Maritime Services

There are many advantages to the holding of vessels and other maritime structures in a foreign country. Apart from the potential tax benefits of registration in a low or no tax country foreign registration may allow a greater freedom of movement and other commercial freedoms such as freedom from restrictions on nationality of crew. Registration of a vessel or other maritime structure under a foreign flag may be possible either freely or may require some local presence such as a resident agent and the registration of a foreign company. Registration may also be subject to restrictions on the nationality of the crew or skipper. Registration requires the payment of a fee usually based on the intended usage of the vessel (whether it is a commercial or pleasure craft) and sometimes its length and tonnage. In the case of both pleasure and commercial vessels the cost of registration and any ongoing renewal charges vary from country to country.

Some of the more popular maritime countries allow for the payment of a fixed tax (sometimes subject to the formation of a local company) rather than a percentage of income. The principle taxation benefits applicable to foreign registration for commercial vessel are a reduced rate of income tax over commercial operations (whether a low percentage or fixed charge). There may also be benefits in connection with provisions for offsetting capital depreciation of vessels against chargeable income.

Value Added Tax Reduction Scheme (European Union Only)
The operation of both pleasure and commercial vessels within the waters of the European Union (EU) may amount to an importation for VAT purposes. In most cases VAT will need to be paid over the value of the vessel on construction or importation. The applicable rate varies from state to state but is likely to be around 20% which in the case of a pleasure craft will be a cost. There are a number of government VAT schemes offered by member states to reduce the rate of tax to as little as 3.4%. Where these schemes operate they are listed in the country specific article on maritime services.

Ancillary Services
Vessel registration requires the support of a number of industries connected with the chartering, insurance, loan financing, managing, berthing, crewing and crew payroll. If any of the above services are going to be used in the country where the vessel is registered it is important to consider the quality of the local infrastructure as well as the availability and cost of resources including human resources.

Factors Affecting Choice of Country
The main considerations affecting choice of country will be based on local tax rates, registration costs and what restrictions are placed on the registration of vessels (such as restrictions based on who can own and operate local vessels) as explained above. Consideration may also be given to whether the vessel has to visit the country where it is flagged, the reputation of the country where the ship will be registered and any restrictions on the movement of vessels under the intended flag as well as the quality of the local infrastructure.