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• How to become a Yachtie

So you’re thinking about becoming a Yachtie?

You may have a friend or relative who already works in the industry, or you have watched TV programmes like Below Deck , you know working on a yacht is the right for you, but where do you start? 

With the potential to earn great money, travel, and work with loads of like-minded people, it’s not surprising this job ticks a lot of boxes for many people. 

Becoming a Yachtie and getting paid to work on luxury yachts may seem like a job and industry that only the elite can have access to, or it just seems too confusing to start. 

However, with an understanding of the requirements, certification, and having some expectations of what job role you should be looking for, starting work as a Yachtie will not seem so daunting.

What is a Yachtie?

Before we go any further, let’s make sure we are all singing off the same hymn sheet. 

A Yachtie is a broad term used to describe anyone who works on a yacht. More specifically, it has become the term for people working as yacht crew on superyachts. 

A superyacht is a very large boat that is extremely luxurious and often owned by multi millionaires and billionaires.

These Yachties who work on superyachts hold a number of different positions. Most Yachties will start their superyacht career working as a Deckhand or Stewardess. With more experience and responsibilities, your role will change as you progress up the career ladder. 

It’s worth noting there are other types of yachting and Yachties. The other kind of ‘Yachtie’ could describe those who hold their Yachtmaster qualification and have jobs like skipper charter boats. 

Job roles for new Yachties

Yachties new to the industry (also known as ‘Green’ Yachties) will traditionally apply for entry levels roles, which are Yacht Deckhands or Yacht Stewardesses. 

These are both very different jobs, so you need to be sure which one you want to do and start training for that career path.

Yacht Stewardess (Stew)

A Stewardess, or Steward , looks after the interior of the yacht. This means anything that happens inside the boat, you will be responsible for it. 

Think of any job in the hospitality industry and then combine it into one role on a yacht, that is what you will be doing.

From making beds, doing the laundry, cleaning, serving food, and hosting dinner, you will do it all to a 5-star standard. Anything less than perfect, and your guests won’t be satisfied.

It’s the small things that make the difference between high standards and exceptional standards. You must have a great eye for detail and be able to make sure no stone is left unturned. Everything on board the ship must be 100% perfect at all times.

You will be reporting to Chief Stew, who will be your manager and give you your task list. After a good few seasons as a green Stewardess, you will have enough experience and confidence to apply for Chief Stewardess roles.

Yacht Deckhand

In contrast to the Stewardess role, Deckhands look after the exterior of the boat. 

Predominantly a male role, Deckhands will do everything from general maintenance to cleaning the teak deck, looking after the toys (Jet Skis, etc.), and even driving the tenders.

Deckhands should know how a yacht operates, the basic terminology used onboard, how to tie knots, and loads and loads of enthusiasm. 

Deckhands may also dip in and out of helping the Stewardesses, and it isn’t uncommon for Deckhands to give a hand during busy evening meal preparation and service.

5 steps to Becoming a Yachtie

With an understanding of the job roles available, you can now decide which one best suits you. With the right attitude, qualifications, and knowing where to look for work, becoming a Yachtie is achievable for anyone who wants it. 

• Have the right attitude
• Pass an ENG1 medical
• Complete STCW Basic Safety Training
• Gain experience
• Go to a superyacht marina

1. Have the right attitude

Along with gaining the correct qualifications to prove your competence, to become a Yachtie, you must have certain characteristics to thrive in this industry.

Yachties have to be well presented, articulate, know how to take orders, and be able to work hard, all with a smile and enthusiasm. You have to be able to work incredibly long hours, sometimes under stressful conditions, without losing your patience.

Having a job on a superyacht may sound glamorous, but if it’s your 10th day working in a row and you’ve got your head stuck down a toilet trying to clean it, you may want to think again. To become a Yachtie, you have to be happy with spending a lot of time away from home without seeing your friends and family. This may all seem obvious, but this situation does not suit everyone, and without careful consideration of the negatives, you will leave this industry quicker than when you arrived.

2. Pass ENG1 Medical

The first actionable step you need to take to become a Yachtie is gaining an ENG1 medical certificate. The ENG1 medical is an examination by an approved MCA (Maritime and Coastguard Agency) Doctor to make sure you are fit and able to work at sea.

Every single person working at sea must have an ENG1 medical certificate , without this, you are not able to start working on superyachts. The examination will take around 45 minutes, during which the doctor will go through a checklist to make sure you have no underlying health conditions that may impact the safety of you or anyone else on board the ship.

The most common reason new yachties fail the ENG1 is colour blindness. Surprisingly many people can go through their whole life without knowing they are colour blind. However, on board a ship, this can have huge implications. If you cannot identify signals and lights correctly, it will be impossible for you to help navigate the ship in an emergency. Unfortunately, this means you cannot start work as a Yachtie.

3. Complete STCW Basic Safety Training

Another requirement for working at sea is completing STCW Basic Safety Training . Similar to the ENG1 you can only get a job on a yacht if you have the STCW certificate. 

STCW stands for ‘Standards of Training, Certification and Watchkeeping’. It is to make sure that all Seafarers have an understanding of what to do in an emergency and are aware of the procedures required. 

STCW Courses are action-packed and quite a bit of fun. From fire fighting to sea survival, you will get stuck in learning, and learn loads of new skills.

4. Gain experience 

If you are lucky enough to have a job offer on a superyacht, then having your ENG1 and STCW certificates will be enough.

Don’t worry if you haven’t already got a job offer, it’s quite normal to go through all these steps and not have a job lined up yet. If this is the case, gaining more experience and qualifications is a good idea to give you a competitive advantage over anyone else applying for the same job role. 

This is achieved through signing up to a Deckhand or Stewardess Course. On these courses, you will get your standard STCW certificate and a list of extra qualifications demonstrating your competence, ability, and commitment to the industry. 

Deckhands will learn how to drive a small yacht, engine maintenance, general yacht repair, and how to clean teak properly. Stewardesses will understand wine and how to serve it, the art of flower arranging, and how to drive a powerboat. 

5. Go to a superyacht marina

After you have completed your superyacht training, now is the time to head out to France and look for work. Along with signing up to yacht crew recruitment agencies, going to one of the main superyacht marinas and handing out your CV to Captains is a great way to find work. This is known as dockwalking.

If you complete your Superyacht Course with us, you will have the option of signing up to our recruitment day in Antibes, France. We head out to France as a group, talk you through the process and offer you our industry contacts.

This is a great way to start your journey, and all our students find work in no time.

How much do Yachties make?

So you’ve heard you can make a good amount of money working on superyachts? Along with the travel, the great salary is why many people decide to become a Yachtie.

Like a job within any industry, salary varies. A Superyacht will agree on a crew salary budget with the owner of the yacht.

If you are just starting out, you can expect a salary of around €2,200 – €3,200 per month. However, the industry standard is €2,500 per month. Once you gain more experience and qualifications, your salary will increase. 

When you look at the salary at face value, it looks great but not incredible, however when you are at sea, you have zero outgoings. Working on a yacht means you don’t have to pay rent, bills, or buy food which will save you heaps of money compared with working at home.

If you want to see the salaries of all yacht crew, check out our Salary Guide.

Do Yachties pay taxes?

Another reason why the salary is so appealing is that in most cases Yachties don’t have to pay tax. 

This is a government scheme called the Seafarers Earning Deduction , and providing you are eligible, Yachties can keep 100% of their earnings.

To be able to apply for Seafarers Earning Deduction, you must be working on a ship outside of UK waters for a period of 365 days. This doesn’t mean you have to spend a whole year at once away from home, rather you can only apply once all the days you work on a yacht adds up to 365.

Being able to understand this tax scheme will be hugely beneficial before you start working on a Superyacht. 

Download our free Guide

Want to know more about working on a Superyacht, please download our free guide .

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31st Aug 2020

Top 10 tips for Superyacht crew

• Financial Planning
• Investments
• South Africa
• Superyachting

Typically Superyacht crew are in a great position to save and invest. Working onboard means having few expenses and things like end-of-season bonuses and favourable tax positions can add up, literally. However, the world of finance and investments can be confusing and it’s often difficult to know exactly where to start. That’s why we’ve collated our top 10 financial advice tips for Superyacht crew in this post.

1. Open a bank account suited to your needs

Opening the right bank account is the most critical step when organising your finances.  Until recently, a Standard Seafarer bank account was considered the only viable option for crew. However, other options exist in the form of ‘free’ online bank accounts .

The most important thing to remember is to have a bank account where your salary is credited in the same currency . This means you have control over when you exchange and transfer your money, rather than being at the mercy of the market on the day your salary lands in your account.

2. don’t fall foul of tax authorities

This is especially important for Superyacht crew as the country in which you must pay tax on your earnings may not necessarily be the same country in which you’re a resident. We understand it can get confusing, so always seek professional advice .

Spend time understanding what tax advantages exist for Superyacht crew. For example, the Seafarers Earnings Deduction (SED) is an allowance that helps UK taxpayers working in the Superyacht industry significantly reduce their tax bill. This is especially important if you decide to manage your own tax returns.

For UK nationals, you are entitled to certain allowances and pensions. Understanding what they are can help you save money, which is why we wrote the UK Crew Guide to Savings, Pensions and Tax .

As we explain in the guide, correctly declaring your income and choosing the right pension plan will put you in the best position to achieve your financial goals. To help you better navigate your obligations and various savings options, the guide is split into four sections:

• Tax – what your obligations are and what allowances are available to UK Superyacht crew.
• Emergency funds ­– what they are and how to secure yours.
• Pension planning – key considerations for crew and available options.
• Savings – how to use Individual Savings Accounts (ISAs) and other savings vehicles to your advantage.

For South African crew, tax issues can be a little more complicated. Some South African yacht crew incorrectly believe that because they have not registered for tax at the South African Revenue Services (SARS), they are not liable to pay any taxes in South Africa.

That is not the case and we strongly encourage all South African crew to read about changes in March 2020 which effectively introduced an ‘expat tax’ .

Given these changes, we wrote a guide exclusively for yacht crew from South Africa who wish to better understand their tax situation. The guide covers:

• what the new legislation includes
• the risks of not declaring your income to SARS
• tax exemptions and how you may qualify
• golden rules for tax

3. Start saving now!!

There is never a perfect time to start saving but once you have opened the right bank account and you’re aware of your tax obligations, it’s a good opportunity to start saving. It is always better to start sooner rather than later and some is always better than none!

Before exploring potential savings and investments, it’s wise to think carefully about what you want to do in the future. What matters most to you and your lifestyle, now and in the future? Once you’ve established what matters, you can start building a financial plan to achieve your goals.

Savings and investments are the third pillar of our three-pillar approach to help professional yacht crew plan and navigate their financial journeys

4. Save in a way that makes sense to you

Yachting presents an incredible opportunity to build personal wealth, but you need to save in a way that makes sense to you , not your fellow crew.

One of the first things we recommend you do is build your emergency fund . It is one of the most important things you should do as part of your savings plan. Not only does an emergency fund act as a financial safety net should you face the unexpected, it will help you build savings easily without even noticing.

It’s important to analyse your current spending and to determine what’s actually stopping you from saving before you launch into choosing the best savings options for you.

That’s why we have written the Yachties Guide to Saving – our free guide that will help you to become a super saver and start planning for your financial freedom.

5. Choose the right investment platform structure for your needs

Investment platforms act as online places to buy, sell and hold your investments. They give you access to things like exchange-traded funds (ETFs), bonds and stocks. But keep in mind that not all investment platforms are the same: different platforms offer different services, which means they charge fees in varying ways.

It’s impossible to avoid paying fees when investing, so it’s essential you weigh the costs of investing with your savings and investment goals. It’s important to choose a platform that suits how and where you will invest. And think carefully about whether you need help when deciding which platform is the best one for you.

As experienced financial advisers, we have access to multiple investment platforms and savings vehicles such as investment bonds. Before recommending the most appropriate investment options for you, we take into account your financial goals and your savings plan. Depending on whether your savings plans are short term (0–5 years) or long term (5–10+ years), we will recommend a mix of investment platforms and savings vehicles.

6. Seek advice from multiple financial advisers

As with any relationship, trust is important when it comes to finding someone to help you manage your personal finances. You need to feel comfortable sharing your financial goals with someone who can then translate those goals into achievable action steps.

Also, because you want your financial adviser to have your best interests at heart, you need to trust them enough to establish a long-term relationship. You need the right ‘fit’.

To work out who you can trust, it’s best to meet with several financial advisers before making your decision. Make sure you ask questions of them and they ask you important questions as well. After all, a great financial adviser’s questions should aim to understand what makes you tick, your aspirations and your concerns.

And finally, make sure they have experience in the Superyacht industry. Financial advisers to the industry understand the unique challenges faced by crew and adapt their way of working to the fast pace of the Superyacht industry.

7. Always stick to your personal financial plan

We all know how easy it is to lose sight of our goals if something unexpected happens, like sudden job loss, illness or, worse yet, a global pandemic. However, an effective financial plan should define all of the actions you need to take should something happen. It’s important to refer to those actions and stick to your personal financial plan.

If you already work with a financial adviser, get in touch with them as soon as something significant changes in your life. They can help you to adjust your financial plan accordingly and keep you on track to achieving your goals.

8. Regularly review your spending and savings

Make it a habit to regularly review your spending and work out if you can save more. Small amounts add up over time. Of course, don’t completely restrict yourself. After all, you’re entitled to enjoy your hard-earned money. Just keep your eye on your financial goals.

Also, consider whether you can commit to a longer term, regular savings plan. Committing to a regular savings plan essentially means agreeing to tying up your money for an agreed period of anywhere from 5 to 20 years. As with any finance-related decision, there are pros and cons of committing to a regular savings plan .

9. Bank your end-of-season bonus

And end-of-season bonus is the perfect savings opportunity for many Superyacht crew . Investing such a lump sum stops you from ‘frittering away’ that money when you’re back on shore and it allows you to benefit from compound interest if you invest it long-term.

Keep in mind that if you keep your bonus as cash, it will be worth less over time because of inflation, so it’s certainly worth investing it and making it go even further.

10. Failing to plan is planning to fail

Savings never seem all that important when you’re financially comfortable. But having savings and investments in place, and planning ahead of retirement, gives you stability, security and ultimately freedom to choose. To choose how long you wish to stay in your yachting career, whether you wish to start a family and ultimately where you want to live and retire when you leave the industry. As the saying goes, if you fail to plan, you are planning to fail.

Learn more about managing your finances

We have developed a bank of resources to help you learn more about managing your money and planning for your future .

Our content is written specifically for Superyacht crew as we understand the unique challenges you face working in a fast-paced industry that crosses international borders.

If you have any questions about our top tips or about finance in general, please get in touch .

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Yachts and Taxes: Everything You Need to Know

7 minute read

Those who are seeking freedom, pleasure, or adventure often dream of owning a boat. Unfortunately, the cost of boat ownership is financially draining due to expenses such as storage, registration, insurance, fuel, and maintenance. However, there is some good news for those who want to set sail.

Can You Write Off a Boat on Your Taxes?

The good news is that there are some tax write-offs available for boats used for business and even pleasure that can offset some of the expenses. And yes, this includes yachts and tax deductions.

What Taxes can You Expect When You Buy a Yacht?

The bad news is that yachts are subject to taxes. These taxes go towards waterway upkeep, on-water services, and boat facilities. Most of the taxes will be state-based, so you should find a planner who is versed in state and local planning as well. There are 4 common taxes that yacht owners have to pay.

Sales tax is paid at the time of purchase. This tax is based either on a percentage applied to a portion of the purchase price or a flat rate with a cap. Yacht owners may also be subject to a local sales tax. The sales and local tax are dependent upon the state, county, and municipality that you made the purchase.

If you don’t pay sales tax on your yacht at the time of purchase, you probably will have to pay a use tax in the state where you will be storing your boat. Use tax is applied to only a certain portion of the yacht’s purchase price. If the sales tax rate is higher in the state you purchased the yacht than the use tax in the state where the boat is being stored and used, then you will probably want to opt to pay the use tax and not the sales tax.

Personal Property Taxes

Many states levy a tax on personal property such as cars, and that could be extended to your boat! Depending on the state the yacht is based out of, you may have to pay personal property taxes on a yearly basis.

Property Taxes

There’s even a property tax on the boat slip. If you own a boat slip, the slip is assessed by the local municipality. If you are leasing a boat slip, property taxes are usually included in the monthly lease.

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What is a Yacht Tax Write-Off?

While there are taxes every yacht owner has to pay, the flipside is that there are some tax deductions that can save yacht owners money on their taxes. The deductions depend on how the yacht is being used.

Business Use

There are some substantial tax deductions if you are using your yacht for a legitimate business purpose such as chartering or for sightseeing tours. To qualify for business use, the yacht must be used for business purposes at least 50% of the time.

Purchase Price Expense Deduction

Under Section 179 of the Internal Revenue Code, the Purchase Price Expense Deduction allows an entity, either a corporation, partnership, or LLC, a one-time deduction of 100% of the purchase price of the yacht, up to a maximum deduction of $500,000, during the year of purchase. However, the benefit is reduced if the purchase price is more than $2 million. The yacht can be new or pre-owned. Equipment upgrades can be written off as well if they are within the same year the yacht was purchased.

Business Expense Deductions

If you are earning income off of your yacht at least 50% of the time, then you can deduct business expenses from your taxes. Some of the business expenses that can be deducted include equipment, slip costs, fuel, maintenance, crew salaries, interest, property tax, insurance, and depreciation. Thanks to the Tax Cuts and Jobs Act, entertainment is no longer deductible.

Home Office Deduction

This deduction is frequently overlooked. If your boat is used as a part-time office, you may also qualify for the home office deduction. The activities in this yacht office must be business-related and occupants must have business discussions while aboard the yacht.

Business Commuting

If you use your boat for commuting to and from work, you also may qualify for tax deductions. Again, you must use the yacht at least 50% of the time for business transportation. The deductions for business commuting include storage, crew salaries, depreciation, repairs, fuel, and insurance.

Depreciation

As mentioned earlier, depreciation can be a tax deduction if the yacht is used in business. A bonus depreciation deduction can be taken in the year the yacht was purchased. Depreciation, in this case, is 100% of the purchase price., but this is only available until the end of 2022. Beginning in 2023, the amount of bonus depreciation will be 80% of the amount over 0,000 after section 179 . The adjusted cost basis of the yacht can be depreciated over the period of 10 years. To determine the cost basis, you deduct the Section 179 expense deduction and the bonus depreciation deduction from the purchase price. Cost basis is the balance.

What are the Tax Advantages of Living on a Boat or Yacht?

Some individuals actually live on their yachts. There are even tax advantages to using your yacht as a primary residence or as a second home.

Is Boat Loan Interest Tax Deductible?

Deducting the interest you pay on your boat loan, similar to mortgage interest, is the biggest tax deduction for recreational boating. To qualify for this deduction, the yacht must have a toilet, cooking facilities, and a sleeping area. The second home mortgage interest deduction has a cap of $750,000.

If you rent your boat out, you need to stay on the boat for either at least 14 nights during the tax year or 10% of the number of days the boat was rented to take advantage of the tax deduction as a second home.

There’s another tax advantage to living on a yacht. If your yacht is listed as your primary residence and you happen to sell it at a profit, you could qualify for a capital gains exclusion which would result in a huge savings on your taxes.

Is There any Deduction for Donating a Yacht to Charity?

If you are in a position to donate your yacht to charity, then the IRS offers a deduction for this generous act. The market value of the yacht on the day it is donated can be deducted from your taxes.

Getting the Most Out of Yacht Tax Deductions

If you are a yacht owner and are looking to save on taxes, deductions can be a powerful strategy. Good tax planners, however, use a variety of strategies each year to save money. Tools such as Corvee tax planning software help taxpayers quickly find the strategies available to them. Request a demo today.

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Home » SA Yachties: the facts on the seafarers tax exemption in South Africa and how it applies to you

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SA Yachties: the facts on the seafarers tax exemption in South Africa and how it applies to you

March 27, 2023

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SEAFARERS & YACHTIES: BATTEN DOWN THE HATCHES AND PROTECT YOURSELVES FROM SOUTH AFRICAN EXPAT TAX

We have dealt with the financial and tax affairs of hundreds of South African seafarers and yachties over the years, many of which have left South Africa at a young age to begin a burgeoning careers on the high seas or are veterans that are envisaging retirement in South Africa.

Unfortunately in both cases, the South African Revenue Service(SARS) knows that you are most likely not paying tax elsewhere on your foreign earnings; and with a home port that changes frequently, you are placed in a grey area in terms of which country you are tax resident of. In the past, proper tax planning and due diligence may have gone unpunished. However, with the new expatriate tax law now in full effect from 1 March 2020, if you are deemed to be tax resident of South Africa and do not qualify for the €œseafarers exemption€ – SARS has full taxing rights on that foreign income.

Implication of expat tax for South African seafarers and yachties

Most South African seafarers are already well aware that SARS is attempting to increase their revenue flow, due to a widely reported deficit in budget, and as such implemented the changes to the section 10(1)(o)(ii), more commonly known as €œthe expat exemption€, of the Income Tax Act No. 58 of 1962. This amendment now allows for SARS to tax expats claiming this specific exemption on their earnings above R1.25 million threshold, from 1 March 2020.

On 5 May 2020, SARS held a media briefing to announce a massive projected loss in revenue and are further below budget due to the COVID 19 outbreak and nationwide lockdown in SA resulting in the SA economy plummeting down to junk status. Furthermore, the rand is greatly weakening against foreign currencies and many local business€™ being unable to operate due to the restrictions imposed in SA. Subsequently, the global situation will now mean that there is further emphasis on increasing revenue and enforcing tax compliance, as announce by SARS in the media briefing, and expats will now face a two-prong attack on their foreign earnings:

• Firstly, an emphasis by SARS on collection of revenue from Expats through the creation of the €œExpat Task Force€ and emphasis on the ability to use the common reporting standards (CRS) to cross check taxpayer declarations with their statements from global banking institutions. Unfortunately, the burden of proof lies on the taxpayer meaning the focus is on repercussions for non-compliance and collecting.
• Secondly, the falling rand has resulted in the R1.25 exemption becoming more and more meaningless, to those earning in a stronger foreign currency. Unfortunately, those that were below the taxable threshold may very well come above this and now have a tax liability in SA, whilst those who were already earning in excess of the exemption having a further liability on their earnings.

Silver Lining for seafarers & yachties

Many seafarers are in a fortunate position as they can claim alternate exemptions to the €œcommon expat exemption€ section 10(1)(o)(ii). This comes from special previsions made directed at Seafarers in the form of section 10(1)(o)(i)(aa) and section 10(1)(o)(i)(bb) exemption. The two €œseafarer exemptions€ allow for the employment remuneration earned to be fully exempt from taxation in SA, when met.

Simply put these exemptions are outlined as the below:

• Section 10(1)(o)(i)(aa) of the Act (€œthe first seafarer exemption€) €“ this exemption relates to officers or crew members onboard a vessel, with foreign employment, whereby the vessel is involved in international transportation of passengers/goods for reward and the taxpayer has met the days test requirement of being outside of SA for more than 183 days during any 12 month period over which the income was earned.
• Section 10(1)(o)(i)(bb) of the Act (€œthe second seafarer exemption€) €“ this exemption relates to officers or crew members onboard a vessel, whereby that vessel is engaged in prospecting; exploration; mining of minerals or production of minerals from the seabed€™s outside of South Africa and the tax payer has met the days test requirement of being outside of SA for more than 183 days during any 12 month period over which the income was earned (not relevant to yacht crew) .

Do not let SARS take the wind out of your sails; ignorance is not a legal argument

As the ownness of proof lies on the taxpayer according to South African tax law, it is important to ensure that you are within the bounds of the law and your income declarations are correctly made and any relevant exemptions are correctly claimed. An exemption is only given when claimed by the taxpayer, alternatively this income is seen as fully taxable. Subsequently, it is essential to claim the correct exemption and meet SARS legislation requirements on these declarations. Therefore, it may often be needed for a taxpayer to register for Provisional tax. This is particularly prudent now as the deadline for first payment on provisional tax is due on the 31 st of August 2020.

Being required to submit a return as a seafarer or yachtie can be daunting due to the already complex world of expatriate tax law and a requirement to submit provisional tax returns only further complicates this. Therefore, it is important to have some level of understanding on what provisional tax is and the purpose of this, in order to appreciate the benefits associated with being a provisional taxpayer. Provisional tax is not distinguished from income tax but rather is merely a process in which a taxpayer is required to pay their tax liability in advance. This prevents the taxpayer from having to pay over one large amount of tax due on assessment in the proceeding tax filing season. The purpose of provisional tax is, therefore, to allow a taxpayer to pay income tax twice during the tax year in which the income is earned, specifically in the months of August and February in every tax year of assessment. This provides unique planning opportunities if you are diligent in your tax planning.

Closing remarks

Should a taxpayer be unsure of their liability or if they indeed qualify for an alternate exemption, it is best to contact experts in the field and ensure they are ticking all the right boxes and meeting their legal obligations in order to avoid any repercussions such as penalties, interest on late payment and in severe situations legal repercussions for tax fraud or evasion.

Seafarers Global has been approached by a number of yacht fleet management companies to educate their SAFFA crew on #ExpatTax2020. As such, we are planning a series of webinars that will be open to the wider seafarer and yachtie community to clear up any misconceptions and provide clear explanations on how the expatriate tax law change can affect you and how you can plan ahead to protect your foreign income.

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Tax strategies for yacht buyers

If you are an American tax-payer, you’ve probably stumbled upon the words “active yacht ownership” or "boat as a business". This post was written to help you better understand what this concept is and how it may apply to your situation. Additionally, there are other considerations you may want to discuss with your financial advisors outside of an “active business”.

While we point out and discuss the possible merits and challenges associated with the tax implications of owning a yacht, this is not intended to provide tax advice, as only a professional accountant or financial advisor acting in a fiduciary capacity should advise you. If you are looking for a reputable CPA to assist you with your decisions surrounding a yacht purchase or making your boat available for charter, please contact Navigare Yachting and we will share several recommendations with you.

Business structure

How you choose to run your business, whether in your name or through a dedicated corporation, will have an impact on the depreciation you can take if any. The choice is yours, however holding title to the yacht in a corporate entity, either an LLC (limited liability company), partnership, or corporation, for example, reduces your legal exposure and financial risk. Holding title through a legal entity may also trigger tax consequences and advantages not available to individuals.

However, notwithstanding the potential tax benefits, most yacht owners will choose an LLC or another Corporate entity to reduce their liability associated with the yacht.

What is active yacht ownership?

The phrase “active yacht ownership” refers to the business strategy of purchasing a yacht and placing it into a charter program to generate income, thus reducing the cost of yacht ownership. Generally, the program allows for some personal use of the yacht at the discretion of the owner.

In some circumstances, additional tax credits are available beyond the “traditional” deduction of day-to-day business expenses. These tax benefits may vary and may or may not apply to your particular situation.

To verify your active participation in the business, the IRS has defined several criteria that one must meet before the additional deductions may be legally taken. These criteria include, but are not limited to:

• The ability and intent to make a profit (this is called the “hobby loss rule”, explained below)
• The owner must perform at least 100 hours of work on the business each year , and more than any other person related to the yacht’s activity (for purposes of the 100-hour test, a taxpayer’s spouse’s participating in the activity is also treated as participation by the taxpayer).

Such hours of work constitute “ material participation ” in your business and may include:

• attending a boat show, and
  
• maintaining the business’s website and promoting the business online, and
  
• travel for physical inspection of your yacht as well as testing of the vessel and its systems, and
• getting to know the intended sailing grounds where your yacht will be placed to promote your charter business. 

Active Participation is very different from passive activity (such as long-term real estate rentals). Generally, any rental activity is deemed a passive activity, without regard to what extent the taxpayer participates in the activity. However, your yacht business is not considered a rental activity if:

• The average period of customer use for the yacht is seven days or less;  
• The average period of customer use for the yacht is 30 days or less AND significant personal services are provided on behalf of the yacht owner for making it available for use by customers.
• Extraordinary personal services are provided by or on behalf of the owner of the yacht in connection with making the yacht available for use by customers.

Expensing through Section 179

One of the most well-known incentives available when actively participating  in a business is a section of the IRS code called “Section 179”. It was designed to help small businesses as they set out to buy or lease new or used equipment. It allows a taxpayer to deduct the cost of certain types of property (such as a yacht) on their income taxes as an expense, rather than requiring the cost of said property to be capitalized and depreciated.

As of January 1, 2018, under section 179(b)(1), the maximum deduction is capped at $1,000,000 per year. This means that a taxpayer may elect to deduct up to $1,000,000 of the value of the yacht per year.

If you adhere to the IRS guidelines and get the competent advice of a knowledgeable CPA, your charter yacht operations may qualify as an active business eligible to take advantage of this and other sections of the IRS code.

The hobby loss rule (Section 183)

Section 183 of the IRS code, also known as the “hobby loss rule”, limits the losses that can be deducted from income that are attributable to hobbies and other not-for-profit activities. In general, losses which occur in for-profit activities are not limited and can be used to offset other income from other activities. But the Section 183 limitation curtails those deductions when the activity has been deemed a hobby.

It is generally accepted that if one generates a profit 3 out of 5 years, the activity is not considered a hobby. However, the code does not state that a profit MUST be made for 3 out of 5 years to clear the hobby loss rule.

Therefore, your business must demonstrate “the ability and the intent” to make a profit. Expert accountants make recommendations on how to justify the “ability and intent” to generate a profit while running a business of yacht charters. Demonstration of “ability and intent” can be shown through careful research before starting a charter activity, and demonstrated by drafting a thorough business plan, documenting charter and non-charter activities rigorously, keeping accurate books of account, and also actively promoting the yacht available for charter.

Since each tax situation is unique and varies from year to year, we advise all of our clients to seek proper professional assistance on this matter before engaging in the charter activity.

Claiming depreciation within your for-profit boat activity

As explained above, expensing under Section 179 of the IRS is the most accelerated form of depreciation. Section 179 allows a taxpayer to expense (or deduct as a current rather than a capital expense) up to their basis in the vessel, currently capped at $1 million per year, of the total purchase price of new and used qualified depreciable assets it purchases and places in service in 2018, with certain limits. Those unable to claim this allowance may recover the cost of qualified assets over longer periods, using the depreciation schedule from Sections 167 or 168.

The special allowance under Section 168 has become known as “bonus depreciation”. Note that it is only applicable if the yacht owner and taxpayer did not use the property before its acquisition and did not acquire the property from a related party. Additionally, a yacht is considered qualified property since it has a recovery period of 20 years or less, however, Section 168 will only apply to a new yacht.

At-risk rules

Section 465 of the IRS code limits losses that may be deducted by certain taxpayers engaged in covered activities under section 465. The at-risk rules apply to the leasing of depreciable personal property, including boats and yachts. Any loss from the covered activity for the year is allowed only to the extent the taxpayer is at-risk concerning the activity at the close of that year.

Alternative strategy: boat as a second home

Should the active business route not suit your sailing program or your circumstances, the second home qualification may be of interest to you.

A watercraft that has at least one berth, a galley, and a toilet can qualify for a mortgage interest deduction as a second home. However, deductions are limited for rentals of a second home used for personal purposes:

• If renting out the second home (yacht), the taxpayer must use it himself/herself for the longer of 15 days or 10% of the number of days the yacht is rented out.
• If a boat is not a personal residence because there are too many rentals or two few personal-use days, it is treated as a rental property and all expenses, including interest, are allocated between rental use and personal use. The personal use portion of the interest expense is not deductible because the property fails to qualify as a residence.

Expenses attributable to rental use are deductible but are subject to the passive, activity, hobby loss, and at-risk limitations described above.

Exit strategy

Prospects looking to purchase a yacht and place it into a charter program should also prepare their exit strategy. It’s critical to understand ahead of time the consequences of terminating the program you've engaged in; one of the most significant events being the recapture, or repayment of certain deductions, at the time you resell your yacht.

Independent advice

Another factor looked at by the IRS in their analysis of how to treat your business, is whether the yacht owner sought independent tax advice outside of the charter operators that promoted the yacht sale in the first place. Therefore, we urge our clients to obtain the expert guidance of a CPA who can walk them through their options and prepare them for a potential tax audit.

Many brokers and yacht management companies do not disclose all of the risks and uncertainties of owning a yacht as a business. Very few charter arrangements will satisfy the IRS requirements, and tax audits can be detailed and onerous!

Should you need further assistance, please contact us , we would be delighted to speak with you and your CPA about creating a charter program well suited to your unique needs.

Explore the Navigare ownership programs .

Additional resources

For more information, please review the following. We do not undertake to provide any advice on your tax situation, but these links could help you ask the right questions of your CPA or other tax professional. Please note that the tax code regulations and tests are updated and amended by the IRS regularly, and therefore we recommend that you speak to a tax and legal professional for more information on any of these topics.

Boatinglaw.com, Checklist for Significant Vessel Purchase http://www.boatinglaw.com/maritimearticles/purchaseofavessel.html

Section 179 (26 U.S.C.A. §179) https://www.law.cornell.edu/uscode/text/26/179

Section 168 (26 U.S.C.A. §168) https://www.law.cornell.edu/uscode/text/26/168

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Foreign Yachts Charged New Tax in South Africa

Yachties extending their stays in South Africa are being threatened with having their vessels impounded unless they temporarily import them, or face having to pay fines.

Customs officials are springing laws on them that apply to commercial vessels, causing confusion at moorings in Richards Bay and Durban. Foreign yachtsmen are being expected to temporarily import their vessel if they remain in South Africa for six months and can be fined up to 15% of the value of their yachts if they break this law.

The KwaZulu-Natal yachting fraternity is also concerned that they have not been informed of this law being enforced. The South African Revenue Services, which manages customs and excise, itself maintains that the document the yachties claim is being used to force them to temporarily import their crafts, is only for commercial vehicles and “does not deal with yachts as such”.

Zululand Yacht Club (ZYC) commodore Kirsten Schreuder said the imposing of this regulation could add unnecessary bureaucracy to an industry in South Africa that heavily relies on foreign yachtsmen bringing their vessels to KwaZulu-Natal’s coastline for repairs.

A vague public document called  SARS Temporary Import of Commercial Vehicles , which was made effective in 2001, is allegedly being shown by custom officials to the yachting fraternity as validation of the need for the boats to be temporarily imported and justification for handing out fines. “It has caused a huge knee-jerk reaction from everyone. In September, the SAPS Water Wing and Customs arrived at the club and started checking papers, telling our foreign yachties they were in breach of the law. We were all caught completely off-guard. We have never been aware of these regulations,” said Schreuder.

With boats being “placed under arrest” according to one yachtie, Customs decided to only slap each transgressing yachtie with a R2 000 fine.

SARS spokesperson Marika Muller said the import document Schreuder is referring to “does not deal with yachts as such” but added that leisure sailors were still subject to certain expenses.

“Yachts that originate from countries within the European Union and SADC are free from customs duty but subject to 14% VAT,” said Muller.

“Yachts with any other origins are subject to the payment of 10% customs duty plus 14% VAT.” She said, however, there were costs payable to Customs although these amounts were refundable.

In further questions posed to Muller regarding the import document, she said “the legislation on which you are basing your question is not applicable to yachts”.

But Zululand yachtie Izak Labuschagne said the entire affair is peculiar. “Yachties go to great efforts to comply with sovereign laws as they are travelling and their boat is their home. This idea of a temporary import is madness … the reasons for it being shown to us by local customs authorities is so vague, the only tangible result it will have is to chase touring yachts away from our shores,” he said. “The manner in which Customs has pursued foreign yachtsmen in our ports has left a perception, rightly or wrongly, that our officials are corrupt and were merely seeking to make a quick buck by extorting money out of unsuspecting foreigners not prepared to fight them.”

According to the ZYC, the yachting industry brings in about R15 million to the South African economy every month and this is likely to increase with the east coast of Africa further north and Suez Canal increasingly becoming a no-go zone because of the threat of Somali pirates. “We are seen as a safe and reliable destination at which to undertake repairs. We are not adverse to new regulations, just we need to know what they are,” said Schreuder.

He said instead of making it confusing for foreign pleasure sailors to sail into South Africa, it should be made easier through the introduction of a cruising permit valid for two years, a practice used in Trindad and Tobago in the Caribbean. “Vessels are brought to SA for refurbishment and repair, which can take up to two years. The owners are often retired and wealthy and either travel our country or fly home, returning once their yacht is repaired. We need to accommodate them and make our destination and boatyards favourable,” said Schreuder.

Durban Marina manager Malcolm Manion said there was a desperate need for further clarity on the regulations. “What we are finding frustrating is there is not much clarity being given on just how the regulations are to be enforced and what is expected of visiting vessels,” said Manion.

Courtesy of www.noonsite.com

Author: Blue Water Sailing

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Australian taxation and yacht crew - a tough relationship: part 1.

Image source: https://pixabay.com/photos/international-flag-australia-2690850/

Co-authored by Tania Waterhouse, Waterhouse Lawyers

On 1st September 2018, the ATO will start to receive financial information about Australian account holders following the introduction of the Common Reporting Standard (CRS) in 2014.

This means they will have access to information on any income held offshore.

As such, it may be time to begin asking yourself “how protected is the money I have from taxation?”

We speak with more and more yachties who spend little to no time in Australia yet are still trapped in the Australian tax system by unforgiving legislation.

Australia’s taxation rules are notoriously unforgiving, especially when it comes to seafarers.

Compared to many other jurisdictions, the ATO have no exemptions or deductions and a mountain to climb in terms of establishing yourself as non-resident, especially if you are a native.

What makes me an Australian resident for tax purposes?

The ATO will apply four tests to determine whether you are resident.

• The 183-day Test
• The Primary and Ordinary Concepts Test
• The Domicile Test
• The Superannuation Test

The most open to interpretation of the 4 tests is the Primary and Ordinary Concepts Test.

Under this you will be seen as an Australian tax resident if you are a resident by “ordinary concepts”.

What this means is that if you are seen to treat Australia as your home, you must pay your taxes there.

Under the Domicile Test, you must have “abandoned” your Australian domicile (which you have because you lived in Australia).

You maintain your status as Australian tax resident under this rule unless you have established a home outside of Australia since leaving, you will also need to sell or let any property you do still hold in the country.

If you have done so, you will be considered to have abandoned your Australian domicile.

This is the only way to overcome this test.

If I am considered a tax resident of Australia, how will this affect me?

As an Australian tax resident, your worldwide income from employment, investments and any other means will need to be declared in Australia by lodging a tax return with the ATO .

Failing to do so essentially constitutes tax evasion and comes with heavy penalties.

It is also important to remember that declaring yourself as non-resident can be treated in the same manner if you are unable to support this declaration in court.

Image source: https://pixabay.com/photos/australian-dollar-money-currency-2874029/

What can I do?

If like many others, you find yourself in the position of spending little to no time in Australia but are still a resident under the Domicile rule, we understand how frustrating it is to have to pay a significant portion of your income to the Australian Tax Office.

Below are a few simple steps you can take which will help you to demonstrate to the ATO that you are no longer an Australian resident:

• Remove yourself from the Electoral register .
• Apply the residency tests as explained above to your situation - r emember you only need to pass one to be an Australian resident and the 183 rule is not the deal breaker.
• Sell or lease your Australian property - this will allow you to demonstrate you do not have a permanent home available to you in Australia
• Obtain a permanent living place abroad - this is the best option so that you are treated as a non-resident.

How to prepare for the worst case scenario

An ATO investigation into your tax affairs is the worst-case scenario.

If the ATO deems you to be resident and you have not met your obligations, you will be liable to pay interest on your unpaid tax as well as penalties which can almost double your original liability.

Tribunal hearings can be unpredictable based upon the individual circumstances of the case, how it is argued, and the luck of the draw when it comes to the AAT tribunal member or Federal Court judge ruling on the matter.

You may have a tribunal member or judge ruling on something outside their area of expertise and this can lead to unpredictable results.

If you are unsure of your residency position and would like more information please contact us to further discuss.

Speak to Us or Comment!

If you have concerns about your Australian tax residency status and how this affects your personal income tax obligations, we can help review your situation and offer advice. Alternatively, let us know what you think in the comments section below, or get in touch with us.

Please feel free to email us directly using the link below:

Click for Tax Return Advice for Seafarers & Yacht Crew

Liked this article? Try reading: Australian Taxation & Yacht Crew - A Tough Relationship: Part 2

Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.

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How many months a year do yachties work?

FAQs About Yachties Working Months

1. are there designated working seasons for yachties, 2. do yachties have fixed schedules during their working months, 3. do yachties get paid during their time off, 4. how is the work schedule determined, 5. can yachties choose their working months, 6. are there any additional perks during the off-season, 7. can yachties take additional freelance jobs during their time off, 8. are yachties compensated for the off-season, 9. can yachties take vacations during their working months, 10. are there any tax implications for yachties working internationally, 11. do yachties receive benefits like healthcare during their working months, 12. is the workload consistent throughout the working months, how many months a year do yachties work.

Yachties, also known as yacht crew members, lead an exciting and adventurous life sailing the open seas. From luxurious yachts to stunning destinations, they get to experience a unique lifestyle. However, many people wonder how many months a year yachties actually work. The answer to this question varies depending on several factors, including the type of yacht, the owner’s preferences, and the specific job role on board.

On average, yachties work around 6-8 months in a year. During this period, they embark on incredible voyages, providing top-notch service to the yacht’s guests and owners. The rest of the year is often considered an “off-season,” where many yachties take a break and enjoy some well-deserved time off. However, it’s important to note that this is just an average figure, and the actual work duration can differ from one yacht to another. Some yachties might work less than 6 months, while others could work for nearly the entire year.

While there are commonly recognized yachting seasons, such as the Mediterranean and Caribbean seasons, the working months can vary depending on the yacht’s itinerary and the owner’s preferences. Yachties often work during the peak seasons when yacht charters are in high demand, which can extend their working period.

Yachties typically follow a rotational schedule, where they work for a certain number of weeks or months and then have time off. This rotation allows for a balanced work-life experience while maintaining the yacht’s operations and guest satisfaction throughout the year.

Yacht crew members usually receive a salary for the duration of their contract, which covers both the working and off-seasons. The amount of paid time off can vary between contracts and should be discussed and agreed upon before joining a yacht.

The work schedule is typically determined by the yacht’s captain or management team, taking into consideration various factors like guest itineraries, maintenance requirements, and industry regulations. Yachties should be prepared for flexibility in their schedule, as changes can occur due to unforeseen circumstances or owner’s requests.

Yachties might have preferences regarding their working months, which they can discuss with their employer during the hiring process. However, the final decision on working months is usually based on the yacht’s requirements and the crew rotation schedules.

During the off-season, when the yacht is not actively cruising, yachties may have the opportunity to participate in extensive training programs, attend industry conferences, or engage in other professional development activities to enhance their skills and knowledge.

Depending on their employment contract, some yachties may have the freedom to take additional freelance jobs or work on other yachts during their time off. However, it’s crucial to review the contract terms and seek permission from the employer before engaging in any outside work commitments.

As yachties work on a contractual basis, the compensation and benefits offered during the off-season can vary. Some contracts may include a stipend or accommodation allowance for the crew members during their time off, while others may focus solely on the working months with no additional compensation during the off-season.

Yachties generally have the option to request vacation time during their working months, depending on the yacht’s operational needs and availability of replacement crew members. It’s advisable to discuss vacation plans with the yacht’s management well in advance to ensure a smooth transition and continuous operation.

Yachties working internationally may have tax implications depending on their citizenship, residency status, and the duration they spend working in specific countries. It’s vital for yachties to consult with tax professionals who specialize in the maritime industry to understand their tax obligations and plan accordingly.

Benefits like healthcare coverage can vary between employment contracts. Some yachties may receive comprehensive healthcare coverage provided by the yacht’s owner, while others may need to arrange their own insurance to cover medical expenses during their working months.

The workload experienced by yachties can vary throughout the working months. During peak seasons or charter periods, the workload can be quite intense with long hours and demanding guest needs. However, during off-peak or maintenance periods, the workload may lessen, giving yachties more time to rest and relax.

As yachties embark on their journey, they encounter varying work schedules and seasons. While the average working months range from 6 to 8, it’s essential to remember that flexibility and adaptability are key in the yachting industry. By embracing the challenges and opportunities that come their way, yachties ensure memorable experiences for guests and a fulfilling career on the open seas.

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New York Lawmakers Look to Repeal Private Jet, Yacht Tax Breaks

By Danielle Muoio Dunn

Several New York State tax breaks could be on the chopping block as lawmakers negotiate a final budget plan ahead of an April 1 deadline, including subsidies for private jets and luxury yachts.

The budget resolution the state Senate passed last week includes two measures, S2556 and S2557 , to end sales and use tax exemptions for vessels costing more than $230,000 and private aircraft. The fiscal plan also includes a bill, S3389 , to repeal more than $300 million in financial incentives for fossil fuels, which state Democrats and climate advocates voiced support for in a virtual press ...

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Biden Targets Private Jets in Hunt for Tax Revenue

The White House’s new focus on corporate aviation is drawing backlash from an industry that says it supports manufacturing.

By Alan Rappeport

Reporting from Washington

The Biden administration is looking to the skies for government revenue, scrutinizing corporate jets as it tries to get big companies to pay more in taxes and to crack down on rich tax evaders .

From Taylor Swift to Fortune 500 chief executives, private air travel has for years been portrayed to exemplify lavishness and excess, putting it on the radar of Democrats who want to rid the tax code of incentives that promote its use.

Companies have long benefited from laws that allow them to write off the cost of jets more quickly than commercial airlines can, and to pay less in fuel taxes. Included in the $5 trillion of tax increases proposed by the White House were plans to target corporate aviation and ramp up scrutiny of executives who use company planes for private trips.

President Biden raised the taxation of corporate jets at his State of the Union address this month and at a campaign event in Philadelphia last week as he laid out his ideas to make big companies “pay their fair share.”

At a Senate hearing on Thursday, Treasury Secretary Janet L. Yellen praised the Internal Revenue Service for embarking on a “new initiative to end abuse of corporate jet write-offs.”

The ideas have drawn swift backlash from the corporate aviation industry, which argues that the proposals unfairly undercut American companies that rely on private planes to allow their executives to more easily visit factories and remote offices.

“We haven’t seen any real justification on why an important and essential American industry is being targeted for tax increases,” said Ed Bolen, president and chief executive of the National Business Aviation Association. “Proposals have been made, impressions may have been left and we would like to understand the facts behind it.”

Mr. Biden’s budget, which is unlikely to be approved by Congress, would hit corporate and private jet users in two ways.

It would raise the tax on jet fuel to $1.06 per gallon from 21.8 cents per gallon over five years. The money goes to the Airport and Airway Trust Fund , which helps finance federal investments in the airport and airway system. The Biden administration contends that the current rate is too low because private jets represent 7 percent of flights handled by the Federal Aviation Administration but contribute just 0.6 percent of the taxes in the fund.

The other proposal would target a lucrative tax break that allows companies to deduct the cost of their planes quickly. Currently, a business can write off a jet’s expense over five years, instead of the seven-year period that applies to commercial airplanes. The budget proposed the same seven-year tax treatment for corporate and commercial jets, which is known as “bonus depreciation.”

The White House estimates that the proposals would raise $4 billion over a decade.

“This is about leveling the playing field for the middle class by making big corporations and the wealthy finally pay their fair share — whether it’s cracking down on wealthy tax cheats or closing loopholes for corporate jet purchases — so we can cut the deficit and invest in the American people,” Michael Kikukawa, a White House spokesman, said.

The White House proposals came just weeks after the Internal Revenue Service announced that it would begin cracking down on corporate jet owners that abused the tax code. It wants to stop companies from claiming millions of dollars in deductions on airplanes that executives sometimes used for personal travel.

Scrutiny of corporate jet use will involve new data analytics tools, which the I.R.S. has been developing with $80 billion granted through the Inflation Reduction Act of 2022. The tax collector plans to begin dozens of new audits that will focus on large companies, partnerships and wealthy taxpayers.

The tax code allows companies to deduct the cost of maintaining a corporate jet if it is used for business purposes. But many allow executives, shareholders and partners to use company planes for personal trips while continuing to claim the full value of those deductions.

The I.R.S. audits will also include the planes’ wealthy passengers, who the agency says should report those trips as income. It estimates that there are tens of thousands of corporate jets in the United States and that a substantial amount of tax revenue is falling through the cracks.

In a speech at American University on Monday evening, Daniel Werfel, the I.R.S. commissioner, said the focus on business aviation was made possible by new funding the agency had received to upgrade its technology, which has allowed it to more rigorously analyze flight data.

“A more digital I.R.S. unlocks our ability to audit the inappropriate write-offs for personal use of corporate assets, such as corporate jets,” he said .

Ryan DeMoor, head of aviation tax at MySky, said he didn’t expect the I.R.S. audits to bring in as much missing tax revenue as the agency anticipated. He said many executives were required to fly on corporate airplanes, even for personal travel, and argued that finance departments tended to be overly cautious about how they reported aviation taxes because of the risk and cost of getting them wrong.

“They’re falling into the fat-cat executive trope out there, which is just not the case,” said Mr. DeMoor, whose business helps companies manage their flight expenses. “Why would a Fortune 500 company put themselves at risk by trying to save a tiny bit of tax money on their flight department?”

Alan Rappeport is an economic policy reporter, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters. More about Alan Rappeport

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Politics | Michelle Wu considering petitioning state for…

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Politics | now ncaa president, ex-gov. charlie baker urges states to ban prop betting on college athletes, subscriber only, politics | michelle wu considering petitioning state for higher commercial tax rates.

Mayor Michelle Wu is considering filing legislation that would allow Boston to increase property taxes on businesses beyond the state limit, given the steady decline in commercial values expected to lead to higher taxes for homeowners.

Wu hinted at what the potential legislation would look like at a town hall last week hosted by WBUR, saying that there’s “precedent” for how to address that scenario, which came in the form of a bill approved by Gov. Mitt Romney two decades ago.

She was referring to the home rule petition former Boston Mayor Thomas Menino lobbied before the City Council and Legislature in 2003. It was signed into law the following year as a statewide option that allowed municipalities to shift more of the tax burden from residents to businesses, exceeding the state law cap of 175%.

“Two decades ago, at this point, there was a similar shift, but it happened because the city’s residential values were all of a sudden going up much faster than commercial values were,” Wu said, “And the way the formula worked out, residents were going to have a double-digit increase in taxes.”

“In order to avoid that,” she said, “the city sought special legislation from the state, from the City Council, and the state ultimately to be able to cushion residential taxpayers more and avoid that shock.”

Wu said her administration was “looking at” what a change in the shift currently allowed by state law would mean, but her office wouldn’t confirm whether she was moving forward with legislation or whether it would be similar to what was implemented two decades ago, when contacted by the Herald on Tuesday.

The 2004 legislation allowed cities the option to shift the commercial rate up to 200% of the residential rate, up from the 175% allowed by state law. It included a tiered system where the rate was reduced 7.5% every year for the next four years, returning to the 175% standard by 2009, a prior GlobeST report states.

“I think that would be important to have those tools available for us to deal with that in this moment,” Wu said last week, when speaking on the potential legislation in a segment when she was asked how the city plans to address an eroding commercial tax base that could lead to a $1 billion-plus budget deficit in five years.

That scenario, laid out in a report issued last month by the Boston Policy Institute, is driven by empty office space and declining commercial values, and could lead to higher taxes for residents.

Exacerbating matters, Wu said, is the city’s heavy reliance on property taxes, which contribute roughly three-quarters of annual budget revenue, most of which comes from commercial property.

While the mayor has not formally filed legislation, the potential for higher taxes on businesses is already drawing criticism.

“It’s an extremely inefficient way to raise revenue,” said Evan Horowitz, executive director of The Center for State Policy Analysis at Tufts University. “There would be a significant loss to offset the gain.”

When tax rates are raised on commercial properties, Horowitz said, that “further depresses the value of those properties, which are already in distress.”

“So over the long term, with approximate values going down, we actually collect less in future property taxes as well,” he said. “There are much more efficient ways to raise taxes and in general you want to raise taxes from healthy factors and healthy industries that can withstand the additional costs.”

He disputed the assertion that such a change would provide necessary relief to homeowners, saying that residential property is a thriving sector of the real estate market today while the commercial side is struggling.

If the city is looking to petition the legislature for a major change, Horowitz said the best solution would be for Boston to follow other cities across the country and try to introduce a local sales tax, which would help to reduce its budgetary reliance on property taxes.

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SOUTH AFRICAN SEAFARERS AND YACHTIES

KNOW YOUR TAX OBLIGATIONS

As most know by now, SARS is grappling to increase revenue for their coffers, looking to South Africans who earn foreign income to subsidise the deficit. With all the uncertainty around the change in the foreign employment income exemption, which is coming into effect as of 1 March 2020, more and more people are wanting to get their tax affairs in order so to ensure that they are compliant with SARS.

One of the biggest issues which has surfaced is that many seafarers and superyacht crew (colloquially known as “yachties”) are not even registered for tax in South Africa, yet they have remaining assets in South Africa to include shares, trusts, properties and policies as well as resident bank account/s.

Donné Trump of Seafarers Global has stated that “it is imperative that as long as you are a South African tax resident or have income or assets in South Africa, you have to be registered for tax. As a tax resident, your worldwide income must be declared to SARS and seafarers have their very own exemptions in place to ensure they acquire the relevant tax relief.”

Complexities For Seafarers

In determining your tax liability working at sea, be it on fishing vessels, exploration ships, luxury liners, yachts, tankers or container ships, a few factors need to be taken into consideration.

“The position of seafarers is more complex than the standard foreign employee in that South African tax law provides for three different categories of exemption, which can be applied for on foreign income”, says  Jonty Leon, Legal Manager of Financial Emigration. “There are various categories that a seafarer may fall into depending on their own unique situation, and most are unaware of these differences, this often creates uncertainty and a tendency for people to get the wrong advice.”

The exemptions are categorised as follows:

• Salaries paid to an officer or a crew member of a ship Section 10(1)(o)(i)(aa) and (bb); or
• Foreign Employment Income earned outside of South Africa Section 10(1)(o)(ii).

The complexity is highlighted by the fact that seafarers work alongside colleagues with different tax circumstances, i.e. one could be exempt from tax in SA, whilst the other taxable. Something as simple as the mere position held by the seafarer, or the title on the vessel can affect this. Thus, seafarers need to understand the law and how it applies to their individual circumstances to be able to protect their foreign earned income.

Uncertainty also creates anxiety in people, however once you understand your personal situation and seek professional assistance, you are in a position to make use of the options that you have available to you.

Where Do Yachties Fit In?

Yachties should specifically be looking at Section 10(1)(o)(i)(aa) in order to determine whether they can take advantage of this exemption. They will need to ensure that the yacht upon which they are employed is a charter yacht used for the purposes of transporting passengers or goods. Should they not meet the requirements to make use of Section 10(1)(o)(i)(aa), they may then consider making use of Section 10(1)(o)(ii) for tax relief.

In terms of Section 10(1)(o)(ii), remuneration received by an employee for services rendered outside of South Africa for or on behalf of the employer will be tax exempt. As of 1 March 2020, this exemption will be limited to the first R1 million. In order to qualify for this exemption, the following requirements must be met:

• There must be an employer-employee relationship;
• There must be remuneration received in respect of services rendered;
• The taxpayer must be outside of SA for a period / periods exceeding 183 day in total during any 12 month period; and
• The taxpayer must be outside of SA for a continuous period of 60 full days during that same period of 12 months.

Dispelling The Myth: No Penalties For Registering

There seems to be a dangerous myth, especially amongst seafarers and yachties, that if one registers for tax, they may automatically be subject to fines or penalties. This myth is one of the major contributors as to why non-compliance is rife in the seafarer market. It is imperative that this myth is dispelled as it is likely be more harmful in the long run.

Donné Trump emphasises that “when registering for tax, one will be seen as a new registrant and will have a date of liability from date of registration. From this date going forward, the taxpayer will need to file tax returns, depending on their tax residency status, either on worldwide income or merely South African sourced income.”

Secure Your Home Port

The longer one is non-compliant, the higher the chances this will impact the taxpayer negatively. Thus, if one meets the requirements to be registered for tax in SA, this should be done without fail or delay. Once this is done, the profile must be kept compliant, with income being declared annually and the correct tax relief methods / exemptions being used. As long as you are an individual who is a South African tax resident earning income, SARS can still find you and you will still be liable to pay taxes in South Africa.

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Income Tax for Canadians Working at Sea – A Canadian Tax Lawyer’s Perspective

Published: April 11, 2020

Last Updated: September 28, 2020

Canadian Taxation of Seafarers

If you are a Canadian citizen or resident working or planning to work at sea, then it may seem counterintuitive to learn that the income you earn from that job will be subject to Canadian income tax as though it was earned here in Canada. After all, we often associate tax liability with the place where the taxpayer is physically present and like many countries, Canada taxes a person’s income based on residence. Foreign taxes notwithstanding, Canadian citizens are usually not taxed on income earned outside of Canada by the Canadian Revenue Agency (CRA) when they are non-resident in a given tax year. So why is it not the same when you are working on a cruise ship? It’s because of the way Canada determines a taxpayer’s resident status for tax purposes.

Taxation and Residence for Tax Purposes

If you are a Canadian resident, then you are subject to a Canadian income tax on your worldwide income. This means that while you may be eligible for potential credits or deductions for foreign taxes paid in other countries, the CRA will tax your full income regardless of where it was earned or received, subject to any tax treaties between Canada and the country where the income was earned. It should be noted that being a resident for tax purposes is not the same thing as being a permanent resident in terms of immigration status. Residence for taxation is a heavily fact-dependent exercise and determined on a case by case basis. So even if you leave Canada to work at sea, the CRA may still consider you to be a resident of Canada for income tax purposes. This can sometimes place Canadian seafarers working on internationally designated ships at a tax disadvantage to many of their foreign counterparts. For example, the income of Indian seafarers working aboard foreign ships outside India is exempt from Indian income tax provided the seafarers are  non-resident  even if the account is maintained with an Indian bank. In India, an individual is only a resident in the tax year if he/she is:

• physically present in India for at least 182 days during the tax year, or
• physically present in India for at least 60 days during the relevant tax year and at least 365 days during the four preceding tax years.

If neither of the above two conditions is met, the individual is said to be non-resident in India in that tax year. For Canadians, the rules to become non-resident for tax purposes are a lot less permissive.

Leaving Canada – Residential Ties and Tie Breaker Rules

Since the CRA insists that a taxpayer must be resident of somewhere for tax purposes even if that taxpayer spends the entire year working at sea, the most prudent way to avoid Canadian income tax is to establish residence elsewhere. In the past, both the CRA and the courts have held the position that a Canadian resident who attempts to cease to be resident in Canada without taking up residence in another country remains a Canadian resident for tax purposes. So any taxpayer that wants to emigrate from Canada will have to establish residence in another country. Merely working on a cruise ship will not suffice. Emigrating can still be advantageous if you are immigrating to a country that does not tax individual income, for example, the Bahamas or the Cayman Islands. Keep in mind that this would trigger a “departure tax” in Canada in which there will be a deemed disposition where you are deemed to have sold and immediately reacquired certain properties you own in Canada at fair market value. This means you will have to report any  capital gain  on the deemed disposition of those properties before leaving Canada. But even if you do decide to make that leap and emigrate from Canada for tax purposes, you still have to be careful to sever your residential ties with Canada.

As previously mentioned, determining an individual’s residence status is a fact dependent exercise and the CRA will consider all relevant facts to each individual’s case. The residential ties you have established or maintained in Canada are the most important factors the CRA will consider in determining your residence status as they represent a certain degree of permanence regarding your presence inside or outside Canada. Significant residential ties include a home, a spouse or common-law partner, and dependents still in Canada. Additionally, the court in Denis M. Lee v. MNR laid out several secondary residential ties that may be considered in determining  residence  for tax purposes such as the use of Canadian identification (like a driver’s license or passport) or the continued ownership of personal property in Canada (such as a car or furniture). The court noted that while no one group of two or three residential ties will in themselves establish that the individual is resident in Canada, a sufficient number of residential ties considered together could establish that the individual is a resident of Canada for income tax purposes. Over the years, the  tax court  has generally held that these secondary residential ties must be looked at collectively to evaluate the significance of any one such tie. While it would be unusual for a single secondary residential tie to be sufficient by itself to lead to a determination of residence, several secondary residential ties have been sufficient to establish residence in Canada for tax purposes. Additionally, if you do not maintain significant residential ties to Canada and establish them in another country, then maintaining secondary residential ties with Canada will be less likely to lead to a determination that you are a factual resident in Canada while abroad.

If you do leave Canada without severing your residential ties in Canada, you will likely be considered a factual resident and not an emigrant. Additionally, if you stay in Canada for 183 days or more then you will be a deemed resident for tax purposes under what is called the sojourner rule. Deemed residents must report their worldwide income but are not eligible for provincial tax credits. However, if you are also considered to be a resident of another country with which Canada has a tax treaty, you may be considered a deemed non-resident. As a deemed non-resident, you would still pay tax on any income you receive from sources in Canada, but you would not be taxed on your worldwide income the way a resident would. In cases where a taxpayer is found to be a resident of both Canada and another country with which Canada has a tax treaty, there are typically tie-breaker rules within those tax treaties that will determine the taxpayer’s residence for tax purposes. Usually, these rules will first rely on a ‘permanent home test’ which provides that an individual is resident for tax purposes in the country where the individual has a permanent home. A permanent home can be any kind of dwelling retained for permanent use regardless of whether it is being rented or if it had been purchased. In cases where the dual-resident has a permanent home in both Canada and the competing tax jurisdiction, the tie-breaker rules in most tax treaties will fall back on the ‘center of vital interests test’ which will examine an individual’s personal and economic ties with each country in question for a determination of residency for tax purposes. For seafarers, severing your residential ties in Canada and establishing residence in another jurisdiction, often through a permanent home, may be your best bet to avoid Canadian income tax.

Tax Tip – Confirming Tax Residence and Voluntary Disclosure

The point is that residence for tax purposes is not the same as living and working in the country claiming the tax. It is possible to have multiple countries coming after you for taxes. If you are a Canadian resident working abroad or at sea, then it is highly recommended that you check in with a Canadian tax lawyer to make sure you won’t get blindsided by significant back taxes. If you think you may have not paid or incorrectly filed your taxes on your cruise ship income, then a knowledgeable Canadian tax lawyer can help you through a  Voluntary Disclosure Program  (VDP) to correct that mistake. The VDP allows you to correct a tax return you previously filed or file a return that should have been filed. If the CRA accepts your VDP application, you will have to pay the taxes owing but will be eligible for relief from prosecution and, in some cases,  penalties  you would otherwise have had to pay.

Additionally, if you do intend to leave Canada for tax purposes, one of our experienced  Canadian tax lawyers  can assist you with submitting a residency determination. While this may reduce some uncertainties about your residence status, be advised that the NR73 is merely the CRA’s opinion and does not preclude the CRA from changing this initial opinion and reviewing your file at a later date.

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Disclaimer:.

"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

About the Author

David j. rotfleisch.

David J. Rotfleisch, a leading Canadian tax lawyer, is not only a certified specialist in taxation but also a chartered professional accountant. Most recently, David is a pioneer in Canadian crypto taxation.

As of April 2020, he was one of 12 Ontario Certified Specialists In Taxation™.

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Restaurant Owner Sentenced to 30 Months’ Imprisonment for Tax Violations That Cost the Government Almost $1.2 Million

PHILADELPHIA – United States Attorney Jacqueline C. Romero announced that Yong Chun (“Steven”) Guo, 57, of Wyomissing, PA, was sentenced by United States District Court Judge Joseph F. Leeson, Jr. to 30 months in federal prison for tax crimes. Guo was also ordered to pay restitution of $1,172,368 and a $95,000 fine.

Guo pleaded guilty in 2023 to conspiracy to defraud the United States, a charge that arose from his use of a cash payroll at his family owned-and-operated restaurant to avoid paying the full amount of employment taxes due. Records seized from the restaurant pursuant to a search warrant showed that employees were paid wages by a combination of paycheck and cash. Records provided by Guo’s accountant showed that only the portion of the payroll that was paid by check was disclosed to Guo’s accountant. The IRS calculated that Guo’s restaurant failed to report on its Forms 941 more than $3.9 million of cash wages that he paid employees from the first quarter of 2013 through the first quarter of 2020, resulting in a payroll tax loss of approximately $444,899.

Guo also pled guilty to attempted tax evasion, a charge that arose from his failure to report cash skimmed from the restaurant on his Form 1040 returns for tax years 2016, 2017, and 2018. The IRS calculated that Guo failed to report more than $2 million of income on his Forms 1040 for 2013 through 2018, resulting in a tax loss of approximately $727,469.  

“Guo’s crimes cost the government more than a million dollars in tax revenue,” said U.S. Attorney Romero. “They’re also a slap in the face to every honest taxpayer who does the right thing each year. As this case shows, we’re fully committed to prosecuting tax cheats who refuse to contribute their fair share. Bottom line: pay what you owe or prepare to pay some serious consequences.”

“Our largest enforcement program is directed at the portion of American taxpayers who willfully and intentionally violate their known legal duty of filing and paying their taxes,” said IRS Criminal Investigation Special Agent in Charge Yury Kruty. “Anyone contemplating cheating on their taxes should know that IRS Criminal Investigation Special Agents work tirelessly, year-round, to investigate tax and financial crimes.”

The case was investigated by the Internal Revenue Service Criminal Investigation and prosecuted by Assistant United States Attorney Karen L. Grigsby.

[email protected] 215-861-8300

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When is Tax Day 2024? Deadlines for filing tax returns, extensions and what you need to know

There is a cliché about life's certainties , and the time for one of them is drawing near.

Tax season is entering crunch time as the deadline to file is just over three weeks away.

The Internal Revenue Service has received 1.7% fewer returns this tax season but has processed 2% fewer returns this year compared to 2023, according to Forbes .

The average tax refund issued by the IRS as of March 1 is $3,182, a 5.1% increase compared to the similar filling period in 2023. The trend may not hold as refund amounts dropped 13% between March and April in 2023, according to Barron's .

Here are the deadlines to file your tax return or request an extension.

When is the last day to file taxes in 2024?

The last day to file a tax return with the IRS is Monday, April 15 for the vast majority of Americans.

If you don't expect to meet the April 15 deadline, you can request a six-month extension before Tax Day to avoid any penalties and interest.

What is the deadline to file an extension

The deadline to file an extension is April 15.

The IRS says you may qualify for an extension and do not need to submit a request electronically or on paper if you live in certain disaster areas .

When is the deadline if I file an extension?

If you file an extension for your tax return, you'll have until Tuesday, Oct. 15, 2024 to file.

What happens if I miss the tax deadline?

If you forget or miss the deadline, the standard penalty is 5% of any tax due for every month the return is late, up to 25% of the unpaid balance.

If you file a return but fail to pay any taxes you owe, or if you get an extension and don't pay (an extension to file is not an extension to pay, the IRS reminds you ), you typically face a much smaller monthly penalty of 0.5% of any unpaid amount.

Does every state have to file taxes by April 15?

Some Americans have different tax deadlines than the standard April 15.

Individuals and businesses in parts of Tennessee affected by the severe storms and tornadoes in December have until June 17 to file their taxes.

Residents of Massachusetts and Maine have until April 17 to file federal taxes because of state holidays.

Individuals and businesses affected by Hamas attacks in Israel  have until Oct. 7 to file their taxes.

Parts of other states, like Michigan, Connecticut, Rhode Island and Maine, have later deadlines to file. For a full list of disaster-related tax relief, visit here .

How to request an extension for a tax return

You can request an extension through the IRS , which is free.

You'll need basic information, like your name, address, Social Security number, estimated tax liability, and payment if you owe anything.

Regardless of income, individual tax filers can use IRS Free File to request an extension electronically. If you prefer to mail a paper version of the extension, called form 4868, make sure it's postmarked no later than April 15.

If you request and extension, you'll have until Oct. 15 to file your return.

Contributing: Daniel de Visé