Yacht Crew Tax & Financial Information - Your Ultimate Guide

Image source: https://pixabay.com/photos/euro-banknotes-hand-holding-money-867410/

Whether you’ve worked in yachting only a few months or many years, it’s guaranteed you’ll have questions surrounding finances, tax obligations and personal concerns to get the most from your off shore income.

Whilst many in the yachting industry find themselves in the unique position of having a high income and low expense lifestyle, a career in yachting can often be fruitful but short.

This makes it all the more important to begin arranging your affairs to maximise the benefit of this income now.

By taking a few simple steps, you can ensure you feel the long-term benefit of the unique position and secure a better future.

In the following chapters, we outline 7 key considerations whilst being employed on a ship.

Simply click on the links below to be taken straight to the chapter that interests you, or read the whole “ultimate guide” to be as fully informed as possible:

1. Yacht Crew Salaries
2. Living Expenses
3. Bank Accounts
4. Insurance
5. Savings & Investments
6. Social Security
7. Tax Obligations

Yacht Crew Salaries

Roles within the yachting industry often come with a generous salary.

Whilst a deckhand cannot realistically expect to earn as much as the captain, it’s usually said everyone on board will do pretty well for themselves.

Your salary will be dependent on a number of factors including:

• type of vessel
• past experience
• qualifications
• paid leave
• end of season bonuses
• performance based incentives
• the vessel’s route
• your relationship with the owner
• guest & charter tips

It’s not uncommon for crew to be offered an end of season bonus, which many put aside into savings or choose to invest.

SY Ranger for example, famously had one of the best retention packages in the industry, where crew received an additional months pay for every year of service.

The following infographic below gives a fairly good measure of the salary ranges expected by various jobs on board a super yacht:

Living Expenses

On top of your salary, you can often expect your living expenses to be covered whilst on board.

The fact that your employer covers food, accommodation and other essentials, often leaves crew with a large disposable income.

Again, there are dependent factors, but it’s not uncommon for experienced crew members to have travel expenses to and from the yacht reimbursed as well!

Bank Accounts

For those taking their firsts steps into yachting, having the right type of bank account to be paid a salary into should be a top priority.

Being paid wages into a domestic, single currency bank account can often be a huge mistake.

Retail banks at home will generally not accept multiple currency deposits and you may find you lose money to the bank through poor exchange rates or high conversion fees.

For this reason, the savviest employees open an offshore multi-currency account with a provider such as the following:

• Standard Bank
• Revolut
• Lloyds

These accounts are designed to hold multiple currencies and are great for paying salaries into.

However, you’re advised to learn more about why leaving your hard-earned cash in one for an extended period is not advised, by reading our article about International Account Myth Busters.

Image source: https://pixabay.com/photos/piggy-bank-money-cow-dollar-bill-3297061/

Insurance

You’ll find most employers provide medical & health insurance to cover costs for injury or sickness, which are vital whilst overseas.

This provision is assumed to be fairly standard throughout the industry, but it’s not always the case and is worth taken into account before you accept any role.

If you fall ill or become injured whilst away and are not covered by your employer’s insurance policy, you may find overseas medical bills very expensive.

Even if you’re covered by your employer’s health & medical policy, there’s other forms of insurance you may need to consider.

For example, long-term absences due to sickness or injury are unlikely to be covered by sickness pay.

In order to guard against this, you should consider a payment protection insurance plan, which covers you for loss of earnings during your time off.

Savings & Investments

Various people take differing approaches to how they save and invest their money whilst employed in the yachting industry.

For example, there’s a great number who take advantage of the well paid lifestyle by investing large sums in stocks & shares, property or many other options as early as possible, to enable them to leave the industry quickly.

There are others however, who choose to leave thousands of pounds worth of currency sitting in offshore accounts, gaining zero interest!

Remember - leaving money in an account accruing 0% interest for an extended period of time actually means the value of the savings will decrease due to rises in inflation.

If this is a situation you find yourself in, you are advised to act quickly.

Read our article to learn 5 ways to make your end of season savings work and avoid currency depreciations.

Social Security

For social security matters, each jurisdiction has different parameters regarding your obligations to pay and the benefits you receive in return.

Some countries like France, insist that you must contribute if you spend more than 181 days on a vessel in French territory, whilst others give you the option to make voluntary contributions if you wish to.

Depending on the jurisdiction, your contributions can cover a number of benefits, which could include the following:

• State pension
• Payments to support you when out of work through sickness etc.
• Widows/Widowers benefits
• Maternity/Paternity payments

Due to recent changes in the French system, social security is a hot topic of conversation amongst yacht crew and yacht owners.

As a consequence, many have avoided French territories for this precise reason.

Under the new system, you’re obliged to make payments if you qualify under either of the following tests:

Test 1

You will be obliged to contribute if you or your vessels spend more than 181 days in France or French waters in any calendar year.

Test 2

You will be obliged to make contributions if you qualify as a French resident for tax purposes.

As it stands, it is the responsibility of the captain or vessel owner to ensure all crew are compliant with French social security laws.

So you should be notified if you’re liable, and may find contributions are taken by your employer at source.

If you think this applies to you, you can read more around the subject of common French social security questions in our recent blog post.

Image source: https://pixabay.com/photos/money-bills-calculator-save-256312/

Tax Obligations

For many years, crew all over the world have been being paid into offshore accounts, with tax authorities being none the wiser.

Unfortunately, this is no longer the case.

With the introduction of the Automatic Exchange of Information and Common Reporting Standard in 2014, any participating tax authority can now request your bank gives them full details of all your holdings, both onshore and offshore.

For this reason, it has become all the more important that you have a strong understanding of your residency position, which will dictate your obligations in declaring income.

If you are ruled to be tax resident of any country, you are obliged to declare your income from any source worldwide, which of course includes your yachting salary.

If you become the subject of an investigation and are found to have failed to declare income whilst being a tax resident under the laws of a relevant jurisdiction, most authorities will expect payment of penalties and fines or interest for late payment.

The only sensible course of action is to fully assess your residency position and voluntarily disclose your income from work and investments, before any authorities ask.

By doing so, you’re demonstrating that you’ve made every effort to remain tax transparent and to fulfil your obligations.

Most authorities will take a much kinder view on those that do, than those that don’t!

Each jurisdiction has different tax laws, with some being more forgiving than others when it comes to taxation placed on your income from yachting.

Below we summarise the differences for each including the UK, USA, New Zealand and Australia:

UK Yacht Crew Tax

The UK system is one of, if not the most forgiving in terms of tax on income from yachting, and as such is one of the most appealing tax residencies.

Through the HMRC’s Seafarers Earnings Deduction (SED), UK yacht crew can declare their income from yachting with a 100% exemption from tax.

To gain 100% tax exemption, you must qualify as a UK tax resident (or EEA resident with no other tax residency) under the Statutory Residency Test, with the special circumstances of seafarers accounted for in the legislation.

Whilst there’s other parameters you must adhere to, the most important one to observe in order to qualify is the limit of 183 days spent onshore in the UK in any rolling 365-day period.

For more information, read our detailed article covering all aspects of the Seafarers Earnings Deduction tax exemption.

US Yacht Crew Tax

The US tax system offers a tax-free amount, which can be earned by US tax residents through the IRS’ Foreign Earned Income Exclusion (FEIE).

This is adjusted annually with earnings up to $104,100 qualifying for the 2018 tax year.

In order to qualify under the FEIE, you need to work and live outside the US and pass one of two tests:

a) Bona Fide Residency Test

You can qualify as a bona fide resident of a foreign country if you reside there for a period, which covers one whole tax year.

The US tax year runs from 1st January – 31st December.

Leaving the country for vacations will not affect your qualification however, you must not submit paperwork notifying them of your presence as non-resident.

b) Physical Presence Test

To qualify for FEIE under this test, you must be present in a foreign country for at least 330 days in any period of 12 consecutive months.

Any declared days spent overseas must cover the entire 24-hour period of said days, so departure and arrival days for example don’t count.

It’s also important to remember that under FEIE, a day spent in international waters also counts as a US day.

Australian Yacht Crew Tax

Australian crew are in the unfortunate position of suffering some of the harshest and most outdated residency laws you’ll find anywhere in the world.

You’ll be subject to the 3 statutory residency tests below:

a) The Domicile Test

You're considered an Australian resident if you’re domicile (the place that is your permanent home or place of your fathers’ birth) is in Australia.

To overcome this test, you must set up a permanent home overseas.

b) The 183 Day Test

If present in Australia for more than half the income year, whether continuously or with breaks, you are said to have a constructive residence in Australia.

To overcome this rule, you need to establish that your usual place of residence is outside Australia and you have no intention of taking up residence back home.

Under this rule, a traveller could feasibly be ruled tax resident unless they can evidence that they have a home elsewhere and have no intention to return to Australia to live.

c) The Superannuation Test

You’re considered a resident of Australia if you are still contributing to a superannuation scheme.

For more information, read part one of a two-part series on Australia’s tax laws and yachting.

New Zealand Yacht Crew Tax

New Zealand residency tax laws are simple and easy to work with.

If you wish to establish a position of non-residency and not have to pay tax on your earnings, you’ll need to qualify via the following tests:

a) 325-Day Rule

You must first establish an initial qualifying period for non-residency of 325 days outside the country in any 365-day period.

These days do not have to be consecutive, so you’re welcome to visit home at any point.

But it’s important that you keep good records of your whereabouts and movement including flight stubs, train tickets and even receipts as evidence of your time spent overseas.

b) 183-Day Rule

Once you’ve established your initial qualifying period of 325 days outside New Zealand, you can then maintain your qualification by not spending any more than 183 days in the country in any 365-day period.

If you break the 183-day threshold, you will need to re-qualify by spending 325 days overseas in any 365-day period.

c) Permanent Place of Abode (PPA)

If you wish to establish non-residency of New Zealand, you must not have a home which is permanently available to you to live in the country.

Under this rule you may still be ruled resident, even if you have spent the necessary time overseas.

A room, which can be used on a temporary basis at a friend or family members’ house, will not be considered a PPA, nor will an investment property in which you don’t spend time.

Speak to Us or Comment!

As you can see, tax residency laws vary across numerous territories, so it's important to know your position early on and what your obligations are.

We'd love to know your thoughts on this article or any questions you might have.

Just leave a comment in the section below or alternatively, contact us if you need professional advice on your yachting income tax obligations.

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.