Every two months Remco Immink, of superyacht finance company Ciris Capital, will share his views on subjects related to the financing of yachts. He will start by explaining the differences between traditional yacht finance and leasing.
The season has come to a good start, in both the Netherlands and in the rest of Europe people are enjoying their motor and sailing yachts. For me personally, this always raises the question of “Where do all those beautiful boats come from?”. Mainly, they are here because of the warm interest of their owners in yachting, and the active and good support by shipyards and brokers of the yachts. But one can also look at these yachts from a different angle. How are all these yachts financed and who really owns the yacht; are they private property, chartered for a short or long period, financed or leased?
As I said before in the press, financing is a broad term. What do we mean by the term financing? Is the yacht financed from own resources, through liquids of an owner’s company, through a mortgage on real estate, through a payment on stocks, through a traditional yacht finance program or through a lease?
Why are yachts financed?
When financing your yacht, the most important issue is to keep your own resources liquid. One’s resources can used in different ways to generate a higher output than the purchase of a yacht, on which one won’t always make a positive output. Even now with the rising interest rates at the capital markets the costs of financing do not weigh up against the gains which can be made on other investments, the stock exchange or other funds.
How can a yacht be financed?
If we speak of the financing of a yacht, we usually mean a traditional yacht financing or a lease. With a financing on a yacht we usually talk about loans of 70-80% of the value of the yacht with a duration of 10 to 15 years. The yacht can sail under most common flags and an owner can sail wherever he wants, off course within the range of the insurance company. Characteristic of a yacht finance is that the yacht is private property or property of a company which belongs to the owner. To protect the interest of the bank a mortgage is secured on the yacht. An alternative for this way of financing is the lease.
Is leasing a useful tool for private individuals who want to buy a yacht? After all, private individuals can’t refund VAT. That’s right, but the Italian lease can be a good alternative for financing your yacht. With an Italian lease the yacht is bought by a lease company which is established in Italy. When the company is established, the yacht is leased to it’s user. The normal term is three years and usually it expires after 120 months. On the monthly terms VAT is being invoiced by the lease company and paid to the tax authorities. The first advantage is that the VAT is not paid at once, but during the term of the lease.
However there is one other important advantage. The Italian lease makes a distinction between the VAT which needs to be paid, and the length of the yacht. The bigger the waterline length of the yacht, the bigger the advantage. For yachts bigger than 24 meters the advantage can be that only 6% VAT is paid, instead of the usual 20% Italian VAT. At the end of the term the lessee can make use of the option to buy the yacht and it becomes private property. The yacht can be registered under most of the acceptable registries/flag states.
Italian Lease or yacht financing?
Both ways have it’s own advantages and disadvantages which are dependent on the situation of the individuals. For this reason we always make a vast inventory on the possibilities and wishes of future yacht owners. Based on these results we can advise every client on the best way of financing. Ciris Capital can offer it’s clients both traditional finance and leasing. The traditional finance program is offered by Ciris Capital BV (based in Zeist, the Netherlands) and the Italian lease is offered by Ciris Capital Leasing srl (based in Milan, Italy).
For more information or a personal check up on your situation, please contact Remco Immink of Ciris Capital.