Financing your Catamaran or Trimaran

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When we talk about two or three hulls, the price goes up, and often requires a loan. Given the low interest rates available at the moment (around 4-5%) taking on a loan to finance your project looks like an increasingly interesting option. In some cases, a loan can have an impact on the legal and fiscal status of your multihull. When buying a boat, whether as a private individual or as a company, the banks offer two possibilities: a loan or a lease-option deal. The loan needs to be secured by a maritime or property mortgage if the risk is high. You are the boat owner and the boat’s documents are in your name. This applies to new and second-hand boats. The length of the loan can be as long as 25 years, although the average is 10. In practice it’s possible to finance a 10-year-old boat over 15 years. The deposit is usually 20-30% and the depreciation schedule can evolve based upon your situation. For example, you can have smaller monthly payments throughout the year, and one big payment at the end to coincide with your dividends being paid out. Each bank has its own particularities, and advice from an independent broker, like Jérôme Wydauw of W.Lease, can be really useful when looking for an offer which suits your needs and constraints. There is also the question of insurance to be considered.

Leasing: Two Different Possibilities

The other type of loan is leasing. Leasing is only available for companies, and the Lease-Option deal is available to companies and private individuals. In this case, it is the bank or lender who buys the boat in their name and charters it to you over a fixed term which is decided at the outset (3 to 15 years maximum). You will then have the possibility to become the owner at the end of the period by paying off the purchase option, which is stipulated in the original contract, as a final charter payment. In some cases, the initial downpayment (1st charter payment) can be considered as the buyback amount. Watch out though. This format is not systematic with all leasing contracts. There are several advantages. The boat cannot be seized by any creditor other than the lender.  It does not count as part of the charterers personal wealth and is not subject to a wealth tax in the countries where it applies. For a company, the rents are depreciable and the sales tax applies to everyone. For the period that the charterer is not the owner, he or she is still responsible for the boat, in particular if there is a law violation or an accident. In Europe, it is the lender who pays the sales tax, and they will then possibly pass this cost on to the renter through the rents, either partially or sometimes not at all. Two sales tax régimes are possible: a fixed amount or the real amount. Given that cruising boats are often outside territorial waters (+ 6 miles from the coast), the government offers a 50% reduction in the sales tax on the charter. The fixed rate is therefore 10% instead of 20% in France. Since 2006, the sales tax is to be paid in the country of delivery.  If you are Belgian and take delivery of your multihull in Greece, where the tax is 24%, you will have to pay 12% sales tax on your charter payments. Once paid, the sales tax cannot be demanded in any other EU country or overseas territories such as the French DOM-TOM which apply this fiscal rule. It is important to keep the original invoice which proves that the sales tax was paid. This is important when it comes to the resale and also allows for free movement. However, based on your sailing program, you can choose to pay the “real” amount. The sales tax will be raised (or not) depending upon the sailing zone. More than 12 miles from the coast, the boat is considered to be out of European waters and is not subject to sales tax. If you enter the 12-mile zone, you pay the tax on a pro-rata basis depending on how long you spend there. Requests of proof can be dealt with later (SatNav records, AIS). For a European, this formula is adapted for a sailing program that takes place 100% outside the EU. If the client takes delivery of the boat within Europe, they have a one-month window to leave without paying sales tax. This formula is not recommended if during a round the world trip you want to make extended stays in European overseas territories. On long trips, this can happen: visits, stopovers, extended technical stopover or even having the boat kept in a secure place. If you decide to go back to Europe, the bank can liquidate the sales tax and add it on to the rents as long as you stipulate this in advance. The other problem comes with selling the boat. You will need to mention “Tax Not Paid”, in your ad, which is not necessarily attractive to any potential buyer. However, if you always sail outside European waters, this formula can be advantageous. But be careful, as if you stay for a long time in one country, then you may need to start paying taxes (see the following article). It’s therefore worth checking in advance before staying somewhere for several months. This can be such a complicated issue that it really is worth sitting down with a specialist and looking at your best options based on your personal fiscal situation, your place of residence and your sailing program.

What about the rest of the world?

It’s obviously way too complex a matter to sum up the case of hundreds of countries in just a few lines… But let’s try and be brief. Any boat which doesn’t fly an EU flag is free to sail in European waters for 18 months. At the end of this period you must leave. If you then stopover in one of the neighboring countries such as Norway, Turkey, Morocco, Tunisia or a country that is not part of the EU fiscal union (Channel Islands, Gibraltar), and come back with a stamp from one of those countries in the ship’s log, you then gain the right to another 18 months in European waters. This tax exemption is also offered in the Overseas Territories, such as the French West Indies and French Polynesia, where after 18 months you must pay dock dues and “Papeetise” the boat (see later). As a general rule, you can buy a boat ex-tax when you do not sail in the waters of your fiscal residence, as the boat will be considered as having been exported. The banks regularly check that the declared use of the boat checks out. However, if it comes back into territorial waters, the multihull will have to be reimported. An American who buys a multihull ex-tax in Bermuda, the BVI or even in Saint Barths will need to pay the import and sailing taxes on the remaining value which is due in the state where they will be sailing in the US. For example, in Florida, this tax is 7% + 1.5% of the price of the boat, but is limited to a maximum of $18,000.

Resale and Second-hand Purchase Facilitated 

On average a lease-option lasts 8-12 years. However, clients tend to change their boat about every 5-6 years. A lease-option contract is transferable to the buyer if their profile is accepted by the bank. It’s an argument which can help the transaction along for the seller and buyer alike, as long as they come from, or have fiscal residence in the lender’s country. In practice, an American or French national cannot take on a lease-option from a German, unless they are resident in the country and have had a bank account there for a considerable time. In principle, you should always go to a lender in your place of tax residency, and they will request that the boat be registered in the same country. If this isn’t the case, then you must liquidate the lease and the bank will have to pay 20% sales tax on the remaining balance. The buyer can then look for their own finance deal if the multihull isn’t that old. In every case, the risk for the bank is linked to the client’s usage of the boat. For boats which are in a management/charter contract, the risk is much more limited, because the lender’s intermediary is a charter professional, which guarantees careful usage and respect of the navigation areas. This opens up more possibilities.           


Leasing in a Charter-Management Contract

There are two main ways of acquiring your boat: a program with guaranteed charter income and one with an option to buy the boat. In one case you buy the boat with your own money or with a loan and become the proprietor. For 5-6 years you receive a monthly income of around 7-9% of the ex-tax value of the multihull. At the end of this period, you either take delivery of your boat, or you look for another boat. The management company will buy your boat. In the other case, especially in countries where it is not always easy for a private individual to be an owner, it’s the management company which buys the boat for you, as long as you contribute 35-45% of the ex-tax price of the boat. You can use your sailing weeks, but you don’t get any income. At the end of the agreed period, there are several possible outcomes: you pay a balance of 20-30% to buy the boat, or if you do not want to buy it, the management company pays you around 20% of your initial deposit. Another possibility is that you hand the boat over to the management company’s sales team. Using this option can help to avoid some taxes, but it’s especially the maintenance, storage, port charges and insurance that you don’t have to pay, (which represent around 20% of the boat’s total budget). You just pay the registration costs. As the management companies have branches in several countries, it’s possible to register the boat at its base which in some cases can save a lot of tax and thus render the operation more profitable. At the end of the contract, if you’d like to bring your multihull back to Europe, you will have to import it once a waiting period has passed and pay the difference on the sales tax. The boat will need to conform to EU standards. Otherwise there’s always the possibility of leaving the EU after the waiting period is over.  

Simulation of a contract with guaranteed income on a Sunsail 404 (Leopard 40) 4 Cabins - 2 bathrooms over a 66-month period.  

Public price including sales tax. All options, ready to sail                             € 570,000

Special discount                                                                                         € 71,000

Expenses                           Revenue


Price including sales tax after discount                                                € 499,000

Guaranteed income over 66 months                                                                                               € 182,967

Deposit 50%                                                                                           € 249,500

Leasing costs, including tax over 66 months                                    € 221,562

Total cost of financing the lease                                                         € 471,062

Buy back value                                                                                                      € 0

Total cost after buy back option                                                         € 288,077

Estimated resale value at end of period                                                                                      € 260,000

Income from charter and resale at end of period                                                                      € 442,967

Total cost to the buyer after resale                                                     € 28,077 (estimate)

Free services in your favor

12 weeks available for sailing per year @ € 6,000/week                                                            € 360,000

Maintenance, port, insurance (10% per year of new price).                                                      € 275,000

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