Yachts Engaged in Trade – A New Dual-Use Initiative

Many industry professionals have shown a great deal of interest to the Yacht Engaged in Trade (YET) programme since its launch in the Monaco Yacht Show last year and the majority have been waiting in anticipation for the first YET to be certified.

The YET initiative, the innovation of the Republic of the Marshall Islands Registry, is a system that allows private superyachts over 24 meters in length, which are in possession of the relevant certifications, to temporarily charter in French and Monegasque waters for up to 84 inconsecutive days a year.

The dual-use system puts an end to the Mediterranean yacht owners dilemma to either use their yacht on a purely private basis without the possibility of chartering to third parties or charter their yacht to thirds parties with obligation to pay Value Added Tax (VAT) on their own charters while their personal use of the yacht will also be monitored to ensure the legitimacy of the yacht’s commercial status.

The YET answers to the need within the luxury yacht market, whereby owners may charter their yachts to third parties on an occasional basis to off-set their annual running costs and use their yachts freely during the rest of the time without the need to put a charter agreement in place, pay VAT when the owner wishes to make use of the yacht for private purposes and shift the yacht’s registration from pleasure to commercial when the owner wishes to charter the yacht.

YET – The Basics

A YET is a private yacht which must be at least 24 meters in length, built to class or classed if over 500 gross tonnes. The yacht must be privately owned and complies on a voluntary basis with all relevant regulations and requirements that apply to commercial yachts. Moreover, the private yacht must be permitted to engage in charter activities for up to 84 inconsecutive days a year.

Which yachts may be registered as YETs?

Applicable yachts must either be in possession of a VAT Paid Certificate (if ultimately owned by EU residents) or in the case of non-EU ownership, enter the EU under the Temporary Importation Procedure in accordance with EU customs regulations permitting yachts entry for up to 18 months without being liable to pay VAT on the value of the yacht in question.

Are there any advantages to attaining a YET certification?

Apart from the flexibility of yacht use which the YET initiative offers, with a YET the owner of the yacht will not need to sign a charter agreement each time he wishes to use the yacht, thus in fiscal terms, the owner will not be required to pay VAT when the yacht is used for private purposes as a YET is a private asset.

Moreover, the yacht will not be required to leave European waters and touch base at a third country port to allow the change of use of the yacht – all this can be achieved within European waters.

The YET initiative also offers complete fiscal transparency since the yacht does not need to shift registration pertaining to the use and thus the owner will not be required to import/export the yacht every time there is a change of use of the yacht.

What’s next for YET?

Whilst at the moment the YET initiative is limited to French and Monegasque waters, thus geographically limiting yacht owners, YET has been based on European legislation, which programme may therefore be implemented in other European member states. The Republic of the Marshall Islands Registry is currently in talks with Italy and Spain, in an attempt to have Europe’s key cruising grounds covered by YET certification, which will revolutionise the way yachts can be chartered.