Starting a career in yachting is an exciting time that brings with it many opportunities. Along with the chance to travel the world, see amazing places, meet lots of new people and drink your fair share of rosè, also comes the opportunity to make some serious money. How you go about managing your money and career in the yachting industry can often be confusing, especially when you’re getting varying advice from fellow crew and random “sages” you meet in the bar. We have tried to provide a rough guide to the top things to consider when it comes to making the most of your time in yachting.
Once you begin your career as a seafarer you’ll find that, unlike when living and working in one country, you’ll be paid in a variety of currencies. Opening a normal current account in your home country will often mean that you lose out on your hard-earned money through international transaction charges and poor exchange rates.
For this reason, you will be best advised to consider a multi-currency, international bank account with the likes of an organisation such as Standard bank. Standard’s multi-currency international account will allow you to take payment in a range of the most widely used currencies including USD, EUR and GBP. Your funds will be held separately in each currency which you have been paid, guaranteeing that only you take a slice of your salary.
It is however important to remember that holding your income offshore does not automatically mean that you are exempt from taxation. Your liability to pay tax will be dictated by your country of residence rather than where your funds are held.
(If you are interested in a bank account tailored to the needs of seafarers, we have the facility to assist you with the set up)
It follows that one of the most common questions we hear from yacht crew is “where am I resident?”. There really is no simple answer to this question; your tax residency will fully depend on your personal circumstances and the guidelines on tax residency for any country will be extensive, with each individual situation requiring a full consultation. However, you can find below a rule of thumb guide for some of the tax residencies we deal with most commonly.
Your Australian tax residency will be determined by the following tests:
·The Domicile Test – You will be deemed a tax resident under the domicile test if Australia is your “domicile of origin”, meaning that Australia is the place of yours or your fathers birth. If either of these are the case, you will need to be able to demonstrate a permanent place of abode elsewhere, in order to disqualify yourself.
·The Primary and Ordinary Concepts Test – You will be deemed resident as per this test if you live in or treat Australia as your home. Further to this, you will qualify as resident under this rule if you are seen to treat Australia as the centre of your dealings, for example by maintaining bank accounts or health insurance in Australia.
·The 183 Test – You will qualify as resident in Australia if you spend more than 183 days in Australia in any 365-day period.
Your New Zealand tax residency will be determined by the following tests:
·The Permanent Place of Abode rule – You will be deemed a New Zealand tax resident if you hold a “permanent place of abode” in New Zealand, meaning that you have a property which Is available to you on a permanent basis should you decide to return to New Zealand.
·The 183 & 325 rules – As a NZ citizen you will be deemed tax resident until you can demonstrate that you have been outside of New Zealand for at least 325 days in any 365 day period. Once you have established this qualifying period for non-residency, you will need to demonstrate that you have not spent more than 183 days in NZ in any 365 days to maintain your non-residency.
The United Kingdom
The literature with regard to UK tax residency is extensive, and each individual situation would require examination, however please find below some situations in which you will definitely be deemed tax resident:
·The 183 rule – This rule will deem you to be tax resident if you spend more than 183 days in the UK.
·If you’re your only home is in the UK and you owned, rented, or lived in it for 91 days in a tax year you will be deemed tax resident. You must also reside in the home for at least 30 days to qualify.
If you qualify as tax resident by any of the rules listed above, your worldwide income will have to be declared in that country; failing to do so is essentially tax evasion. A common misconception being that you are only liable to pay tax on income from the country in which you are resident.
Taxation & Exemptions
In the current climate following the introduction of CRS and FATCA, it has never been more important that your tax affairs are up to date. Your liability to pay tax will be determined by your tax residency. Whilst tax residency in countries such as New Zealand & Australia will mean your worldwide income is taxable at the same level as individuals who earn their entire income within their borders, some countries will look more favourably upon you as a seafarer. Some examples can be found below:
The United States – Foreign Earned Income Exclusion (FEIE)
The US will offer you a tax-free exemption on your foreign earned income up to $102,100 for the 17/18 tax year under FEIE legislation. The amount of income you can earn abroad tax free is adjusted annually with inflation and income above this level will be taxable.
The United Kingdom – Seafarers Earnings Deduction
Perhaps the kindest taxation system in the world when it comes to earnings at sea will be found in the UK. HMRC will allow your entire income without taxation provided you satisfy the following rules:
·You are not a permanent resident in any other country.
·You are employed (as opposed to self-employed).
·Your income was gained through employment on a moving vessel (the seafarers earnings deduction will exclude fixed platforms such as oil rigs).
·You spend less than 183 days a year in the UK.
Whilst the start of your yachting career is an exciting time which presents opportunities which you would be hard pressed to find in any other industry; you will also be presented with financial planning, residency and taxation issues which you will not find elsewhere.
If you would like further information with regard to any of the issues discussed in this article, we are here to help.
To be continued…
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