Flag of Choice


The Flag State is responsible for the registration and regulation of the yacht to exacting international standards; whilst ownership is a complex world of finance and tax planning, providing bespoke solutions to owners for the intended use of the yacht. What is clear now is that the two are not inextricably linked. They should be considered as separate decisions.It is perfectly possible to avail oneself of the fiscal advantages offered by one jurisdiction, whilst benefiting from the advantages that another can bring to the table as a reputable flag state.

So where we hear talk of special purpose vehicles, ownership structures, yacht leasing schemes, VAT paid, temporary importation, Yachts engaged in trade (YETs), charter licences and so on – this is the financial world of yachting and there are many professionals out there to advise the best solution. To support this market, there are many financial centres where the most advantageous solution may reside, including the Isle of Man.

But that does not have to be the same jurisdiction which gives the vessel its nationality and whose flag it flies – the ‘Flag State’. In an increasingly competitive and globalised world, it is unlikely that any single jurisdiction will represent the best solution for each piece of the puzzle. For instance, the optimal solution may be an ownership vehicle and VAT registration in country ‘X’ with the yacht registered in country ‘Y’. Such arrangements are widely accepted and, generally speaking, represent nothing more than prudent financial planning.

This allows owners, and their operators, to choose the flag state which fits with their requirements. They will need to look for a jurisdiction which provides political and financial stability in which to register their asset. Equally they need to look at the performance of the flag state in terms of quality of its fleet and its experience and expertise with large yachts. Service is key and they should look for a 24/7 service delivered in a pragmatic and helpful manner with an appropriate emergency response should things go wrong. These represent head vs. heart choices and we all know yachts are emotional purchases where owners may have national and emotional ties to a certain flag, which will almost certainly win out over other choices.

As one of the world’s leading flag states and a British Red Ensign register, the Isle of Man has been at the forefront of maintaining the large yacht codes in line with current industry practice from the start. It is this expertise and pragmatism in the regulatory environment which governs the construction and operation of large yachts which sets the Red Ensign Registers apart from other jurisdictions offering Flag State services for yachts. But it is the delivery of large yacht services and the relationship which the Isle of Man builds with owners, operators, captains and crew of its yachts which makes the real difference. Add in the advice and support during the build of unique and individual superyachts and you have a very attractive package, available to owners or ownership structures domiciled in 65 different countries.Flags like the Isle of Man keep it very simple. We look solely at our regulatory piece in the puzzle. We have regulations which apply to private yachts, and more stringent regulations and Codes which apply to large commercial yachts. We also offer an optional survey regime to private yachts in the form of our ‘Pleasure Yacht Plus’ scheme, which offers voluntary compliance with the strictest code requirements.

So let’s be clear. The choice of state for financial structures and the yacht’s flag state are both major decisions, but they do not need to be the same jurisdiction.Our advice is to keep them separate and choose wisely to seek a solution which works for the owner and allows him or her to enjoy their yacht.

For more details Tel: +44 (0)1624 688500
or visit www.iomshipregistry.com