Canada. Buy a boat in the name of my corporation

[dmitrytoda]

Scotty Kiwi, TrentePieds and everybody else, thank you for your input!
I talked to my own accountant today and now I got a lot to think about lol

[Stu Jackson]

Originally Posted by dmitrytoda

Scotty Kiwi, TrentePieds and everybody else, thank you for your input!
I talked to my own accountant today and now I got a lot to think about lol

Cool, you're two for two! You took this advice as well as our recommendation to buy & read Waggoners.


Good for you!

[ChrisJHC]

Is this a way that it could work?

Have your company invest in a charter yacht via one of the big names.

That is clearly being run as a business with clear revenue expectations, contracts, third-party ownership, etc, etc

You then get to use it for personal use according to the terms of the contract.
In Aus, you may have to declare your personal use as a fringe benefit.

Of course, this doesn’t give you your own yacht and you only get to use it some of the time but it might work.
Some schemes I’ve seen give you 12 weeks a year personal use so that might suffice. Alternately, invest in 5 yachts and just move from one to another all year round.

[Lake-Effect]

Originally Posted by Scotty Kiwi

... I have owned and operated boats which might normal be considered to be pleasure yachts in my previous IT corporations without insurmountable issue...


As a profit center, the vessels' lost money, just as a swanky premises does.

In other words... Dmitry, maybe you're just not thinking big enough.

[boatpoker]

Originally Posted by dmitrytoda

I have a small corporation that has nothing to do with sailing (IT consulting) and some money in it that is enough to buy a boat. I want to avoid paying that money to myself as either salary or dividends (and paying personal income tax on it). So I want to buy a boat for the corporation, saying that I am going to use it for business: open a sailing school, charter it out, take tourists out for day sails, whatever.

This business does not need to actually generate an income (although that would be nice). My main goal is to avoid paying income tax that would decimate my capital, and not to be harrassed by CRA for it. And then charge all the boat improvements, marina fees etc as business expenses as well.

1. Has anybody pulled off anything similar?
2. Should I register a second corporation with a different business nature or I can use the same one?
3. Which kind of sailing-related business is the easiest to make look legit in CRA's eyes?

None of this will fly with CRA. The vessel must be used "exclusivley" for business purposes to write anything off. One phone call to CRA will confirm this.

Or read through this mess .....
https://www.canada.ca/en/revenue-age...e-vessels.html

[Capt. Lace]

Sell your business take the money to buy the boat and go into business. You have much more fun and an experience of a lifetime.

[Mainstreet]

Pay the appropriate tax to free the funds you have and buy the boat. Trust me, CRA will find you and will determine that you’re scamming them. At that point your life will be hell instead of paradise!

[grube]

Our current vessel is a Cdn made boat (Coastal Craft 45’) but was owned by a Cdn who lived in California. He was a wine vintner in Napa Valley and had been an accountant and a successful Wall St broker prior. He did exactly what you mentioned — but the boat was registered in the USA. I discussed with my accountant how CRA would look on that and he said to hold my hands out parallel— for purpose of putting on the handcuffs when they catch me — which they would. Note that they have hired on hordes of new young folks who are very sharp with their pencils and calculators (or modern versions thereof). They will catch you. So I just pay for all the expenses and it being a 30-knot two-engine powerboat vice our old sailing boats — it sure ain’t cheap.

[CharlesBTaylor]

Ah these sailor boat owners are a patient bunch It’s so aweful to lose the whole peace of mind that maybe boat owning brings but to place a scam over the experience is the crime Really you should educate yourself to the fact that whether you get caught or not The only folks you might run into that tried this you will meet behind bars. First educate yourself and practice good ethics And maybe you can relax on your boat being an honest person Please

[gagrant]

There is one corporate dodge that some friends with expensive boats have used and that is to purchase the boat in a corporation. The boat is then an asset in a holding company. As I understand it when you go to sell the boat you are actually selling a corporation and so the buyer does not have to pay all the taxes associated with the boat. You do have to pay corporate filing charges. It was popular at one point, but I heard that there is a problem with that strategy now. I have noticed when I do safety inspections for our club that there are a number of larger boats registered to corporations that function as family boats. You just buy the corporation that owns the boat. In BC sales tax if you buy a boat privately is 12% and only 7% if through a registered broker.

[The Other Side]

Your setting yourself up for an audit and they are never pleasant.

[JimJohnston]

The Canadian Federal Income tax says:
PART XV
Administration and Enforcement
Administration
Marginal note:Minister’s duty

220 (1) The Minister shall administer and enforce this Act and the Commissioner of Revenue may exercise all the powers and perform the duties of the Minister under this Act.

You need to study the preceeding 219 Sections of the Act to find out you won't have a chance.

[Montanan]

I'll go out a limb here but I suspect that CRA will be rather similar to the US IRS in this regard. This is guidance from the USA perspective.

Do recognize that you will be invoking GST / HST on the charter service.

Boat as a Second Home Tax Deduction
You can take the home mortgage interest deduction for one second home in addition to your primary home but you must itemize deductions. A boat is considered a second home for federal tax purposes if it has a head (bathroom) a bed (sleeping berth) and a galley (kitchen). You’ll need IRS Form 1098 to deduct the interest and also any points paid to secure a loan.

Boat as a Business
If you work from your boat, you can take a portion of such space on the boat as a "home office deduction" although that may raise a flag quickly. That would be limited to say the area where your desk and chair are on the boat, but not the berth, engine room, head, galley, salon, etc. Additionally, if you use your boat to entertain clients, you may qualify for a deduction as an entertainment expense. You must have a reasonable expectation of gaining future revenue as a result of this entertainment during which you must conduct at least some business discussions.

Thorough documentation of entertaining clients is necessary for each expense including date of use, location, reason for the use and the occupations of the persons aboard. The limit of the deduction is 50 percent of the costs associated with this outing (as with any other travel or entertainment expenses). You can include costs specifically related to that outing: fuel, food, drinks transient mooring or entry fees (such as for a fishing tournament).

Charter Boat Tax Deductions
You can charter your boat (acting as the captain) but you need to show genuine effort at making a profit. You’ll need a U.S. Coast Guard license to take out six paying passengers and you may need to increase your boat insurance if you use it for commercial purposes. You can write off depreciation (for example a straight-line 7 years), maintenance, boat equipment purchases, fuel and mooring costs. Detailed records of every expense as well as the amount of income will be necessary. To avoid extra attention from the IRS, you’ll need to make a profit in at least three out of every five years. You can only deduct the percentage of overall expenses that you use the boat for business. You cannot write off expenses when you’re pleasure boating, or living aboard, only the portion of time used for the charter if the boat has multiple uses [differentiate between time used as your abode, as your pleasure boat, as your business activity]. You’ll be paying income taxes on the revenue [income] you earn so do the numbers before deciding on this course of action.

Boat for Transportation
If you use your boat to commute (at least 50% of the time for business transportation) you can deduct fuel costs, insurance, repairs, dock or slip fees, crew salaries, hurricane storage, and depreciation. You cannot use the boat to entertain clients or that will nullify the boat transport deduction.

Taxes are Inevitable, But Can Be Managed
As the saying goes, “there’s no escaping death and the taxman,” so discuss the nuances of the above situations with an accountant or maritime attorney. There are many exceptions as well as frequent tax law changes so the issues are difficult to keep up with and the penalties can be high. Consult with a tax expert before settling on any course of action.

If you liveaboard the company boat then the company likely will need to charge you for such personal usage or to declare such as taxable income for such beneficial private use of company property.

It kinds of sounds like you might be trying to scam the system instead of truly develop a going business concern and the CRS will likely approach such from that perspective. It being easy for them to deny your filing as a business activity and then put the burden of proof onto you.

[LifePart2]

Originally Posted by ChrisJHC

Is this a way that it could work?

Have your company invest in a charter yacht via one of the big names.

That is clearly being run as a business with clear revenue expectations, contracts, third-party ownership, etc, etc

You then get to use it for personal use according to the terms of the contract.
In Aus, you may have to declare your personal use as a fringe benefit.

Of course, this doesn’t give you your own yacht and you only get to use it some of the time but it might work.
Some schemes I’ve seen give you 12 weeks a year personal use so that might suffice. Alternately, invest in 5 yachts and just move from one to another all year round.

Yes, that can work. When we bought our boat we bought it IN our corporation and we left it, for the first year, with a charter company in BVI. It earned money, and it cost money for maintenance. All that was reported as normal business expenses. We wanted to do a lot of refits on it, so there were a lot of tax-decuctible expenses.

When we decided to take it out of charter we then sold it from the company to ourselves privately. Now it is privately owned.

Was there much of an advantage over buying it personally and doing the same? Probably not.

The advice on this thread has been consistently: don't do it.

I agree with that. Not worth it.

[jeepers]

Originally Posted by dmitrytoda

Scotty Kiwi, TrentePieds and everybody else, thank you for your input!
I talked to my own accountant today and now I got a lot to think about lol

I have been self employed & employed for decades.
In Service, Maintenance, Construction, Engineering, Consulting, Retail businesses and more.
Filed my taxes was auditted twice with no changes, penalties, fines etc
Dmitry we need to chat.
In my opinion you are going about this the wrong way.
Yes, I just read the 4 pages of your post.
Hint;
Don't try to make your boat fit into your IT Consulting business.
But instead make your IT business FIT into your boat.
There is no "Nudge nudge wink wink"

Cheers.