A global guide on asset protection for superyachts with Kate

In this article, we hear from Kate Shaw, Manager in the yachting team, who outlines why asset protection is essential for super yachts and the leading jurisdictions offering robust asset protection.

In March I headed to London to attend the Superyacht Investor Forum!

Much of our work at Affinity in yachting is through organic referrals, therefore it was an invaluable opportunity to meet with my brilliant network of intermediaries.

I also heard from industry leaders who analysed the sector landscape to spark some insightful discussions. Macro factors were a talking point, including the current global political uncertainty and its impact on the yachting sector. Overall, the global yachting sector is optimistic due to its resilience and continuous economic growth in recent years.

We are seeing growth in new jurisdictions, such as Turkey, a projected booming buyers’ market in the U.S., and fast-growing markets like the UAE, all of which drive the industry’s dynamic growth.

Asset protection for yachts

A key discussion which sparked my interest was multi-jurisdictional asset protection.

For yacht owners, it is essential to implement asset protection to protect the asset against and minimise any external risks, such as damages and legal disputes. A yacht is a highly valuable tangible asset, which increases the many legal considerations to be aware of.

Various asset protection strategies exist, including security, insurance and trusts. A trust offers a separation between the legal entity, the trust that owns the asset, and the beneficial ownership. A trust provides many advantages, a key being enhanced limited liability, which protects the owner against risk.

A trust also provides enhanced flexibility, enabling an owner to add further details on the ownership and operational aspects. In addition to protection, a trust can implement a long-term strategy to secure the asset through estate planning techniques. Estate planning determines who will inherit the asset, eliminating potential legal disputes later.

So, you choose to structure your asset in a trust. But where?

As a global fiduciary provider, our footprint offers a variety of jurisdictions for our yachting clients to structure in. Our clients benefit from the asset protection and robust legal protections in place.

Our offshore footprint offers strong asset protection due to the modern trust laws in place, providing key benefits, including privacy and flexibility.

The Cayman Islands

An example is the Cayman Islands, which has a strong legal framework based on English Common Law. The jurisdiction offers tax neutrality, confidentiality and robust protection.

There are various types of innovative structures renowned for their flexibility, including company structures and trust structures, all of which provide varying benefits.

In addition to the attractive legal and fiscal environment, the Cayman Islands is a leading maritime hub. Registered vessels are classed as British ships, sailing under the Red Ensign flag, under the Royal Navy’s protection. There are various attractive regimes in place, such as the Temporary Admission regime, which enables non-EU yacht owners to enter the EU without paying VAT for 18 months.

USA

South Dakota

Another region of our global footprint is the U.S.A., including South Florida and South Dakota. South Dakota is a reputable state for its progressive and innovative trust legislation, which provides unmatched advantages in trust administration, particularly regarding asset protection and privacy.

Its trust laws are designed around protecting assets from lawsuits and creditors and the privacy of trust creators and beneficiaries. There are many compelling financial advantages, including complete tax neutrality on assets and continued perpetuity, which implements a trust indefinitely mitigating exposure to tax between generations.

South Dakota is an ideal location to structure a luxury asset due to the compelling trust legislation, offering outstanding asset protection.

Florida

Florida boasts a favourable landscape for structuring, offering enhanced asset protection benefits. By establishing a holding company, assets can be protected from potential liabilities. The structure also provides enhanced operational efficiencies and centralised control, which streamlines decision making.

Florida’s robust legal environment is ideal for structuring assets, in addition to the 0% income tax rate offering compelling financial benefits. LLCs, including pass-through entities, avoid double taxation on both corporate and personal tax.

A recognised global location in the maritime industry, Florida is a leading hub for yachting transactions and attracts international buyers every year. Its state-of-the-art infrastructure is ideal for yacht owners seeking to enjoy its marinas and beautiful, vast coastline.

UK

Having recently established an office in the UK, we can now offer our clients onshore structuring. Onshore structuring has various benefits when combined with offshore, as multi-jurisdictional structuring mitigates risks further whilst taking advantage of the legal protections in multiple jurisdictions. Some key onshore benefits include simplified regulatory reporting and domestic financial services.

The UK is a favourable jurisdiction for yacht registration and has held an established maritime sector since 1786. It offers owners world-class maritime business services, a well-regulated, stable environment, an internationally recognised Red Ensign flag, and robust vessel protection.

The Isle of Man

The Isle of Man is a recognised jurisdiction in the private wealth sector, renowned for its compelling offshore benefits and stable landscape for luxury asset structuring. Located in the British Isles, the Isle of Man is a self-governed Crown dependency and the jurisdiction’s legislation is based upon English common law which offers a robust, legal environment. It offers a high level of confidentiality and range of structuring vehicles, including holding structures, trusts and foundations, which are ideally suited to shielding a luxury asset, such as a yacht. The jurisdiction also has an advantageous fiscal landscape, with the absence of corporation, capital gains and inheritance tax.

The Isle of Man also has an established maritime sector and offers clients high service levels with
impeccable professional standards and regulatory regime. In addition to the ownership structuring benefits, registered yachts sail under the prestigious Red Ensign Flag.

Malta

A strategic location in the EU, Malta is a favourable onshore jurisdiction offering exceptional offshore benefits for asset protection. Malta is a leading maritime hub with a reputable flag and strong legal framework, offering many flexible vessel ownership structures. Owners can effectively structure their assets through companies and leasing arrangements, providing many financial advantages and robust protection.

Malta’s competitive fiscal regime offers an attractive VAT rate, which provides owners with significant savings. Malta has also implemented a tonnage tax regime, resulting in taxes levied based on the tonnage of the yacht rather than its profits. This is relevant to commercial vessels, which can significantly reduce their taxes, especially in international waters. There are also many other exemptions on import duties and other taxes.

Malta Shipping Registry currently ranks first in the world in terms of superyachts registered, which is no surprise considering the superior financial and commercial benefits that are in place for vessels.

In summary

Choosing a jurisdiction with a stable and robust legal environment is essential when structuring a yacht to implement asset protection. Many other factors, such as the size of the yacht, how it will be operated, and the yacht owner’s nationality, are also relevant.

Our global footprint provides our yachting clients with a choice of world-leading maritime hubs to structure and protect their assets. We work closely with our clients to ascertain their circumstances and goals to provide the most efficient solution.

Contact us

If you would like to know more about asset protection for your yacht, registration or have any other yachting enquiries, feel free to me at kate@affintyco.com for a one-to-one conversation.