Limitations of the YET Programme

The possibility of dual use of yachts (i.e. the ability to use a vessel both privately and for charter while within the EU) has an obvious attraction for owners otherwise faced with the binary choice of operating exclusively on either a private or commercial basis.

The Yacht Engaged in Trade (YET) programme, which is available under the flags of both the Cayman Islands and the Marshall Islands, allows private yachts over 24 metres in length to undertake limited charter activity (for up to 84 days in a calendar year) while maintaining their private status. However, while this programme offers obvious advantages, it also comes with certain limitations that must be carefully considered by yacht owners.

The YET programme is available to yachts operating in the EU on the basis of the Temporary Admission relief from VAT or yachts which are VAT paid. Yachts operating under the programme are required to maintain full commercial compliance at all times, even when not engaged in trade. Maintaining that compliance is likely to result in considerable additional costs and an increased regulatory burden, which some owners may find to be prohibitive, especially where yachts undertake only very limited charter activity.

As a general rule, operation under the YET programme is limited to France and Monaco although, in certain circumstances, yachts using the programme can also operate in Italy. A further significant restriction is that the main charterer of the yacht must be a non-EU resident.

Despite these restrictions, the YET programme does offer some flexibility and a clear bonus, affording yacht owners the opportunity to defray some of the costs of ownership, whilst sparing them the requirement of paying VAT on their own use of that yacht – a requirement which, for many owners, is the main drawback to adopting a full commercial structure.

From the point of view of the fiscal authorities in the EU, a wider endorsement of the YET programme should make sense, as it would open up an additional revenue stream by facilitating the collection of VAT on charter fees earned by yachts otherwise operating privately under Temporary Admission and therefore neither collecting VAT, nor paying very much of it. However, irrespective of this incentive, there seems to be little appetite amongst other EU member states to extend the programme’s geographical scope.

By operating with a foot in each camp, a yacht owner’s compliance requirements grow significantly but, provided that care is taken, operation under the YET programme confers a unique benefit. Anyone establishing or reconsidering such an operation is advised to evaluate carefully the pros and cons and ensure that they are fully aware of all legal and fiscal implications.