Tax and Title Questions

[Meck]

Hello all,

My wife and I are planning to cruise into the offshore sunset on our still to find Catamaran this spring.

I'm hoping someone might have some advice for us.. We just set up a business corporation in Belize and we are planing to purchase the yacht in the US, through the Belize Corporation. After purchase we expect to spend at least 3 months fixing and refitting the boat (hopefully in Texas) to our taste and then sail off into the sunset, destination unknown. We don't want to pay US taxes if we don't have too, but I don't fully understand the consequences of titling a boat offshore.

I'm wondering, since we are US citizens if this is good idea??

Should we flag the boat with a Belize Flag?

What are the advantages/disadvantages of an offshore flag?


Any advice would be GREATLY appreciated.

Happy New Year!

Jon and Jules
Vail Colorado (for a few more months!)

[Charlie]

Welcome aboard. Good luck with your goal.

Pretty complicated question. If you do a search you will find plenty of questions in regard to title but I don't remeber seeing one about titlling a boat in Belize. There are other states that have low to know taxes and don't require you to be a resident.

[Chief Engineer]

It vexes me that people want to title their vessels under foreign flags....with the express intent to avoid taxes. But hey, whatever floats your boat.

I don't know what if any difficulties you may have in port entry...an American Crew on a foreign flagged vessel. Probably none.

For me, I would much rather have whatever protection (real or imagined) the American Flag offers.

BTW if you plan on being in Maryland waters for longer than 90 days in a calendar year....get your checkbook out.

[Ex-Calif]

I think you have to study the rules of Belize. I am an American with a work permit and visa for Singapore.

It would be ridiculous of me to have a US registered boat while living here. However, even with proper visa and work permit I had to get a local sponsor in order to register my boat. Basically just an "I know this guy" sort of thing.

If I bought a boat in the US with the intention of bringing it here I would use every legal means to no pay US tax, register it here and pay appropriate taxes here.

There are a ton of reasons for Americans to not register in the US.

You business in Belize may provide the opportunity to export the boat from the US and register it there. There may be taxes to be paid in Belize.

[Chief Engineer]

Please enlighten us>

Originally Posted by Ex-Calif

There are a ton of reasons for Americans to not register in the US.
.

[Ex-Calif]

Originally Posted by Chief Engineer

Please enlighten us>

Primarily if you don't live there. But also:

Legal avoidance of taxes
Security
If you are a resident, permanent resident or dual citizen of a country that has less bureaucracy

OK maybe not a ton of reasons but certainly there are enough valid reasons to not register in the US.

[maxingout]

I documented my boat in the Cayman Islands for liability protection from absurd USA lawsuits.

I am a physician, and I was afraid of getting sued in the USA if someone was ever injured on my yacht. Lawsuits are out of control in the USA, and by putting my boat in a Cayman corporation, it meant that I personally could not be sued if there was a yachting accident. The boat is owned by the Cayman corporation, and not by me.

I lived outside the USA for twenty-eight years and was not a resident of any state. I purchased my yacht to specificially do a circumnavigation, and I needed a flag of convience during the voyage. The Cayman Islands worked as good as any other flag.

When I purchased my catamaran, I purchased it offshore in the Bahamas, and I was living in Saudi Arabia at the time of the purchase. I had a representative sign the papers for me in the Bahamas because I could not be present.

As far as taxes are concerned in your case, if you do the deal onshore, you will owe taxes. If you do the deal offshore and document it offshore, then you will owe whatever taxes and fees are due offshore.

Docmentation offshore isn't cheap, and in fact may be more expensive than registering it in the USA. Cayman documentation and corporation costs more than $2500 annually to maintain in many cases. I've been there and done it.

[maxingout]

What are the advantages/disadvantages of an offshore flag?

In our circumnavigation, there were no particular disadvantages to flying a Cayman Islands Flag. Documentation certificates from the Cayman Islands are considered British Registry. We flew the Cayman Island Flag, we showed our British Documentation papers from the Cayman Islands, and used our US passports. In an eleven year circumnavigation, none of these things mattered to port officials anywhere we travelled around the world.

[s/v Moondancer]

If you have a US registered boat the Coast Guard have right of search anywhere in the world...However, listening to my SSB one night I heard a Miami Coast Guard Officer say:

" Sorry Ma'am, I can't send a Coast Guard cutter 300 miles out of US waters for a none US boat!" But then she was not a citizen of the US either.

My last boat was US Coast Guard documented (cost $133) and my present one is on the British secondary register because that existed when I bought the boat. Practiacally there has been no difference either in or out of US waters. I did not pay state sales tax on either.

However, as a doctor who once got sued by a patient, who I had never met or had any responsibility for, who collasped on my day off ( I did save her life a day later when I returned to work) I can understand the liability issue. It is something about which my wife worries because while the boat is a foreign corporation I am not and there is never any doubt about who is in charge.

If I bought a US boat in the US I would get Coast Guard Documentation and good insurance.

Phil

[Bradley]

For a USA citizen it is difficult for me to determine any situations for a cruising sailor where documenting with other than the USCG would be a better and cheaper course. The one exception may be where you are a permanent resident alien in another country and the boat will be kept there the great majority of time.

First, it is easy and cheap to document and maintain documentation in the USA. And it is extremely expensive to do a foreign registry -- about 2 to 5K a year. This will be a lot of liability insurance.

Secondly, if there is any perceived advantage to having the boat owned by a corporation, that can easily and cheaply be accomplished with a Delaware corporation. Broadly speaking, the law on liability is not where the boat is registered but where the liability situation occurred. If I am driving my MO licensed vehicle in IL and have an accident, the law of IL is applicable.

Of important consideration for you is to remember that however and wherever a boat is title/documented has no affect on the captain's liability. A captain is always personally liable for his own negligence. This is no different than a truck driver for a large trucking company is still personally liable for his/her negligence.

Thirdly, I would imagine it would be much easier to do the paperwork for selling the boat if it is documented in the USA than in an offshore tax haven.

Fourth, there does not appear to be any insurance savings to offshore titling. As long as the captain has a USA passport, all of the insurance companies I have contacted treat the boat as a USA boat for insurance underwriting purposes. Again, let me add the caveat that being a permanent alien resident may change a comapny's position, but it will have no affect on cruisers.

Fifth, it will not save personal property taxes. States that have personal property taxes do not care where the boat is titled. They just care if the boat is in their state.

As a last thought. Corporations that have no business purpose and a single asset will always have a difficult time keeping the courts from "piercing the corporate veil." Also, the assets of the corporation (the boat) will be subject to execution even if there is no piercing.

[Ex-Calif]

Originally Posted by Meck

Hello all,

My wife and I are planning to cruise into the offshore sunset on our still to find Catamaran this spring.

Originally Posted by Bradley

For a USA citizen it is difficult for me to determine any situations for a cruising sailor where documenting with other than the USCG would be a better and cheaper course. The one exception may be where you are a permanent resident alien in another country and the boat will be kept there the great majority of time.

Bradley - While I don't dispute anything you wrote for a boat that will be kept in the USA the original poster is planning on leaving the USA and there may be advantage to being non-US registered.

[Caribsailors]

Just a thought, as this is process I went through for my new life. Don't know how it will work for an American.

I purchased my vessel offshore and refitted offshore. Registered the vessel under my countries flag, because I'm a proud Canadian, and have not paid any tax on the vessel in my country because we have not entered Canadian waters.

Luckily or unluckily Canada has no tropical entities


Cheers

[REsCat]

I purchased my vessel offshore and refitted offshore. Registered the vessel under my countries flag, because I'm a proud Canadian, and have not paid any tax on the vessel in my country because we have not entered Canadian waters.

I just purchased my boat and documented it Canadian for the same reasons although I realize that I can never bring my boat back to Canadian waters without paying (duty 9%,then pst/gst 14%)OUCH!!!!
However on making entry anywhere else, Cdn passports with Cdn registry keeps it somewhat simplified and Insurance/liability is reasonable although the boat is owned by a Canadian Corp and that has +/- .

[Connemara]

Originally Posted by REsCat

I just purchased my boat and documented it Canadian for the same reasons although I realize that I can never bring my boat back to Canadian waters without paying (duty 9%,then pst/gst 14%)OUCH!!!!
However on making entry anywhere else, Cdn passports with Cdn registry keeps it somewhat simplified and Insurance/liability is reasonable although the boat is owned by a Canadian Corp and that has +/- .

Question: Surely that's only if you are importing the vessel? Isn't there a grace period?

IOW, if you come up the Erie Canal and spend a couple of months on the Canadian side, there's a few months before you're considered to be importing your boat and subject to import duties.

Or so I think I heard someone say once. Gord will probably know.

OTOH, it's probably not a good idea to try to bamboozle the customs guys. Guy down the way on A dock imported his Catalina from the States and asked the Customs/Excise guy what would happen if neglected to pay the duties.

"Doesn't bother me," came the reply. "Sooner or later we'll just come and take your boat."


Connemara


PS: GST is down to 5%, but I can't see why you'd be expected to pay GST or provincial sales tax on a boat purchased offshore. So probably just the import duties.

[REsCat]

Originally Posted by Connemara

Question: Surely that's only if you are importing the vessel? Isn't there a grace period?

IOW, if you come up the Erie Canal and spend a couple of months on the Canadian side, there's a few months before you're considered to be importing your boat and subject to import duties.

Or so I think I heard someone say once. Gord will probably know.

OTOH, it's probably not a good idea to try to bamboozle the customs guys. Guy down the way on A dock imported his Catalina from the States and asked the Customs/Excise guy what would happen if neglected to pay the duties.

"Doesn't bother me," came the reply. "Sooner or later we'll just come and take your boat."


Connemara


PS: GST is down to 5%, but I can't see why you'd be expected to pay GST or provincial sales tax on a boat purchased offshore. So probably just the import duties.

My Investigations revealed a ZERO tolerance for bringing the boat into Canadian waters(ok 24-48hrs max, one time!) before 9% duty and (yes 5% gst) and 8% pst is collectable on the "duty paid value converted into Cdn funds from the US purchase price that I paid. OUCH! OUCH! OUCH!

The customs guys are vigilant and a Catana 471 is a large, relatively rare boat seen in CDN waters and would get noticed anywhere it goes. Try to evade them or play dumb will end in a mess!