Ship and Yacht Registration
By Lowtax Editorial
20 September, 2013
It has now become the norm for ships to be registered in International Offshore Financial Centres (IOFCs) and there has been intense competition between some of the IOFCs to offer the most advantageous operating and fiscal regime. The major shipping registries are adding new features like yacht registries and expedited registrations procedures in order to attract new business, and in this feature, we round up some of the most interesting developments in the fast-growing world of offshore shipping and yacht registries over the past few months.
Ownership, registration, administration and operation of ships are four different activities, and are often situated in two, three or even four different jurisdictions in order to achieve an optimum result. Thus, an owner in a high-tax, non-maritime country might register his ships in a low-tax jurisdiction, operate them from there, but administer them from a European port city.
It is normal to create a company in the low-tax jurisdiction for each ship, in order to provide insulation in the event of problems. In addition to ship ownership, other maritime activities sometimes conducted from IOFCs include container leasing and ship chartering.
Shipping registries are by no means restricted to 'offshore', however. Many high-tax countries offer 'tonnage tax' regimes, under which ship-owners are charged according to the tonnage of their fleets, thus preserving employment for the host country, and in some cases they run their own registries as well, although these are often 'closed' rather than 'open' registries.
However, in the feature we concentrate mainly on recent marine registry developments in offshore and low-tax jurisdictions, with a brief synopsis of registration requirements and tax advantages in each featured territory.
The Republic of the Marshall Islands Maritime Administrator has recently revised its RMI Yacht Code (MI-103), to reflect changes in the yacht market, not only in terms of the increasing size and complexity of yachts being designed and built, but also to cover recent technological and regulatory developments.
The Code applies to all commercial yachts of 24 meters in loadline length and above and certain sections of the Code apply to Private Yachts Limited Charter (PYLC) of any tonnage. The Code sets the standards and substantial equivalencies for safety, security, pollution prevention and seafarer accommodations appropriate to the size of the yacht. The Code replaces the previous RMI Commercial Yacht Code in its entirety.
Last year, the Vice President of the Marshall Islands shipping registry Charles McHardy announced that the registry will target growth in the offshore drilling sector to build upon its world-leading market position in this area.
Figures released by the Registry show that gross tonnage surpassed 87 million gross tons at the end of October 2012, with 2,780 ships registered. Growth in the Registry's mobile offshore fleet has been particularly marked, McHardy highlighted, attributing the 71% expansion seen over the past five years to the Registry's specialist industry knowledge. The Marshall Islands has retained its place as the world's third largest shipping register this year, behind Panama and Liberia.
McHardy said that the registry's placement of representatives in key markets had been important for unlocking new business. The Registrys dedication to its growing offshore customer base is apparent through its expanding presence in key offshore sectors [in Asia, the Middle East, and South America], said McHardy. This provides owners and operators local access to regulatory and technical assistance for offshore operations."
Registration, Taxation and Fees
Types of vessels that may be registered under the Marshall Islands flag include: tankers, cargo ships, containerships, passenger ships, MODUs, tugs, yachts, fishing vessels and other ocean-going vessels.
Vessels should be under 20 years of age at time of registration. A waiver of the age requirement may be granted depending upon a satisfactory evaluation of the condition, seaworthiness and usage of the vessel.
Ownership must be in the name of a Marshall Islands national, corporation, limited or general partnership, limited liability company or foreign maritime entity qualified in the Marshall Islands.
All commercial vessels are required to be classed by a Classification Society that is recognized by the Maritime Administrator (some exceptions may be made for yachts and fishing vessels; contact IRI for specifics).
The registration of private yachts is limited to those of 12 meters or more in length. The Maritime Administrator may, however, consider waiving the minimum size limitation and other requirements for private yachts less than 12 meters in length given the necessary justification.
The Administration considers any pleasure yacht not on charter or carrying passengers for hire, not engaged in trade or commerce, and being used solely for the pleasure or recreational purposes of its owner to be a private yacht.
A Marshall Islands citizen or national or a qualified foreign maritime entity must own the vessel. The term "citizen" or "national" includes Marshall Islands corporations, limited liability companies, partnerships and associations of individuals.
To the Maritime Administration, any pleasure yacht engaged in trade, commerce, on charter or carrying passengers for hire is a commercial yacht. The registration of commercial yachts is limited to those of 24 meters or more in length. The Maritime Administrator may, however, consider waiving the minimum size limitation and other requirements for commercial yachts less than 24 meters in length given the necessary justification.
Commercial yacht ownership requirement are the same as those for private yachts.
The Marshall Islands statutorily exempts all non-resident (i.e. offshore) companies from taxes. Any company formed through one of International Registries, Inc.'s worldwide offices is a non-resident Marshall Islands company. Thus, all foreign-owned companies and partnerships are exempt if they do not do business in the Marshall Islands.
There is an annual tonnage tax which is paid according to the following scale (excluding yachts):
- For vessels of 2,500 Net Tons (NT) or less.....USD500
- For vessels of 2,501 NT to 5,000 NT..............USD0.20 per NT
- For vessels of 5,001 NT to 25,000 NT............USD0.17 per NT
- For vessels of 25,001 NT to 50,000 NT..........USD0.15 per NT
- For vessels over 50,000 NT...........................USD0.125 per NT
Initial registration fees are USD1,500 for yachts and USD2,500 for commercial ships. Annul re-registration fees are USD1,500 for all types of vessel.
The Palau International Shipping Registry has officially opened its doors following a launch ceremony which saw the registration of its first two vessels, the cruise ships Amusement World (12,764 Gross Registered Tonnage (GRT)) and Leisure World (15,653 GRT) operated by Universal Ship Management.
The Republic of Palau consists of eight principal islands and more than 250 smaller ones lying in the western Pacific, with maritime boundaries with Indonesia, Philippines and the Federate State of Micronesia. The Registry is headquartered and administered in Houston, USA.
Despite the territory's diminutive size, with a population of just 22,000, the Registry is aiming to punch well above its weight, and has already signed up to the most significant major shipping conventions, including: the International Convention for Safety of Life at Sea; the International Convention for the Prevention of Pollution from Ships; the Safety of Training, Certification and Watchkeeping; the Bunker Convention; the Civil Liability Convention; and the Maritime Labour Convention 2006, among others.
Registration, Taxation and Fees
The Palau International Ship Registry was created in 2010 and its head office is located in Houston, Texas.
Seagoing vessels of any tonnage engaged in foreign trade including commercial yachts and private yachts, 12 meters or more in length, are eligible for registration. Vessels more than 20 years old are not eligible for registration; however, upon completion of a Pre-entry survey confirming the good condition of the vessel, this restriction can be waived. The Palau Flag Administration observes all US and UN Sanctions, so vessels that are in breach of these sanctions are not accepted.
A Provisional Certificate of Registration for a vessel may be obtained in one (1) business day, provided that all the required information, proof of ownership and initial registration fees have been paid. The Provisional Certificate is valid for 6 months during which time the owner/operator can gather the documents required for the Permanent Certificate of Registry, which is then valid for 5 years.
Annual fees and taxes are payable on vessels registered on the PISR. Further details of vessel registration requirements and procedures can be found on the Palau International Ship Registry website.
Isle of Man
In April 2013, it was announced that the Isle of Man Ship Registry can now take vessels with ownership structures in Monaco or Switzerland thanks to recent legislative changes passed by the island's parliament, the Tynwald.
The latest regulations extends the list of qualified owners already approved, to include citizens, corporate bodies incorporated in Monaco or Switzerland, or limited partnerships with their principal place of business in Monaco or Switzerland, as persons who are qualified to be the owners of Manx vessels. The move is aimed at securing a greater market share of superyachts business, in response to requests by the Isle of Man yacht industry.
In August 2013, it was revealed that the Isle of Man Ship Registry had registered the Hanjin Blue Ocean,' the last of nine 13,000 Twenty-foot Equivalent Unit (TEU) container vessels to register as a group in the Isle of Man. At over 360 meters long and 48.2 meters wide, the nine vessels are the largest to be registered in the Isle of Man and some of the largest vessels currently in operation in the world.
Indeed, the Isle of Man registry continues to thrive, finishing 2012 on a new high of 15 million Gross Registered Tonnes (GRT), an increase of over 8% year-on-year.
The Isle of Man is home to one of the world's fastest growing registries, averaging tonnage growth of 11% over the past few years. Although the total number of vessels on the register has remained relatively static for the past few years, at approximately 1,050, the workload for registrars has increased significantly, dealing with around 10 new registrations each month, and various other filings.
The Registry has seen significant growth from Asia in particular. Since 2009, more than 20 vessels operated from Singapore have registered under the Isle of Man ensign, representing around 12% of Manx GRT (1.7m). Recognizing Singapore as a strategic location for the Registry, in April of 2012 the Isle of Man established a representative office in Singapore, and exhibited for the second time at the Singapore Yacht Show, as well as at events in China and Japan.
Registration, Taxation and Fees
Bodies Corporate incorporated in the Isle of Man, United Kingdom, Channel Islands, the European Union and EEA and the British Dependent Territories are classed as qualified owners, as are Isle of Man and British citizens, British Dependent Territory citizens British Overseas citizens and EU/EEA citizens.
In August 2009, the Isle of Man Ship Registry announced three important changes to its operating practices to enhance its registration process and make it more attractive and simpler for its clients, as follows:
- The Registry has retracted its policy wherein visits and inspections were mandatory prior to acceptance. The Registry will automatically accept vessels less than ten years of age, which satisfy the Registrys vetting processes. This will include new builds, many of which are constructed in the Far East, in an effort to speed the registration process and reduce the initial costs for Isle of Man registration dramatically.
- The Registry is to welcome previously excluded ship types such as passenger vessels. According to the Registry, this is a natural progression as super yachts become larger and move towards full SOLAS compliance for greater "guest numbers."
- The Registry has changed the limits to age on entry for ships. Previously set at 15 years, the limit will be extended to 20 years and even further for vessels which are technically managed from the Isle of Man.
The small ships register is for locally owned vessels less than 24 metres in length. It is not a title register and a mortgage cannot be registered against any vessel on it. The registration procedure is simple with just a couple of forms to be completed and lasts five years when it can be renewed as required.
The rate of corporate tax for shipping company income in the Isle of Man is 0%. However, in March 2009, the Isle of Man Ship Registry announced its intention to introduce an annual registration fee for the first time in its 25-year history. For merchant vessels and commercial yachts, initial and annual fees are GBP730 and GBP1,200 respectively. For pleasure yachts these fees are GBP160 and GBP115, respectively.
In January, a new consultancy specializing in yacht and aircraft registration and documentation was opened in Guernsey, ahead of the launch of the island's new aircraft registry later this year.
The new consultancy, Oceanskies Limited, has been founded by industry professionals Duncan Swanson and Tom Becker, who together have more than 20 years' experience in the structuring of the ownership of yachts and aircraft, their registration, documentation and operation.
The primary focus of Oceanskies is to assist family offices, trustees and wealth managers of high net worth individuals either purchasing or already owning yachts and aircraft in respect of the documentary aspects of the operation of these assets.
Guernsey has operated a shipping registry separate from the United Kingdom's since 1973, with registration presently limited to vessels of up to 150 Gross Tonnage (GT) although an increase to 400 GT is under consideration.
Registration, Taxation and Fees
The Registry is open to vessels, currently up to a limit of 150 gross tonnage (as ascertained under the Merchant Shipping (Tonnage) (Bailiwick of Guernsey) Regulations 2009, particularly pleasure yachts.
Vessels intended for commercial use (up to a maximum of 24 metres loadline length - ITC69) can be registered but must comply fully with the Code of Practice for Small Commercial Vessels and manning requirements.
To qualify for registration, the majority of shares in a vessel (33 of the 64) must be owned either by a British subject or a company registered in and having its principal place of business in a British Crown Dependency or Overseas Territory. Foreign nationals may own up to 31 shares in a vessel, provided that the remainder of the shares are in 'qualified ownership'. Any shares jointly owned by qualified and unqualified owners count as unqualified shares.
Registration of a vessel under 'Part I' of the Merchant Shipping (Bailiwick of Guernsey) Law, 2002 gives legal title to the vessel, recognition as a British ship and enables other transactions such as mortgages and Court Orders to be registered on the vessel.
Corporate income tax in Guernsey is 0%, except for specific banking activities, which are taxed at 10%. Initial and ongoing registrations fees are GBP280 each.
Further details on the Code of Practice can be obtained from the Maritime &Coastguard Agency's website.
Antigua and Barbuda
In 2011, the Caribbean territory of Antigua and Barbuda officially launched the Antigua and Barbuda Yacht Registry at a ceremony held in November that year.
Speaking at the opening ceremony, the Director/Registrar General of Antigua and Barbuda's Department of Marine Services and Merchant Shipping, Dwight Gardiner said that the territory's shipping registry had already experienced significant success with the number of merchant ships registered amounting to approximately 1,400.
Approximately 240 yachts are currently registered in the territory, but the government has decided that in order to further expand this segment it will establish a registry dedicated to pleasure vessels.
Registration, Taxation and Fees
There are no age limits for ships registering in Antigua and Barbuda, however for ships more than 12 months old, it is a requirement that the ship is inspected by a flag state inspector prior to acceptance for registry.
Applicants must be able to demonstrate: proof of ownership, which may be a Bill of Sale or a Builders Certificate in the case of a new-build; that the ship is not registered elsewhere at the same time and this is usually with a Certificate of Deletion from the previous registry if there is one; Proof of eligibility to own an Antigua and Barbuda ship which may be a copy of a passport for CARICOM nationals, or a copy of the certificate of Incorporation for corporate entities; and that the owning Company is in good standing in the case of corporate entities over one year old.
Merchant ships fall within the scope of the international conventions governing international shipping standards and they must comply with the accepted international safety standards.
In order to register a vessel in Antigua and Barbuda, the applicant must be meeting one of the following requirements:
- be a citizen of Antigua and Barbuda or of a Member State of the Caribbean Community or the Organisation of Eastern Caribbean States;
- be a legal corporate body in Antigua and Barbuda;
- be a corporation registered under the International Business Corporation Act;
- be a corporate body or a partnership concern registered elsewhere which is registered under the Companies Act.
Commercial yachts are yachts that engage in any kind of commercial activity for reward. This includes chartering. Because such vessels are not Pleasure Yachts they fall within the scope of the international conventions governing shipping standards and they must comply with various safety standards. The ownership requirements are the same as for merchant vessels.
Antigua and Barbuda also provides for the registration of pleasure yachts. To register a pleasure yacht, and owner must be a citizen of Antigua and Barbuda or of a Member State of the Caribbean Community or the Organisation of Eastern Caribbean States; or a legal corporate body in Antigua and Barbuda such as an IBC.
Companies formed under the International Business Corporations Act are exempt from direct taxes. The initial safety inspection fee for vessels more than 12 months old is EUR1,000. There is also an annual fee of EUR950.
Further information on ship registration requirements and procedures and be found on the Antigua and Barbuda Department of Marine Services and Merchant Shipping website.
Senior officials from the Bahamas' Maritime Authority (BMA) have held a number of meetings in Rio de Janeiro, Brazil, to generate further business opportunities for the territory's ship registry, and meet with businesses who have already registered vessels under the Bahamas' ensign.
The BMA said that, for the Bahamas, Brazil is a key growth market, home to the fastest expanding oil and gas offshore market in the world. BMA Chairman Anthony Kikivarakis said service was the central theme in every meeting held. The Bahamas prides itself on service and sees the shipping industry and related services as the third pillar of its economy, he said.
The BMA held discussions with the Maritime Authority of Brazil, and visited the Brasa Shipyard in Niteroi, where delegates witnessed the fabrication of topside modules for a Floating, Production, Storage and Offloading (FPSO) unit.
The Barbados is presently home to the world's 5th largest shipping registry. More than 1,500 vessels are registered in the Bahamas, totalling over 25m gross tonnes.
Registration, Taxation and Fees
The Bahamas Maritime Organisation, headquartered in London, administers the registry, supervises initial and subsequent ship surveys through a world-wide network of authorised inspectors, and ensures adequate training and skill levels among the crews of Bahamian vessels.
Foreign-owned ships engaged in international trade may be registered in The Bahamas. Vessels over 12 years old are subject to a pre-registration inspection undertaken by an authorised Bahamas inspector and applications are approved on an individual basis. Applications for vessels of less than 1600 net tons may also be submitted to the register and will be assessed on an individual basis.
A foreign owner, irrespective of nationality or place of incorporation, can hold direct title to a Bahamas-flagged ship.
Ship owners wishing to register their vessels under the Bahamas Flag may do so through the London, Nassau, New York or Hong Kong offices. Additionally, registration documents can currently be processed through the Tokyo Agency office.
Vessels are provisionally registered for a period of six months to allow owners to complete all flag change formalities and fulfil BMA requirements for permanent registration. Once all requirements are met, a permanent Certificate of Registry will be issued.
Foreign owners holding vessels in a Bahamian company will pay no income tax or capital gains tax in The Bahamas. Registration fees have been waived since July 1, 2011. Annual fees are as follows:
- Ships/yachts not engaged in commercial trade: USD700;
- Ships of 2,000 ton or less pay USD2,552;
- USD0.20 per net registered ton for vessels between 2,000 and 5,000 tons, plus USD2,155;
- USD0.17 per net registered ton for vessels over 5,000, plus USD2,305;
In March 2013, Cypriot Transport Minister Tasos Mitsopoulos assured that the operations of the nation's Shipping Registry will be unaffected by the turmoil in the banking sector.
Mitsopoulos reassured shipping companies with vessels registered in Cyprus that there were no impending changes to the nation's tonnage tax regime, and announced that the Government had extended the deadline for payment of tax and other dues for the 2013 tax year by two weeks, to April 15, 2013.
In a written statement, the Minister said: "The Department of Merchant Shipping and the Registrar of Cyprus ships have been and will continue to operate as usual."
Registration, Taxation and Fees
In recent years Cyprus has developed a maritime policy which is highly favourable for ship owners.
A ship may be registered in Cyprus if it is majority-owned by a Cypriot person or company; a non-Cypriot company qualifies if it is majority-owned by Cypriots.
Registration traditionally depends on the age and type of the ship. Under the latest rules, cargo vessels of more than 500 tons and not exceeding 15 years of age may be freely registered in Cyprus. Vessels over 15 years of age but not exceeding 20 may be registered subject to a satisfactory entry inspection. Vessels over 20 years of age but not exceeding 25 must also undergo an entry inspection and, where it is required by legislation that the vessel should comply with the ISM Code, operated by a ship management company having its principal place of business in the EU or European Economic Area (EEA). Vessels over the age of 25 are not accepted for registration in the Cyprus register.
Ships may be provisionally registered while they are in a non-Cyprus port; this must be converted into permanent registration during an actual visit to Cyprus within 9 months.
Shipping companies owned by non-residents and deriving their income from sources outside Cyprus are not subject to Cypriot taxation.
A new tonnage tax system was approved by the European Commission on March 24, 2010 under state aid rules for maritime transport. The simplified tonnage tax system extends the favourable benefits available to owners of Cyprus flag vessels and ship managers to owners of foreign flag vessels and charterers. It also extends the tax benefits that previously only covered profits from the operation of vessels in shipping activities, to cover profits on the sale of vessels, interest earned on funds used other than for investment purposes and dividends paid directly or indirectly from shipping-related profits.
In November 2012, the Gibraltar Port Authority, the Gibraltar Maritime Administration (GMA) and the Gibraltar Yacht Registry (GYR) have each launched new online web portals, as part of government efforts to support the growth of the local shipping and yacht registry.
The government explained that the online sites had been revamped to provide a more professional, dynamic and user-friendly experience to users and enhance the territory's maritime sector offering.
Gibraltar's Minister for Tourism, Public Transport and the Port, Neil Costa, commented: "A lot of time and effort has been put into these websites and I am very pleased with the results, as indeed I am sure will be their regular users and visitors. Apart from the practical benefits of these completely revamped sites, Gibraltar's maritime services will be so much more accessible globally."
The Gibraltar Ship Register (GSR) is a member of the Category I Red Ensign Group of the United Kingdom and United Kingdom dependency registers, and nearly every type of commercial vessel is represented on the Gibraltar Registry.
Changes in Gibraltar legislation now permit a wider range of individuals or corporate bodies to be qualified persons eligible to own a registerable ship.
The GSR currently offers three types of registration: full registration; bareboat registration; and registration under construction.
EU Nationals and /or companies incorporated in the EU/EEA may apply to qualify as registered owners/bareboat charterers of Gibraltar-registered vessels. Companies not located within EU or EEA will have to be first registered as a Foreign Maritime Entity before they can have ships registered under their ownership or charter. If the owners or the bareboat charterers do not have an office in Gibraltar, then they must appoint a person or company in Gibraltar to represent them.
Generally, the GSR only accepts ships that are under 20 years of age. However, ships over 20 years may also be registered subject to a pre-registration survey.
Full Registrations are valid for five years, bareboat registrations for up to two years and are all renewable.
In order to register on Gibraltars ship registry, owners must British Citizens, British Dependent Territories citizens, British Overseas citizens or EU or EEA nationals or companies registered within the EU or EEA, and have a majority interest in the vessels ownership.
If the owner(s) making up the majority interest (i.e. 33 shares) is/are not residents of Gibraltar, a Representative Person/Registered Agent must be appointed. A body corporate is treated as resident if it has a place of business in Gibraltar.
Ordinarily resident companies pay income tax on their worldwide income at 10%. A non-resident company is defined as one that is incorporated in Gibraltar and does not trade or earn income in Gibraltar. Such a company is not liable to corporation tax.
Gibraltar has a very competitive fee structure for registration; the registration fee following provisional registration is GBP350 and the annual renewal fee is GBP100.
For ships of 24 metres or more in length, there is an annual tonnage tax, payable at the following rates:
- Up to and including 50,000 GT: GBP800 plus GBP0.07 per GT
- From 50,001 GT up to and including 100,000 GT - GBP800 plus GBP0.07 per GT up to and including 50,000 GT plus GBP0.04 per GT in excess 50,000.
- 100,001 GT or more - GBP800 plus GBP0.07 per GT up to and including 50,000 plus GBP0.04 per GT from 50,001 to 100,000 plus GBP0.02 per GT in excess of 100,000 subject to a maximum Annual Tonnage Tax payable in the sum of GBP9,000.
Although it is part of the EU the absence of VAT means that ships or pleasure craft can be imported without a VAT charge. This has led to a substantial increase in the registration of yachts and other private vessels in recent years.
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