USA Registration - Desirable for US Citizen?

[capcook]

Hi All... This has probably been covered before, but I could not find a thread that specifically addressed the Q... I am a USA Citizen, when I buy my CAT, is there any significant advantage to Registration Outside the USA and if so where is best ? Is this even possible for a US Citizen to register the boat in say BVI and live in USA ?

Does a USA registration mean paying the annual property tax in whatever state you register or can you avoid this tax by being out of the country on Jan 1 ?

I guess having a BVI registration creates a huge hassle when crusing around the USA with all the new Home Land Security issues...

So to register in the USA or not ... Pros / Cons... Many THANKS !!!

[Dockhead]

I've just been through this. If you live in the U.S. and plan to keep the boat there, then I can't think of any reason not to register in the U.S. U.S. or BVI doesn't affect your taxes. If your boat spends a certain amount of time in any U.S. state then you will pay taxes there, whatever the flag.

[Pblais]

am a USA Citizen, when I buy my CAT, is there any significant advantage to Registration Outside the USA and if so where is best ?

Mostly it's against the law. Just as in the US it's a citizens only club. The idea was to create a system where the title registration means you are you and own the boat. Some countries will allow you after a fashion to register outside the US. Historically it's done as a tax dodge. Most tax collectors are honorable among tax collectors. To register the title outside the US in any country requires you to hire a local agent that does this for you for a fee (annual). This is great if you own an oil tanker.

The ability to conceal it is growing shorter. A USCG documentation certificate is about as good as it gets as far as proving you own the boat. Add a US passport and you be good all over the world.

[Hud3]

It's really simple if you plan to leave the Country. Just document your boat with the USCG. Once documented, there's no annual fee to renew the documentation. You just have to do it faithfully every 12 months, and the USCG will send you an email to remind you. And as Paul says, you'll have incontrovertible proof that you own the boat. That's a good thing!

Then sail off to wherever. The USCG documentation will get you in and out wherever you go, along with your passport.

As far as local taxes in the States, if you're not in a specific state for more than the limit that that state sets for collecting a "user fee", "registration fee", or "property tax", then you'll be OK legally. You won't have to pay it. The time limits and conditions vary by State, so if you're planning on lingering somewhere, you'd be wise to check it out.

[s/v Jedi]

I don't understand the negative attitude towards "offshore registering" your boat and it certainly is not illegal to do so; you are wrong about that Paul! Legal methods for paying less tax are completely... legal, honorable and even admirable. Only fools find ways to pay extra tax.

When you, not being a BVI citizen, want to register your boat there, you will find that you, personally, can't do that. So, you need to erect a company in the BVI and your company, being a separate and BVI entity, can register the boat. The boat will be owned by the company and the company's share capital is all invested in the boat. The "agent" you hire, is the lawyer/notary to erect the company and supply the address, director's and secretary, which are all required for keeping up the company. It's all easy and quick, you will never even have to go there if you don't want. The total cost is $5k-$6k first year and about $1,200 each year thereafter. That includes the yearly registration fee, government fee (instead of paying tax you pay a fixed fee) and the fees for the "agent". Normally, you would need financial gain somewhere that more than compensates these fees before it makes sense. The BVI company can be used for any business like any other company and it's profits are tax-free as long as you don't sell/operate the BVI market itself. Again, this is just as legal as buying milk in the Publix.

Instead of BVI you can do: Cayman Islands, Marshall Islands, St Vincent, Panama etc.

For us EU types it makes sense for being able to sail to the EU without paying VAT (stay 18 months). Other advantages I've heard about are separation of liability and the wish to fly a different ensign. BVI and Caymans are very popular because you fly the British ensign which gives you a lot of advantages that other flags, like Panamanian, lack. Like easy US entry etc. That is actually the only negative for Panamanian registration, the rest is all much better (and cheaper) than British flagged.

A BVI flagged boat does not pay state taxes in any US state as long as it has the federal cruising permit. It's just a foreign boat with a foreign owner, sailed by you.

cheers,
Nick.

[hellosailor]

"The total cost is $5k-$6k first year and about $1,200 each year thereafter. "
Nick, if the boat is owned by a corporation, doesn't that also mean the corporation needs to pay corporate insurance rates, rather higher than personal ones?

[Pelagic]

Well explained Nick.

If your plans are not to keep the yacht mostly within your resident country of which you are a national then it is silly to invoke State taxes and native liabilities for short visits.

If you plan to have the yacht travelling mostly in countries where you are not a national, then keeping your yacht registered anonymously with a well received British Ensign or other flag of convenience is a much more private and non political presentation, than identifying yourself at a distance

You don’t need to own a Super yacht to reap the benefits of owning a foreign flagged yacht under corporate ownership.

As Nick explained, it has other perfectly legal and honorable business uses which may become of value to you as your travels expand business opportunities outside your residence.

[Pblais]

You don’t need to own a Super yacht to reap the benefits of owning a foreign flagged yacht under corporate ownership.

The point is the numbers are not always in your favor to do so. Avoiding taxes to pay fees is not the same as just avoiding taxes. Once it's gone I don't care where the money ends up. It would cost me a lot more money to maintain a foreign flag.

The total cost is $5k-$6k first year and about $1,200 each year thereafter.

I can keep a 1/2 million dollar boat in the state of Virgina and pay all the taxes both sales and personal property taxes and save money. Not included I would save on the insurance, slip fees, and maintenance. With the last items included I would think you need more than a million dollar boat to save money. So yes it's true since most super yachts really start at 10 million US. But they still have hideous operating expenses.

There really are no federal taxes to be paid for US boats. It's only up to the states.

Instead of BVI you can do: Cayman Islands, Marshall Islands, St Vincent, Panama

You forgot Jersey (sorry Dave). The list is not a long list in any case. In all the rest it is not legal to title a boat unless you are a citizen. That was my original point. It's true in all countries any way. A small few number allow local agents to make money off EU hostages but you can't do it yourself.

The original question was about titles not taxes.

[capcook]

Originally Posted by s/v Jedi

The total cost is $5k-$6k first year and about $1,200 each year thereafter

Thanks All... this is really helpful..


Nick, do you know if BVI assesses any annual taxes (in addition to annual fees for the corporation) on vessels left in the country indifinetly ? All the States assess either a Personal Property Tax or equivalent. In Florida, it is assessed on January 1 and is quite nasty...


Again thanks for the input...

Cheers

[Dockhead]

Originally Posted by Pblais

The point is the numbers are not always in your favor to do so. Avoiding taxes to pay fees is not the same as just avoiding taxes. Once it's gone I don't care where the money ends up. It would cost me a lot more money to maintain a foreign flag.



I can keep a 1/2 million dollar boat in the state of Virgina and pay all the taxes both sales and personal property taxes and save money. Not included I would save on the insurance, slip fees, and maintenance. With the last items included I would think you need more than a million dollar boat to save money. So yes it's true since most super yachts really start at 10 million US. But they still have hideous operating expenses.

There really are no federal taxes to be paid for US boats. It's only up to the states.



You forgot Jersey (sorry Dave). The list is not a long list in any case. In all the rest it is not legal to title a boat unless you are a citizen. That was my original point. It's true in all countries any way. A small few number allow local agents to make money off EU hostages but you can't do it yourself.

The original question was about titles not taxes.

Well, you don't avoid any taxes by registering in a foreign country, at least if you're American or British. Again, taxes have nothing to do with flag in most countries. In some cases there is a small import duty when you bring a yacht into the U.S. from abroad, but this is due upon IMPORTATION of the boat, and flagging it has nothing to do with that -- it is physically bringing it into the country. State tax is the same -- it has nothing to do with the flag, it has to do with the vessel being present in the state more than a certain period of time and/or the owner being resident there.

In the EU, including the UK, you pay VAT on a boat when you "import" it. If you are not an EU national or resident, you can bring a boat into EU waters for 18 months at a time as a "temporary import" before having to pay tax. Here maybe the flag does play some role -- if you flag the vessel in an EU country then you can't use the temporary import scheme. But you can flag a vessel in an EU country and NOT pay any VAT -- if you're using the vessel in the Caribbean, for example.

Owning a boat in an offshore company might have some advantages if you're chartering it. But if you're not generating any income then I can't really think of any advantage. Coat Guard registration for Americans is great and you don't pay any taxes you wouldn't otherwise pay. For Brits, likewise with MCA registration. I'm buying a boat in the UK and as a U.S. citizen who does not reside in the UK I am not eligible to register her in my own name, and so I'm doing it in a UK company which I set up for the purpose. The boat is VAT-paid, but I don't have to UK flag her to maintain that status. I want to maintain the UK flag just to make it simpler when I sell her (and to attract less attention in UK waters -- I figure a U.S. flag would be kind of confusing to the authorities). You can set up a UK company in a few hours online for about $150, and it costs peanuts to maintain. There are no taxes whatsoever on boats in the UK (hooray!) other than VAT due at purchase. It's great.

All of this is perfectly and absolutely legal; don't let Paul scare you. You can always, as far as I know, own a boat in a local company, whatever your citizenship or residency. You can own in your own name as long as you're either a citizen or a resident (you don't have to be a citizen).

Insurance rates are exactly the same if you own in a company; the rates are determined by type of use, not form of ownership (and the rates are very low in the UK, only about 0.25% of the declared value per annum for a very broad policy). The UK is a surprisingly yacht-friendly place; cheap insurance, no taxes, no licenses (except for radios), almost no restrictions on discharges (unless you're polluting with oily bilge water), amazing infrastructure. Would be yacht paradise if it weren't for the horrible weather. And the expensive marinas and fuel.

[Dockhead]

Originally Posted by s/v Jedi

For us EU types it makes sense for being able to sail to the EU without paying VAT (stay 18 months). .

Now that IS illegal, if the boat is being operated by EU citizens. I don't know if it's enforced, but that is definitely not buying milk at Publix. If the boat were being operated by me , then it is perfectly legal.

Originally Posted by s/v Jedi

A BVI flagged boat does not pay state taxes in any US state as long as it has the federal cruising permit. It's just a foreign boat with a foreign owner, sailed by you.
Nick.

I'd be somewhat careful with that if you're a U.S. citizen and resident. That's a bit of a gray area, which according to some things I've read is tolerated, but could definitely be considered -- if they chose to enforce it -- a scheme artificially created to avoid taxes. Plus you have to take the boat out of the country after a year. I would just pay the taxes myself if I were a U.S. citizen, U.S. resident, and planned to keep my boat in my home state.

See:

raysloans.com - OFFSHORE REGISTRATION - Recreational lending for boats & (RV’S)

[hellosailor]

Dockhead, it is the same basic problem as the infamous "Delaware Corporations" that owned boats as a tax dodge so commonly into the late 70's before state enforcement got stepped up all over in the US.

If the sole purpose of a corporation/business is to evade taxes, as opposed to avoiding taxes, then the tax authorities usually catch up and deem it to be a "sham corporation". Seizing the assets, assessing fines and penalties back to day one at the highest possible rate, freezing bank accounts...all the usual good stuff.

Folks think international borders help prevent that, and to some extent they still do. But offshore credit card accounts (Cayman Islands) and now Swiss banks rejecting US customers...our IRS has developed some finesse with applying international leverage to make sure "render unto Caeser" happens more often.

I'm sure there are still good schemes out there and good ways to, ah, hide assets and ownership. From what I'm told the IRS subscribes to the same magazines that pitch those offers to everyone else. <G>

[Dockhead]

Originally Posted by hellosailor

Dockhead, it is the same basic problem as the infamous "Delaware Corporations" that owned boats as a tax dodge so commonly into the late 70's before state enforcement got stepped up all over in the US.

If the sole purpose of a corporation/business is to evade taxes, as opposed to avoiding taxes, then the tax authorities usually catch up and deem it to be a "sham corporation". Seizing the assets, assessing fines and penalties back to day one at the highest possible rate, freezing bank accounts...all the usual good stuff.

Folks think international borders help prevent that, and to some extent they still do. But offshore credit card accounts (Cayman Islands) and now Swiss banks rejecting US customers...our IRS has developed some finesse with applying international leverage to make sure "render unto Caeser" happens more often.

I'm sure there are still good schemes out there and good ways to, ah, hide assets and ownership. From what I'm told the IRS subscribes to the same magazines that pitch those offers to everyone else. <G>

Well, I never suggested hiding anything. If you have to hide your ultimate ownership then that's a good sign that your scheme is not perfectly legal. I am the official owner of the UK corporation which will own my boat; that fact is in the public record which anyone can see. It is also perfectly legal for a U.S. citizen to own a BVI company (you have to report it as a CFC though, to the IRS) which can perfectly legally own a boat. Things get messy, though, when you own a BVI company which owns your boat which you park right in front of your house in Ft. Lauderdale, where you are a resident. It's not a question of a "sham company" (no such thing legally) but it is a rather transparent tax dodge with no purpose other than avoiding taxes, and the authorities have the right to look at substance over form in such cases and hit you up for the taxes.

[hellosailor]

"Well, I never suggested hiding anything."
And I never said you did. I commented on a question of corporations versus taxmen, nothing more implied or intended.

'It is also perfectly legal for a U.S. citizen to own a BVI company (you have to report it as a CFC though, to the IRS) which can perfectly legally own a boat."
Absolutely. And as long as that corporation has other assets, other business, other reasons for existing, perhaps earns money and operates as a business in general--that might be agreed to by the tax men as well.
It is when the corporation has no other clients, does no other business, and performs no other functions except tax evasion, that it gets declared a sham.
All else being relative and just a matter of scope and detail. Including, whether the tax men are really looking to nail someone. (Al Capone's bane? <G>)

[Reality Check]

Originally Posted by Dockhead

I've just been through this. If you live in the U.S. and plan to keep the boat there, then I can't think of any reason not to register in the U.S. U.S. or BVI doesn't affect your taxes. If your boat spends a certain amount of time in any U.S. state then you will pay taxes there, whatever the flag.

Agree! I also went through the same evaluation and did exactly the same and the same as most other US Citizens have done. While every state may be looking at ways to gain more tax money, at this time as stated in this post group, you do not owe any state taxes unless you bring the boat to the state and stay longer than the prescribed time. I know of few people who purchase a boat in BVI that do not leave it in the BVI long term... even effectively for ever with no intent of ever bringing it back to US. US flag is cost effective and had no significant drawbacks that I have seen and none has been reported to me by a mass of sailors I run across and have extended conversations on this subject and many others both on the boat and here and other sailing related forums.

Having it BVI registered does have many negative factors, cost being the primary and insurance can also be a significant cost adder from a non individually owned boat. Corporations, including BVI ones are far more open to taxes than individual boats owned by real people.

If you are going to spend time in the BVI/USVI and SVI area, the US registration would be of significant advantage if only for the Local Boaters Option available.