Superyacht registration under a Monaco flag is one of those things that you do because it is highly prestigious, and not because of common sense, especially when your vessel is over a certain size.
Superyacht registration in general can often be a grey area. It can be a challenging process, one could easily be confused and even industry experts can become unstuck. Even in the Principality of Monaco, there are many legal firms focusing exclusively on legislations around superyachts.
One example is the fiscal (VAT) status of a vessel, and the other the registration process. (jurisdiction and commercial or non-commercial activity of the vessel).
To avoid any confusion, the very first thing one must do is identify whether the vessel will be used for commercial purpose or for private use.
One of the major objectives for superyacht owners is the correct registration and ownership procedure of their valuable asset, especially in regards to having an efficient Tax and VAT structure. This includes, but is not limited to tax jurisdiction, domicile status, or VAT and operational use of the vessel.
The main European Union jurisdictions for registering a vessel are the UK, Malta, Madeira, France, Italy, Cyprus and of course the Principality of Monaco. However, jurisdictions such as Malta, Greece being scrutinised heavily by the European Union.
It is important to know that the flag you choose can have a direct impact on your potential liabilities, privacy and enjoyment. As mentioned before, important future considerations for example are whether you intend to use the superyacht for private or commercial use.
Each flag state has the authority to enforce varying regulations based on their specific requirements including certification, safety, inspection and pollution prevention.
Normally the superyacht owner’s residence and tax status will be taken into consideration, as well as where the yacht will be located.
In general Monegasque nationals and residents can apply to register a boat under the Monegasque flag.
The Principality of Monaco has two primary requirements:
- All vessels under the Monegasque flag must show their name and the word “MONACO” on the stern, to the exclusion of any other wording.
- Yachts people who wish to appoint a captain and/or a crew must notify the Department of Maritime Affairs.
The vessel registration is quite simple in Monaco once you have the invoice to prove ownership, examples of this would be photos from all sides of the vessel and the necessarily certificates that accompany the vessel. The application must then be submitted to the Department of Maritime Affairs in Monaco.
An annual naturalisation fee is payable for all boats under the Monegasque flag. Payment must be made within a month from the date of the bill being sent by the Department of Maritime Affairs to obtain the annual stamp. This stamp is essential, as without it, the naturalisation is not fully valid.
It is also important to know that for vessels of over 5 meters, a proof will be requested that the radio complies with all obligations.
Furthermore, for vessels over 7.5 meters purchased within the E.U, you will need to present a confirmation that the boat complies with all tax obligations.
On the insurance side, the yacht, crew and all passengers must be properly insured in the event of accident, incident or liability issue.
One of the misconceptions with yacht registration comes in regards of the moorings. It is highly important to consider that granting permission to navigate under the Monegasque flag does not automatically include the allocation of a mooring in one of the Principality’s ports.
The general rule is based on the first come first serve basis. For this reason, even for long-term residents it is impossible to get a mooring space in the Monaco ports. The waiting list is more than 10 years, and there is no place for short cuts and exceptions through corruption.
This rule is very strict, and even the moorings are not transferable to a new ship belonging to an owner who already has a mooring already in the port, or subsequently to a new owner of a ship that is already moored in Monaco.
More about the Superyacht registration
Due to the limited port space, only Monegasque or Monaco residents can register a vessel in the Principality. There is a saying that Monaco is for supercars and not for superyachts.
One of the most important things for superyacht registering, is that Monaco has no Monegasque commercial flag. For this reason, registering a superyacht in Monaco is not VAT free, and yachts will have to have the VAT paid, which is 20% of the purchasing price.
The 20% of VAT paid on every new yacht could be for example, a hefty 20 million Euro on the 100 Million Euro purchase price. To put this in a simple form, the Principality of Monaco is not the most cost-efficient choice, but the most prestigious one.
Other countries such as Malta and Cyprus offer much better advantages for the fraction of the VAT that would be payable in the Principality. However, it is also important to understand that the European Union has started to crack down against yacht registration in Malta and Cyprus. The European Commission has put Malta, Greece and Cyprus on notice of infringement proceedings for not levying the correct amount of Value Added Tax on the provision of yachts. The infamous Paradise Papers revealed widespread VAT evasion in the yacht sector, facilitated by national rules which do not comply with EU law.
For this reason, Cyprus does not really except anymore superyacht leases, while Malta is still in a fight with the European Union. One of the predicted outcomes of this fight is that superyacht owners may need to pay the VAT difference, and this sum can be relatively huge on large vessels. However, on the human side, most owners do not want to be involved in a tax evasion investigation which brings back their attention back to safe jurisdictions such as the Principality of Monaco.
In reality, registering a small yacht with maximum 2 crew members can be very well executed in the Principality of Monaco, while for bigger vessels the owners might consider alternative international registry options in order to avoid the numerous restrictions in the Principality.
Also worthy of note is that the crew of a Monaco based yacht must be hired through the Monaco Employment Office, and full social security is due. Furthermore, the Captain must have Monegasque or French certificates. Generally speaking, the bigger is the vessel, the more certificates and compliance it needs. This is very challenging for very large yachts, because it is difficult to have all necessary certificates, often up to 45-60 in total.
Truth to be told there are very few large vessels registered under the Monaco flag.
For example, a Cayman Island flag (which registers your vessel as a British Ship) allows the owners to hire captains in a much more flexible way, and they do not need to do it through special authorities such as the Monaco Employment Office in the Principality. This can also save owners up to 45% of Social Security Funds payable in Monaco.
You might also want to consider registering your vessel under a flag which is highly respected in the European Union. Obviously, there are huge differences between the different flags and in their prestige as well. For example, the Cayman Islands have a Red Ensigned flag, which means a high standard for the maintenance of the yacht.
By having the Red Ensigned flag, authorities know that all papers, equipment and crew related documentations are in order. It shows a high standard compared to other countries such as Madeira which is more flexible on its regulations. Choosing the right flag can also save time, energy and more importantly the hassle in the ports where your superyacht will take a visit.
Yacht owners should never forget that by owning a vessel they will need to comply with multiple jurisdictions. One is the jurisdiction where they register the yacht, and the second is the jurisdiction where the yacht will visit in the future. A poorly chosen flag can bring lot of unnecessarily port checks, technical inspections and so on.
Many port authorities do a “random” port safe control check based on the flags of the vessel. To give you an example from the car industry, say there are two BMW cars, both cars have the exact same specification, however one is registered in Germany and the other in Romania. Knowing the Germany car registration and TÜV standards, when they enter a police checkpoint, it is highly likely that the authorities will check the car from Romania as opposed to the one from Germany. Prejudice or not, your flag will immediately show a picture of your yacht profile to the port authorities.
Another good important point to consider is that your chosen flag brings with it specific consular help. Therefore, if you have any port issues it can be very handy if the country of your chosen flag has an embassy of consular office in the same country. Consular help can be very helpful when a non-EU registered ship enters an EU custom zone, or an EU registered ships leaves the European Union.
If one decided to choose the Monaco flag for yacht registration, pays the VAT and decided to accept the employment though the Monaco Employment Office, you will still be faced with certain restrictions. One of those restrictions is the distance that the superyacht can travel. Due to the agreement between Monaco and France, from 1963, no Monaco flagged vessel can go further than the France flag authorises it. It is another point where the Monegasque legislations merge together with the French one.
Summarising, for small vessels with limited crew members Monaco can be an ideal destination for yacht registration, however for large superyachts the main consideration is the status symbol of having a Monaco registered superyacht. We can conclude that registering a superyacht in Monaco is a question of prestige.
In the case you decide to register your vessel in the Principality of Monaco, it is highly recommended to seek professional advice.
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Living in Monaco
It is available for purchase in English at: http://amzn.com/1496107004
The author Zsolt Szemerszky intended to hunt down the myth around Monaco and to go beyond gossips. Zsolt is also know by releasing Monaco’s first gourmand book. The Signature Dishes of the Principality of Monaco was launch last December 2016 as the number one release in wine pairing at Amazon.com allows gastronomy lovers to discover the excellence of the Principality of Monaco thanks to recipes and interviews with Executive Chefs who hold together over 50 Michelin stars.
However Living in Monaco is significantly different from his other books. It is not a travel book, it is an ultimate guideline to those who are aiming to get a glimpse about the real Monaco and who have the desire to relocate their personal or business life to the Principality.
The book explains the benefits of the relocation (both for private and business reasons), the life quality in the Principality, and reveals how can one capitalise the unseen treasures and business potentials of Monaco. The “Relocation and what it takes” chapter also explains all the tiny details, traps, tips and best practices while it offers a detailed overview of the administrative mechanism of the Principality.
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The book is available for purchase in English at: http://amzn.com/1496107004