business and will expect to make a reasonable profit from your boat too - so it might not be as flexible as you would like.

In my opinion there are two viable options, buy into a yacht invest program and let a charter company run the boat for you, or just buy the boat and use it yourself. I opted for buy and use myself - it allowed me to have a great dinghy with a big outboard, improved equipment over a basic charter inventory and I kept personal items on board - which made the boat feel like a second home rather than soulless holiday accommodation.

Everyone has different budgets and expectations so you really need to decide for yourself what suits you best.

If you are intending to invest and use a charter company, then book a charter with them at the location you want to keep your boat and check out their staff and the condition of the fleet - importantly, before they know your intentions - even the same charter company will have variations in competence at their charter locations and if given the option will steer you towards their best location for a "try before you buy" scenario.

 

[Tranona]

You are right - if you want to charter then you have to go the whole hog and follow the rules which are expensive. The fixed costs of being a charter boat are high and you will simply not cover the costs out of your net income (after operators 20% cut) to get any contribution towards your marina fees. The 3000 euros surplus I mentioned was after paying the low price "charter" marina fees. 16 weeks is good utilisation. The previous 6 years averaged 18 as a "company owned" boat and the charter rate was lower than comparable newer boats. The break even on basic costs is around 12 weeks which will be difficult to achieve if you want 3 months usage (we usually did 3 weeks!).

Long winded way of saying you will lose money and shorten the life of your boat if you attempt to recoup some of your own costs by chartering. You don't say what your budget or time horizon is, but if I were doing this again I would be talking to operators who now offer much more flexible contracts on new boats to allow more private usage than the more traditional 6 season purchase/charter contracts. I did well out of mine, essentially covering the cost of buying the boat, 6 years of holiday and eventually selling the boat after 15 years (and sailing back to UK) for roughly what I paid for it. Not sure you could do that now, but if you have the capital up front you can get deals that allow you good use of a boat you could not afford outright. BUT you have to have a clear long term plan to the end as bailing out early will almost certainly result in a loss.

 

[solver]

Thank you for the wise words! They really help towards our next decision.

I think Tranona mentoned something about putting the boat in bond, does that mean put it under charter management when not used? Can you do that while under TA?

 

[Tranona]

No, in bond is with customs who seal it and take the documents. I don't know whether that can be offset against your TA 18 months but is used in Greece so that you don't have to pay cruising tax when you are not using the boat. Best to take professional advice where you intend keeping the boat because although the "rules" are set, local interpretation is not unknown. Greece and Croatia are relatively easy places to do the 18 month out of EU bit as they are geographically close to non EU countries, Montenegro, Albania and Turkey