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July 16, 2014updated 11 Jan 2016 2:15pm

What you need to know before you buy your superyacht

By Spear's

Sales of superyachts are on the rise again after a few tough years of recession. So you’ve made the decision to buy a yacht or even have one built to your own exacting specifications. Do you want an onboard helipad or submarine? Would you prefer a teak or walnut interior?

Creating the wow factor is of course important but there are a number of more mundane factors you should also bear in mind at the outset. How the ownership of your yacht is structured will be an important first consideration. Will it be used solely for you and your family’s personal use or will it be available to charter?

Whether your key concern is asset protection (on divorce or where liability needs to be limited), succession planning or simply a desire to maintain confidentiality, it is imperative to put the right holding structure in place which is both tax efficient and supports your and your family’s long-term objectives.

Your domicile and current residence position will have an important bearing on the structure which is most suitable for you, be it an offshore corporate or trust structure or even outright personal ownership.

Of course, local law advice will also need to be taken in the relevant jurisdictions to ensure the proposed holding structure does not have any adverse implications: for example, the proposed new Russian-controlled foreign company rules may make it less desirable for our Russian friends to hold their yacht through an offshore corporate structure.

VAT will also be an important driver. If you want to sail your yacht in EU waters, you will generally have to pay VAT on the yacht’s value, at the rate applicable in the EU country through which the yacht first enters the EU (Malta is an attractive jurisdiction for VAT planning).

But if your yacht is registered outside the EU, you are non-EU resident and your yacht will only be used temporarily in EU waters (for a period of usually up to eighteen months), VAT will not generally be payable. But be warned, VAT issues are complex and it will be important to ensure that you obtain specialist advice.

When talking to your advisers, have at your fingertips the length, tonnage, cost and type of yacht (sail or motor), whether it is for personal use, charter or a combination of both, and how long you intend to spend sailing in EU waters factors, all of which may affect the VAT position.

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It will also be important to consider who will undertake the ongoing management and administration of your yacht. Flagging needs to be considered (that’s vehicle registration to us landlubbers). Should you fly the Red Ensign? Or would the flag of the Marshall Islands be better, particularly if you intend to spend time cruising the Caribbean and Americas?

Tonnage measurement surveys, obtaining radio licences and commissioning satellite equipment, arranging insurance for yacht, crew members and guests, drawing up crew employment contracts and arranging for the ongoing upkeep and maintenance should all be on your to do list.

This is a long list of things to consider but there are plenty of professional service providers who can help. Whatever your objectives, with the right advice, it will be plain sailing into the Mediterranean or Caribbean sunset.

Emily O’Donnell is a lawyer at boutique private wealth law firm Maurice Turnor Gardner LLP

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