The single most important decision a buyer must make before closing on a yacht is where the yacht will be registered. He should understand the benefits and drawbacks of each registry before making this decision. It goes without saying, a buyer should consult with a maritime attorney before making a move.
Presently, the most widely used yacht registries are the United States, the Marshall Islands, the Cayman Islands, St. Vincent and the Grenadines and the British Virgin Islands. In 2010, Florida enacted a law capping the tax on the sale or use of a boat by any person, partnership or company at $18,000. Due to the large volume of registration inquiries generated by the Florida cap, this article will focus on the advantages and disadvantages of documenting in the U.S. and/or registering in Florida and comparing that to what registering in a foreign jurisdiction offers.
Concerning documenting in the U.S. with the National Vessel Documentation Center (NVDC), the advantages of flying a U.S. flag are as follows:
•There is an affordable documentation fee.
•The renewal each year is free, as long as you renew within 30 days of the expiration date.
•The yacht ownership may be by an individual, a partnership or a company.
•Lenders may record mortgages or debts on the yacht’s abstract, meaning that anyone will have access to this information.
•Duplicative names are allowed.
•The Certificate of Documentation (COD) notes all important yacht information and is internationally recognized.
The disadvantages to documenting in U.S. are as follows:
•The U.S. Coast Guard reports all newly documented yachts at the end of each month to each State’s department of revenue.
•In most cases, the owner must be a U.S. citizen.
•Depending on the state in which the company is formed, almost all U.S. companies are now required to list directors, officers, and sometimes shareholders, to the state in which the company was formed, diminishing the confidentiality.
•Only U.S.-built yachts may charter in the U.S., unless the yacht owner has obtained a MARAD waiver to overcome this requirement.
•For the most part, the yacht’s crew must be US citizens or residents.
•Anyone can easily record a debt against the yacht with little or no verification necessary.
•The COD is only valid for one year and must be renewed yearly.
•The NVDC is usually always behind, so obtaining the COD takes, on average, a month.
Let’s turn to the good, the bad and the ugly regarding registering with the state of Florida. The advantages of registering in Florida are as follows:
•Any person or company, domestic or international, can register a yacht in Florida.
•There is an affordable registration fee after paying the sales tax and quick turnaround time to receive the registration.
•Assuming all Federal issues are met, yachts registered in Florida may also charter in Florida without concern of taxation on the charter.
•If the sales tax was paid, then the owner may list the yacht for sale without needing to give care, custody and control over to a licensed Florida yacht broker.
The disadvantages of registering in Florida are as follows:
•The owner must display Florida numbers on the bow of the boat if they do not document the boat with the U.S. Coast Guard.
•If the yacht is not also documented with the U.S., then the yacht may not be a U.S.-flagged boat, as the nationality of the yacht is the same as the nationality of its owner.
•Regardless of being registered in Florida, if the yacht is flying a foreign flag, then the yacht is still subject to U.S. Customs regulations.
•If the yacht is only registered in Florida, then it is not recommended for use outside the U.S., except perhaps the Bahamas.
•Although a mortgage can be recorded on the Florida title, the mortgage is only considered a lien and does not afford the protections of a recorded mortgage.
How does this all compare with registering with a foreign jurisdiction? Listed below are the advantages of foreign registration:
•In most of the foreign jurisdictions common to yachting, citizenship of that jurisdiction is not a requirement to form a company in that jurisdiction.
•Most foreign jurisdictions provide better anonymity and asset protection.
•Crew nationality is not an issue.
•It is more difficult to record a maritime lien with foreign jurisdictions.
•Foreign-registered yachts may still opt to pay Florida sales tax and register in Florida.
•There are more options for chartering, particularly in the Mediterranean.
The disadvantages to foreign registration are as follows:
•It is more costly to obtain and maintain than documenting in the U.S. and/or registering with Florida.
•In most jurisdictions, only one name can be used on a yacht per hailing port.
•When cruising within the U.S., the yacht must either clear in and out of each Customs port or obtain a cruising license, which must be renewed each year.
•When cruising within the U.S., even with a cruising license, the yacht must call and report into each U.S, Coast Guard district and US Customs it enters.