PRESS RELEASES
2009 - The Year in Review
2008 - The Year in Review

MEDIA
July 2010 - Case Study - Alpha Z33 USA to Monaco
March 5, 2009 - Article: Business Review Week
January 2009 - Article: Offshore Yachting Wally Regatta
September 24, 2008 - Artricle: Herald Tribune
May 2007 - Article: Ocean Magazine
November 2005 - Article: Ocean Magazine

September 24, 2009 - International Herald Tribune.

As yachts get bigger, financing grows more sophisticated

Billionaires may be wealthy enough to pay for a multimillion-dollar yacht with cash, but why would they? "People don't become rich by being casual with their money," says Paul Archer, managing director of Arrow Services Monaco. He created his company 13 years ago to advise aspiring yacht owners on the financial aspects of their acquisition, including construction loans, mortgages, leasing, refinancing and insurance.

"I saw that boats were getting bigger and bigger," says Archer, "and the financial structuring needed was becoming more and more sophisticated." A custom built superyacht takes several years complete; it makes little sense to tie up significant amounts of capital for that length of time. An owner may choose construction loan financing for a customized boat, a "rate lock program" to lock into a fixed interest rate at the time of purchase while waiting for delivery, an interest-only loan if the owner plans to sell after a few years or more conventional fixed and variable loans.

The best structure for an individual depends on his (or, more rarely, her) primary country of residence, the size of the boat, whether chartering is contemplated and if the asset will be sold in the near future.

Every case is different. Archer observes that a businessman from Moscow has quite a different situation from a banker in London. Russians, for example, don't have to pay the value added tax (VAT) required of European Union residents. Americans can import a boat temporarily into the EU for up to 18 months without VAT, but then they have to leave. They can anchor somewhere else for a month or so, then come back and start a new 18 month period, but they can't charter their boat.

The VAT for EU residents of up to 20 percent of sales price becomes a significant figure on a luxury yacht. A legal way that French and Italian yacht-loving multimillionaires can soften the blow is through yacht leasing, which lowers taxes and adds a financing element. A French or Italian bank "owns" the yacht and leases it to the customer for a period of time, after which he exercises his option to buy it.

Jean-Luc Chassefiere, director of the Societe Monegasque des Etudes Financieres, a subsidiary of Compagnie Monegasque de Banque, illustrates the system: France applies a VAT of 19.6 percent to all category A boats, regardless of their size; with a leasing program, the rate drops to 9.8 percent. After four years, the title reverts completely to the owner. In Italy, the VAT on boats is 20 percent, but a leasing program for a yacht of 80 feet or more reduces that to 6 percent, and the owner takes full possession in three years.

Download article as .pdf document