Friday, July 17, 2009

Buying a foreign yacht and changing the flag.

A little on a boats registration. Each boat like each person has a nationalaity or "Flag". The owners/captain/boat need not share the same nationality as the boat. However, where one chooses to purchase, operate and store you boat can have a major impact on taxes. Thus, most of the mega yachts are registered in the Bahamas, Cayman islands or a number of other tax havens. For the average Joe it's simply not cost effective to pay high dollar attorneys to set up dummy corportaitons in offshore tax havens and then pay them yearly to maintaine the ruse.

As it turns out our new boat LightSpeed was registered in the Turks and Cacios Islands and owned by a corporation. Our first order of business was to disolve this relationship as quickly as possible as the attorneys that managed the corportation billed out at $300 an hour. OUCH! there was no way we wanted to pay ongoing yearly fees of $2-3K when we could register with the US Coast Guard for a one time fee of $100 with no ongoing costs.

So for this particular deal the purchase path of least resistance was to:
1). Do a stock transfer to obtain ownership of the corporation that owned the boat.
2). Deregister the boat in the Turks and Caicos Islands.
3). Direct the corportation to sell the boat to us as individuals.
4) . Registater the boat with the USCG (i.e. change the "Flag" to USA).
5). Disolve the corporation.
5). Make all this happen in a timely manner... Yeah, Right!!!

The problems we encountered:
1). Attorney that managed the corportaiton and purchase process made mistakes at every turn. It was like herding cats and then he had the gall to charge us for time to correct his own mistakes at $300 per hour!

Our perspective:
If you are a citizen or resident of the USA and will use the boat OUTSIDE USA state waters then the way to go is with a US Coast Guard Documentation. This is the gold standard for establishing chain of title and costs a little more than $100 to complete the paper work yourself. Ongoing costs are zero. Note: You will need to have any foreign "Bills of Sale" Apostillized (a Hight level Notary takes time and money).
If you plan to be in USA State waters (i.e Maryland) for more than 90 days watch out as the state could come after you for "Use" tax in the neighborhood of 6%. Ouch. And some states want you to pay tax the day you enter there waters (i.e. Florida) if you are not registered in any other state. No issue for us as we plan to be well away from the USA for quite a while. Registration is usually not too expensive, but use, excise or sales tax can really hurt.

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