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Old 13-02-2014, 13:43   #16
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pirate Re: Flag of Convenience

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Yikes I didn't know that, can you explain.
You buy a US boat.. its a US boat and can come and go at will.. regardless of the flag.. you however are a completely different matter..
I would suggest you go SSR.. pennies for a 5yr registration and you'll be more welcomed than a Stars and Stripes fluttering off the back.. sorry guys.. that's the way it is..
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Old 13-02-2014, 13:49   #17
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Re: Flag of Convenience

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Yikes I didn't know that, can you explain.
Since I'm a US citizen I only hear this from other cruisers but apparently the US rules for non citizens cruising our waters, technically you are supposed to check in and report every time you move to another port.

Seems like enforcement and even awareness of this rule is spotty. Some cruisers report in some locales they received strict admonitions from the authorities if they failed to exactly follow the rules and in other locales the authorities asked them why they were calling to report.
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Old 13-02-2014, 13:55   #18
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Re: Flag of Convenience

Ludd, you could easily get in big trouble unless you contact the sources to find out the real laws. Unless Congress went and did something behind our backs, "you" can't federally document a vessel in the US. The ownership, personal or corporate, has to be 51% US Citizen to federally document a vessel. There are no exceptions to that although a DUAL citizenship might be forgetting to mention they were counted as being "US".

There's also a danger to playing with US state corporations. If the corporation has no other major assets and no business purpose besides sheltering ownership of the vessel, and the vessel itself is not run as an "arm's length" business (i.e. as a full time charter vessel with a full time manager or agent) then the entire corporation can be deemed a "sham corporation" and tossed out. Our IRS does this all the time for tax purposes, other agencies can follow the same protocols.

Insurance, liability, confiscation, deportation...these are the problems you can get into by setting up a corporate dodge, or trying to find other ways to beat the system. Now, some states will allow non-residents to register a boat, and AFAIK all states will allow non-citizens to register a boat, no corporation or sham required. If it is state-registered you won't need a cruising permit to keep it in the US, although as mentioned, you may have some issues clearing foreign customs with it.

Bottom line? Check with the sources, or with an admiralty lawyer, who has malpractice insurance to cover some of your potentially huge damages if they're wrong about things.

These days, tax men and many others have no sense of humor and are aggressively pursuing sources of revenue. Like confiscating vessels and levying fines.
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Old 13-02-2014, 14:09   #19
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Re: Flag of Convenience

On my pontoon here in SW Turkey there are at least 10 boats with Delaware registration, out of about 50. There are 3 other pontoons plus a harbor wall and an inner wall where the ratio would be the same. They are all owned by Turks. Our poor old USA cruisers (3 flags only) are assumed to be Turkish from a distance but since their boats are obviously not for the charter market, close up they are better-recognized.
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Old 13-02-2014, 14:10   #20
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Re: Flag of Convenience

As a small word of caution from someone that has fallen foul of the Infernal Revenue Service after spending 1 day too many in the US, be very very careful of the implications of buying a US flagged vessel, keeping it in the US or buying an LLC. If you are not careful you will be considered a US resident and subject to tax on your worldwide income. Every single penny of it!!! And the IRS will chase you to the end of the world for it.

Having looked into the whole registration thing due to Croatia joining the EU this year we found out that if you are an EU citizen and have a vessel in EU waters regardless of the flag it flies you are liable for VAT. So even if you kept it in the US or Caribbean but ventured into the waters of Martinique or Guadalope you would instantly be liable for full French VAT at 19.7% (last time I checked the rate) as these 2 islands are classed as EU territory.

Sometimes the old adage of "honesty is the best policy" does stand true and I would personally declare the true and honest situation rather than risk losing everything.

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Old 13-02-2014, 14:15   #21
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Re: Flag of Convenience

"On my pontoon here in SW Turkey there are at least 10 boats with Delaware registration,...They are all owned by Turks. "

And unless you are their confidant, attorney, or similarly privileged, you can't know the true and complete details of their "ownership", much less whether it is legal and proper. On the other hand, anyone can read the laws and follow the court cases, i.e. prosecutions in tax court. The Turkish government may turn a blind eye and everyone many find it very convenient--but that doesn't mean it is safe, or legal.
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Old 13-02-2014, 14:29   #22
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Re: Flag of Convenience

We see Turkish boats with US flags in Greece, too and they don't care, and they are EU. The Turkish government doesn't turn a blind eye to much at all re tax and these boats are all Delaware-registered for that reason.

If you move out of Turkey to the EU-area with a boat registered anywhere at all and you are a Resident of the EU, VAT is definitely payable but I think the OP is well aware of that. If he stays in Turkey, doesn't apply.
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Old 13-02-2014, 15:16   #23
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Re: Flag of Convenience

Copied from the USCG web site addressing documentation and citizenship.

Note the highlighted section. It specifies majority ownership of the corporation by US citizens only for coastwise (which means for commercial use like cargo, tugs, etc) or fisheries endorsement of the documentation. That does not apply to recreational vessels.


Citizenship is established by completion of form CG-1258. In addition to individuals, corporations, partnerships, and other entities capable of holding legal title may be deemed citizens for documentation purposes. Corporations must be registered in a state or the U.S; the chief executive officer and chairman of the board of directors must be U.S. citizens, and no more than a minority of the number of directors necessary to constitute a quorum may be non-citizens. In addition, at least 75% of the stock must be vested in U.S. citizens for a coastwise or fisheries endorsement.
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Old 13-02-2014, 18:50   #24
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Re: Flag of Convenience

Thanks Skipmac
Do you perhaps have a link to that USCG website ?
I'd certainly be interested in trying to find the section that covers recreational vessels.
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Old 13-02-2014, 19:46   #25
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Re: Flag of Convenience

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Corporations must be registered in a state or the U.S; the chief executive officer and chairman of the board of directors must be U.S. citizens, and no more than a minority of the number of directors necessary to constitute a quorum may be non-citizens.
[/B]
While technically this does mean the Corporation wouldn't have to be majority US owned, there is the practical matter. In the case of this discussion you have a foreign individual. Now is he then going to form a corporation and appoint a CEO and Chairman who are US citizens and a majority of the board of US citizens, which essentially means giving up control of the Corporation. Yes, as owner, he could still vote them out and replace them but still a very complicated situation. And who would serve in those positions? They almost certainly would require compensation.

More reasons to have an attorney knowledgeable in the field to advise you. While it is possible to form a Corporation and have non US owners as majority shareholders, it's hard for me to imagine when that would be a preferred choice for an individual. When this would be used is a US Corporation with US officers and directors but a subsidiary of a foreign entity. I can't imagine an individual going this route, however.
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Old 13-02-2014, 19:50   #26
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Re: Flag of Convenience

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Originally Posted by hogesinwa View Post
We see Turkish boats with US flags etc
Just because they do it, does not mean it is legal.

The US is very insular. I bet these registrations slip through because the process simply does not check the citizenship of the owners if the corporation. Similarly, bureacrats in other countries don't care. As long as the registration certificate is legitimate they must take it at face value.

If the boat never makes it into US waters then no problem. Even if the boat makes it into the US then most officials will take the registration certificate at face value. But eventually you will meet a savvy official and then you will be in hot water.

If you are only going to keep the boat in the US then you do not need federal registration. Just get state registration and mark your boat appropriately. All US law enforcement is more familiar with state registration and no questions will be asked. Cruising on a foreign flagged vessel in the US is a huge pain.

In any case, the OP might be over thinking this. For Australia, VAT is only due when the boat is imported into Australia. My boat is Australian registered but VAT has never been paid because it has never been to Australia. I bet the rules are similar for the UK. If you want avoid VAT register the boat in the UK just don't take the boat home.
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Old 13-02-2014, 20:12   #27
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Re: Flag of Convenience

Just buy the asset, register under the SSR. Don't worry about vat till you decide, if ever, to take her home.

Also beware of Internet advice. Martinique and guadaloupe are outside the Eu VAT area even though they are inside the EU customs union. Hence they are similar to the canaries and VAT would not be due.

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Old 14-02-2014, 01:05   #28
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Re: Flag of Convenience

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Originally Posted by skipmac View Post
Since I'm a US citizen I only hear this from other cruisers but apparently the US rules for non citizens cruising our waters, technically you are supposed to check in and report every time you move to another port.

Seems like enforcement and even awareness of this rule is spotty. Some cruisers report in some locales they received strict admonitions from the authorities if they failed to exactly follow the rules and in other locales the authorities asked them why they were calling to report.
yeah, was thinking of that.

Plus I beleive a non US reg boat will need a cruising permit - valid for 3? / 6? Months.

And wherever reg is boat will be subject to local taxes depending on how long it stays in a state ( rules vary by state). Some states even have purchase taxes on s/h boats and some have annual wealth taxes.

I agree with GBN that internet advice not to be relied upon! But imo an excellent and cheap way to get a handle on the overall issues and questions for those who can be relied upon - albeit that usually involves payment to a pro (with PII cover!).
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Old 14-02-2014, 01:25   #29
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Re: Flag of Convenience

Btw I agree with your concerns on buying a s/h company.

The goood news with a boat at least starting with uscg documentation is that is absolute proof of title (unlike either the UK ssr or part 1). Plus it has a register of liens.

Imo if buying in the USA, but only intending on spending a few months / season in the USA then I would go with the ssr route (re reg as part of the purchase transaction) and make sure she was not in a state that had a sales tax and that she didi not stay anywhere long enough to get a state tax bill - a rolling stone gathers no taxes .

UK reg itself does not generate any vat bill - if the boat does not enter eu waters.

Regarding Delaware, iirc the state does not record beneficial ownership of companies (only shareholders) -unlike the offshore tax havens like Jersey!....... the irs only interested in whether the company is owned by a US citizen, you / the company gets to declare to the irs. As no US official has any reason or capacity to check the boats in Turkey then the boat reg not following the letter does not become an issue - but that not the same as being 100% kosher. .....personally I would avoid the Delaware route on simple cost reasons. If in the future you are no longer a UK resident (and need to not have any document signed by you saying that you are!) then I would go for Jersey reg (same as UK part 1 - including with the red ensign), as an eu citizen you can own the boat in own name - which will save a fortune on annual company costs.
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Old 14-02-2014, 01:27   #30
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Re: Flag of Convenience

Or keep the Seadog!

Www.Facebook.com/seadog30
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