Financing a Yacht: Advantages of Offshore Banking Account11 min read
Reading Time: 4 minutesOffshore banking is a way for smart buyers to fund their yacht intelligently.
As anyone who’s ever set foot on a luxury yacht will tell you, these floating abodes aren’t cheap. Most yachters have no idea how much they will need to invest to buy their fabled boat.
In this detailed tutorial, let’s see what are the main benefits of using an offshore bank such as The Kingdom Bank for yacht financing.
What are the Advantages of Financing a Yacht Through an Offshore Banking Account?
For instance, the most significant advantage of borrowing your yacht from an online offshore bank like The Kingdom Bank is that you’ll have more control over exchange rates.
Since yachts are typically purchased within one nation but utilized worldwide, currency valuations over the life of a yacht loan can significantly affect costs if not handled properly.
As part of its online banking service, The Kingdom Bank offers real-time exchange rates for many foreign currencies directly to its customers.
This enables smart yacht owners to profit from favorable exchange rates when making major purchases or scheduling repairs abroad. Instead of being surprised by conversion charges, the costs are transparent and predictable.
Offshore banks also provide more personalised terms of payment that match the financial cycles of yacht ownership. With seasonal charters, cruises worldwide and constant maintenance, your income does not last throughout the year.
Prominent companies such as The Kingdom Bank consult directly with the client to design flexible loan plans ranging from up to six-month deferred payment plans for large refits or long-distance cruises.
This reduces money stress when you’re short on cash.
How Does an Offshore Banking Account Help with Currency Exchange on Yacht Loans?
Offshore banking is one way in which multi-currency accounts can ease money movements. Instead of having to change money every time they pay for a yacht, owners could keep balances in the primary currencies used to pay for the yacht.
For instance, an owner based in the UK may receive charter revenue in Euros but repairs must be done in US Dollars.
When you have a Euro and USD account with one offshore bank account, you can exchange currencies directly between banks at interbank exchange rates without third party conversion charges.
Besides, offshore banks permit clients to get loans directly in their own currency. For instance, a French buyer buying a Greek yacht might take out a loan in Euros so as to be less exposed to currency risk in the long run.
You pay interest and principal payments in the same currency and are protected from price changes that may affect affordability in the long run.
You can even check out live exchange rates through online banks to keep an eye on currency rates and spending plans.
Are There Tax Benefits to Using Offshore Banking Accounts for Yacht Financing?
The best selling point for offshore banking is potential tax deductions. Profits from international yacht rentals and sales can be taxed in several jurisdictions depending on the laws.
A support bank account offshore helps consolidate income and expenditures at zero or low taxes. This revenue can then be reinvested back into the yacht or enterprise without heavy taxes.
In the same way, interest paid on a yacht loan with an offshore bank might be exempt from taxation in your country of residence but not in the offshore jurisdiction. A qualified adviser can help organise funding and ownership offshore in a manner that would yield maximum tax advantages in the long run.
If you’re a mobile user who spends a good part of your time away, an offshore firm can make it easier to pay taxes in several countries.
What Types of Yachts are Typically Financed Through Offshore Banks?
Offshore banking is ideal for any yacht, but there are particularly compelling opportunities for larger superyacht investments between $5-10M or higher.
Even with exchange rates or interest rates that vary slightly over a 20-30 year loan, the hundreds of thousands of dollars can vary significantly at these higher prices. Offshore banks manage the money and have flexible terms, ensuring the safety of these massive investments.
Exceptionally big yachts such as expedition boats and private megayachts in excess of $50M are often also financed through offshore structures.
Confidentiality and security are at the very top of these ranks. Keeping the yacht ownership within an offshore company, and having an accompanying offshore bank account, also offers privacy that is not provided by banking in the country.
Outsource professionals are also ideal for ultra-high net worth clients who require elaborate tax planning.
What are the Legal Considerations When Using Offshore Accounts for Yacht Financing?
Offshore banking does bring clear financial benefits, but it also comes with its own legal responsibilities. Licensed professionals familiar with marine and offshore banking regulations can navigate this terrain in the right way.
The key to choosing an offshore jurisdiction is a reliable offshore jurisdiction where the banking laws are as transparent as they are in the West.
Ownership and financing structures should also adhere to flag state requirements for vessel registration. Some countries have laws against foreign ownership that an offshore company can break. The tax status of the ultimate beneficial owner(s) also influences rules.
Under the guidance of well-trained legal and tax professionals however, such points can be resolved in advance to ensure that the deal remains squarely legal.
There should also be proper due diligence on the offshore bank. The Kingdom Bank, for example, is the largest bank with the most financial licences and is regulated by international regulators such as the Financial Services Regulatory Authority.
This helps give property owners reassurance that their assets are protected by a trusted organization. In general, working with a licensed and regulated offshore professional can alleviate legal hurdles.
A high-end yacht buyer committing to massive purchases benefits directly from an offshore bank such as The Kingdom Bank – from better money control to tax avoidance. It is essential to hire professionals who can architect structures in the legal frameworks that are relevant to the circumstances.
If you’re putting together a multi-million dollar yacht purchase, the long term cost savings of offshore banking is hard to beat.
Contact an advisor at The Kingdom Bank today to see how we can help you finance your dream boat.
