II. Alternative Registries
Beyond the Red Ensign Group, other flag states, such as Malta, Cyprus or the Marshall Islands, have been very successful in providing yacht registration to yacht owners and yacht management companies. Other flags to be considered, within and without the EU, are Madeira, Italy, Luxembourg, Cyprus, the Cook Islands, St Vincent & the Grenadines and The Bahamas.
For navigating within the EU, the pragmatic approach of Malta has made it a very attractive alternative to the UK for those wishing to flag a yacht within the EU. Malta is ‘white list’ country under the Paris and Tokyo MOUs and as a full EU member state is suitable for VAT-paid yachts, as well for those who are commercially trading in the EU.
Under the Malta Flag a yacht may be registered as a Private yacht or a Commercial yacht:
- A private registered yacht to be any pleasure yacht, of six metres in length or more, that does not carry passengers for reward and is not engaged in trade but is used for the sole purpose of the owner
- A commercially registered yacht is considered to be a yacht, of 15 metres in length or more, which do not carry cargo, carries not more than 12 passengers and operated by the owner or body corporate owning the yacht for commercial use
The following classes of yachts will be considered for commercial registration:
- Yachts in commercial use of not less than 15 metres in length and not more than 24 metres
- Superyachts in commercial use of more than 24 metres in length and less than 500 gross tonnes
- Superyachts in commercial use of more than 24 metres in length and 500 gross tonnes and over
Yacht registration, whether private or commercial, is a very simple and straightforward process subject to all documentation being in order. Yachts are first registered provisionally under the Malta Flag for six months (extendible for a further period, or periods not exceeding in the aggregate six months) during which period all documentation needs to be finalised.
A commercial Yacht Code sets the required standards of safety and pollution prevention.
Marshall Islands-registered yachts have automatic rights to a cruising permit for sailing in US territorial waters and qualifying private yachts are permitted to charter up to 84 days per year, subject to detailed surveys when on charter. Together with the new Yacht Engage in Trade (YET) regime, the Republic of the Marshall Islands (RMI) has taken a lead in facilitating the mixed use of yachts.
The RMI allows, through its national legislation and the RMI Yacht Code, the registration of private yachts, private yachts limited charter, commercial yachts, and passenger yachts. It also allows for RMI flagged private yachts to charter in French and Monégasque waters without the need for commercial registration by requesting a Temporary Certificate of Registry for Yacht Engaged in Trade.
Ownership of yachts registered in the RMI must be through an RMI corporation, limited or general partnership, limited liability company, or a qualified foreign maritime entity. The RMI offers the following advantages:
- Private yachts may carry more than 12 guests on board provided additional flag State requirements are met.
- Private yachts are eligible to obtain a US Cruising Permit.
- RMI commercially compliant yachts are eligible to charter in Europe.
- Private yachts of 18 meters (m) or more in length and less than 500 gross tons (GT) may be chartered out for up to 84 days as a private yacht limited charter (PYLC), provided additional flag State and local requirements are met.
- Yachts may be registered while under construction.
- Helideck certification.
- Existing MCA LY2/LY3-certified yachts may transfer to the RMI flag. Certified yachts from other flags may be accepted as well
- 350 GT Master/500 GT Mate’s licence is available for qualified applicants.
- Master (Yachts) – Unlimited Tonnage licence is available for qualified applicants.
- The RMI is included on the ‘white lists’ of both the Paris and Tokyo MOUs. The RMI meets the flag criteria for a low risk ship under the Paris MOU’s New Inspection Regime.
- The RMI has adopted groundbreaking legislation that permits the registration of a yacht that is still subject to a recorded mortgage in its present country of registry. This legislation provides for the continuation of the preferred status of the mortgage without interruption; thus, the foreign mortgage lien accompanies the yacht into the RMI Registry.
- Legal and financial professionals worldwide recognize the RMI legal system and mortgage recordation procedures.
- Support and technical assistance are available worldwide from a staff of qualified and experienced industry professionals.
Cyprus is a well-established international shipping register with maritime offices in New York, London, Rotterdam, Piraeus, Brussels and Hamburg offering services to Cyprus ships. It also has a network of local inspectors of Cyprus ships, covering important ports worldwide in order to ensure efficient and effective control of Cypriot vessels and to avoid detentions by port state control.
Cyprus is an EU flag with low registration costs and low set up and operating costs for companies. A yacht can only be registered under the Cyprus flag if it is acquired by a Cypriot individual or a Cypriot legal entity, so foreign owners must set up a ‘yacht owning company’ and transfer the yacht to that company.
There is no tax on profits from the operation or management of a Cyprus-registered vessel or on dividends received from a vessel owning company, and there is no capital gains tax on the sale or transfer of a Cyprus-registered vessel or the shares of a vessel owning company.
There is no income tax on the wages of officers and crew. There is also no stamp duty on ship mortgage deeds or other security documents and full protection for financiers and mortgagees.
Provisional registration of a ship may remain in force for six months and may be renewed once, for a further three months. The permanent registration of a provisionally registered vessel must be completed within the period of provisional registration.
The Cyprus legislation provides for the two forms or bareboat registration. The Parallel-in registration allows a foreign flag vessel on bareboat charter to a Cyprus shipping company to be registered in parallel under the Cyprus flag for a period, usually of two years. The Parallel-out registration offers the possibility to owners of Cyprus ships to bareboat charter them to a foreign person or company under a ‘parallel’ registration in a foreign register for the duration of the charter party.
Other Flag States
If a client is considering other flag states, SMS will be able to assist through Sovereign’s global network of offices and agents.