WHERE A YACHT IS REGISTERED CAN HAVE A DIRECT BEARING ON THE OWNER’S PRIVACY, TAXES AND EXPOSURE TO LIABILITY AND BOARDING. ADAM FIANDER SUGGESTS THERE ARE A NUMBER OF IMPORTANT CONSIDERATIONS FOR A RANGE OF SURPRISINGLY DIFFERENT REASONS
Choice of flag signifies the nationality of choice under which a yacht has been documented. Its presence provides marine authorities such as Coastguards, Harbour Masters, Customs Officials and Port State Control with visible evidence of the flag state regime under whose maritime governance, rules, regulations and procedural ‘framework’ the yacht, captain and crew adhere to whilst at sea.
The underpinnings of any decision, however, will more likely stem from how well a chosen flag state will support an owners legal and financial responsibility in terms of VAT and tax liabilities. Whether there are any loopholes or benefits from certain exemptions that might apply, and how financially efficient the yacht will be when carrying out its duties, either as a private registered, commercial registered or dual certified vessel.
Other factors influencing choice will be determined by examples such as physical characteristics of the yacht, in terms of size, including tonnage and length. Yachts under the 500grt displacement rule being rewarded with significantly less costly and less stringent national and international regulations than those over this important threshold.
Nationality of ownership (EU, Commonwealth citizen or otherwise), whether purchase finance is required, residency of principal guests, manning requirements, survey requirements and having ready access to approved flag-state designated surveyors worldwide, arrangement fees and annual fees (if any), speed and simplicity of the process, customer service and ongoing support are examples of other variables which need to be applied.
CHOICE OF FLAG IS ONE TO WHICH OWNERS SHOULD GIVE CAREFUL THOUGHT; A DECISION COULD SO EASILY BE MADE ON THE BASIS OF SHORT TERM CONVENIENCE BUT THE GLOBAL RECOGNITION AND REPUTATION OF EACH FLAG STATE NEEDS TO BE WEIGHED CAREFULLY
“Getting the flag state right for your vessel is potentially as important a decision as the choice of vessel itself,” explains Joshua Paine from the Guernsey Registry of British Ships, who then added: “Choice of flag is one to which owners should give careful thought; a decision could so easily be made on the basis of short term convenience but the global recognition and reputation of each flag state needs to be weighed carefully, particularly in terms of where a vessel is most likely to be operating and ensuring that the interests of the owner and their crew are addressed properly by the selected maritime administration.”
Giving out altogether more subliminal messages, your chosen flag is as much about portraying confidence and the inferred subtleties as anything else and something which is perhaps best described along lines similar to the old wives tale that you can ‘always tell a man by his shoes’.
Shane Barks from luxury asset management specialists and yacht registry experts, Baker Tilly Isle of Man, said: “Flying the British Red Ensign is more than a show of national pride. It is a hugely respected flag; a badge of quality that shows the vessel is run and operated to its potential. Our experience shows that the jurisdiction and the flag under which a vessel is run provide owners with confidence and belief that their investment is being looked after.
And while Baker Tilly Isle of Man are happy to recommend the Isle Of Man Registry in certain cases, their position as being part of a global advisory network enables access to the kind of independent advice owner’s find useful.
Head of Group Business Development at Baker Tilly, David Stevenson, said: “We would discuss the client’s particular requirements before providing the appropriate advice as to which jurisdiction would be best suited and this may include the Isle of Man if that works for the client. There are of course many other highly respected jurisdictions such as Malta, Cayman Islands and the USA where we would be happy to provide assistance to the client going forward.”
Certainly national pride plays an important part, but my research suggested that even this is not nearly as prevalent as it once was. And with government registries, or their officially approved
agencies, now marketing themselves openly at international events and public shows such as the Monaco Yacht Show, for example, less and less matters of nationality and eligibility restrictions in general appear to apply.
FLYING THE BRITISH RED ENSIGN IS MORE THAN A SHOW OF NATIONAL PRIDE. IT IS A HUGELY RESPECTED FLAG; A BADGE OF QUALITY THAT SHOWS THE VESSEL IS RUN AND OPERATED TO ITS POTENTIAL
“The Maltese flag is a European flag of quality with very high level of customer care from the flag state as well as the professional service providers who offer the complete corporate services” says Mark Darmanin Kissaun, Director, SD Yachts, Malta, who added: “National pride used to be considered in the past, however, as more and more yachts joined our registry, national pride has become somewhat secondary as non local owners appreciate the high level of service and efficiency offered by Malta, besides the Maltese flag is a very attractive flag to fly on the stern of a yacht.”
When it comes to nationality and choice of flag, the option of setting up a corporate entity to effectively own the yacht within a chosen jurisdiction and the allocation of shares and directorships to the appropriate people means, in effect, there are few barriers that cannot be successfully navigated around one way or another.
By highlighting those all important ‘Unique Sales Points’ such as fee incentives, special concessions and other singular benefits, the challenge for registries is to differentiate themselves and to ‘add-value’ in one form or another. From a marketing perspective, it’s about how well each registry presents its case, as much as anything else.
There’s one aspect I felt that many registries don’t push hard enough and that’s their willingness and capability when it comes to assisting an owner’s design team and shipyard during a new build. Being, as superyachts are, the kind of unique and amazing one-off expressions of their owner’s visionary and heartfelt desires, once a shipyard and project team have been appointed, the adherence of prescriptive regulations and safety requirements, as determined by the relevant construction code, can leave some aspects of the design & build process open to, let’s say ‘misinterpretation’, at best.
Debbie Podger, Assistant Registrar, Jersey Ships’ Registry, Ports of Jersey, explained more when she told us: “It’s always beneficial for a yard/owner/agent to take the Flag administration onboard when building a new vessel to LY3/PYC standards. The Jersey Registry can work directly with those involved to ensure that all applicable standards are met so the owner does not incur later expenses in endeavouring to comply. Jersey has dedicated, authorised staff to oversee this work, who will visit yards on a time-schedule basis and offer technical advice and support throughout the build stages.”
The Republic of Panama registry, for example, has a very forward thinking attitude to ‘eco-friendly’ yachts, particularly in the case of new builds and yachts up to three and five years old. The registry offers fee discounts that are graded according to GRT and age of yacht.
Virna J.Ayala F. who is based at the Panama Consul in Marseille, France, told us: “If the yacht is a new construction for commercial use registered in Panama, some of the discounts included in our Circular MMC-298 (dated August 2017) may be applied. One of the discounts applied on design and construction of commercial vessels, is connected to the energy efficiency of the vessel, called discount Eco-Ship. This is a discount of 50% during the period of 3 years in favor of a vessel wanting to register with us, and once they prove programs of social corporate responsibility focused on reduction of atmospheric or sea contamination.”
Treated with the kind of reverence it deserves, correct choice of flag is quite simply one of the best decisions any yacht owner, captain or shore-based manager can make.
