| If there is a single concept which has | | | | Sailing between 20.01 - 24m VAT: 8% |
| revolutionized the car industry in recent years, it is | | | | Motor between 16.01 - 24m VAT: 8% |
| the idea of leasing a vehicle rather than owning it. | | | | Sailing between 10.01 - 20m VAT: 10% |
| Nowhere has this been seen more dramatically | | | | Motor between 12.01 - 16m VAT: 10% |
| than in the business sector where leasing is now | | | | Sailing up to 10m VAT: 12% |
| the standard for car ownership. | | | | Motor between 7.51 -12m VAT: 12% |
| Leasing for boats has been available in Europe for | | | | Motor up to 7.5m VAT: 18% |
| several years, but it is a purchasing option that is | | | | Category D (protected waters only) VAT: 20% |
| little understood by the boating community in | | | | The French leasing scheme is very similar and is |
| general, and particularly in the UK, despite the fact | | | | based on the same principles of assumed time in |
| that it can offer significant VAT advantages | | | | EU waters. Their categories are based on the |
| whether the vessel is used for private or | | | | Class of vessel as shown in the Certificate of |
| commercial use. The two most popular schemes | | | | Registry. The French VAT base rate is 19.6%, |
| are those used in Italy and France. | | | | and the minimum payable under the French |
| At the time of their introduction, both countries | | | | system is 9.8% for a Class 1 vessel (50% of |
| were suffering a decline in yacht manufacturing. In | | | | 19.6%) |
| an effort to halt this decline, both governments | | | | The most recent country to introduce a leasing |
| introduced incentives for yacht owners to buy | | | | incentive is Malta, and with a lower VAT base |
| their vessels under leasing schemes, which | | | | rate of 18%, their rates vary from a minimum of |
| provided significant VAT reductions. In addition, | | | | 5.4% to a maximum of 18%. |
| the schemes were based on the concept that the | | | | Having covered the basic principles of what a |
| larger the vessel then the greater the saving, | | | | leasing scheme is, and how it works, we can now |
| thus encouraging owners to buy larger boats. | | | | consider the mechanics of acquiring a vessel using |
| The growth of yacht manufacturing in the Italian | | | | a European lease as follows: |
| market in recent years has been spectacular, with | | | | Example - Individual Purchase Of A New Boat |
| a proportionate increase in leasing which was up | | | | From UK Broker/ Manufacturer |
| 32% in Q1 of 2005, and now represents nearly | | | | 1.The client chooses the boat and agrees a price |
| 6% of all yacht financing. | | | | with the dealer/broker or manufacturer. 2.The |
| Before explaining the details of these schemes, it | | | | client agrees a deposit and lease period with the |
| is important to understand some of the concepts | | | | bank. 3.The bank pays for the boat. 4.The boat is |
| behind them, which should help to clarify some of | | | | leased to the client who pays installments at the |
| the relevant issues. | | | | reduced rate depending on the scheme, vessel |
| Firstly, in simple terms, a lease involves a bank or | | | | type and size. 5.At the end of the contract the |
| finance house, buying the asset and then | | | | bank sell the yacht to the client at the agreed 1% |
| effectively renting it back to the client for an | | | | residual value. Full rate VAT applies to this |
| agreed period at an agreed price. This is defined | | | | payment as this is a transfer of goods. 6.The |
| as a transfer of services. At the end of the lease, | | | | boat is now VAT paid. |
| the client has the option to buy the asset which | | | | The above example is for an individual (or group |
| then becomes a transfer of goods. For VAT | | | | of individuals) purchasing a boat using a European |
| purposes a yacht lease is a supply of services | | | | leasing scheme. In two cases it is possible to have |
| and is deemed to take place where the person | | | | a VAT free lease as follows: |
| who makes the supply is established: i.e. French | | | | • A charter business buying a vessel which is |
| bank in France, Italian bank in Italy etc. | | | | used 100% for chartering in EU waters. |
| Secondly, they are simple to set up and | | | | • An individual buying a vessel for use 100% |
| administer and can be in individual, joint, or | | | | outside EU waters |
| company names. Finally, it is important to | | | | Detailed below are some of the main features of |
| understand that there can be two VAT elements, | | | | the leasing schemes: |
| namely the VAT on the purchase price and the | | | | • Leasing facility available from 300,000 euros ( |
| VAT on the leasing repayments. | | | | no maximum ) |
| If we take the Italian scheme as an example, the | | | | • Initial deposit between 20% and 50% |
| Italian law states that VAT has to be applied to | | | | • Lease maturity from 3 to 8 years |
| leasing repayments, only in relation to the time | | | | • Residual value 1% |
| spent within EU waters. Given that it is impossible | | | | • Available for both private and company |
| to determine this accurately, the Italian Revenue | | | | ownership |
| Agency (along with the French & Maltese) has | | | | • Available for both new and used boats |
| agreed that an assumed period can be applied to | | | | • Registration in virtually any country and any |
| a leasing contract, based on certain criteria. Under | | | | flag |
| the Italian scheme this is a combination of vessel | | | | • UK flag is available under the scheme |
| type and size, so for a motor vessel over 24 | | | | • Chartering is permitted within the lease |
| metres in length, a rate of 6% VAT applies (30% | | | | agreement |
| of the standard Italian VAT rate of 20%) | | | | As a specialist marine financial services broker, we |
| In other words it has been assumed that a vessel | | | | are receiving an increasing number of enquiries |
| of this size (24 metres plus) would spend 30% of | | | | from both the UK and Europe to arrange leasing |
| its time in EU waters (ie the European summer | | | | schemes with our European banking partners. The |
| for example) and outside EU waters for the | | | | schemes are straightforward to arrange and |
| remainder of the year (the Caribbean for | | | | administer, and can offer significant savings in |
| example) The table below shows the various | | | | VAT. As a company we also offer a wide variety |
| rates which have been agreed under the Italian | | | | of more conventional marine mortgages as we |
| leasing scheme: | | | | believe that whilst leasing offers many |
| Motor or sailing over 24 metres in length VAT: | | | | advantages, this may not be appropriate for all |
| 6% | | | | our clients. |