Yacht charter business in Thailand
Requirements, use cases, and licensing issues for Thailand’s charter businesses
Yacht charter: Under a charter agreement, all or a part of a yacht is hired by a charterer for a specified voyage or period of time. Thailand’s laws allow demise charter agreements and commercial charter agreements. In the first case of a bareboat charter agreement, possession, command, and navigation of the vessel are relinquished to the charterer. This includes crew selection, vessel operation, and management. In a crewed charter contract, the charter party rents the vessel for a specified time, but the owner remains in charge of the vessel operations and selects the crew. Under Thai laws, the type of charter agreement has an influence on the owner’s liability, applicable requirements and regulations, tax implications, license requirements, and more.
Cross-border cases: Due to their commercial nature, charter yachts must comply with many different rules and regulations in order to operative legally. This applies in particular if the flag state and the port state are in different jurisdictions. Charter agreements can be arranged for travel within Thailand or across borders. The agreement can be concluded directly with the owner and/or through an agent or broker. The yacht might be registered in Thailand or have a foreign flag. This includes cases where foreign yachts carry passengers and, if applicable, load or unload passengers in Thailand. This results in complex legal and tax issues in individual circumstances.
12 PAX limitation: If a yacht carries more than twelve passengers irrespective of whether payment is made, the vessel is considered a passenger ship which puts it into a different category from superyachts. This qualification includes children and babies and is regardless of the size of the yacht. A passenger ship must be in compliance with the International Convention for the Safety of Life at Sea (SOLAS), which requires rigorous testing, training, and surveying. SOLAS is an international maritime treaty that sets the minimum safety standards worldwide.
Taxation gets complicated with commercial yachts embarking guests in third countries outside Thailand, with a tax burden pro-rata to the time or travel route they spend in Thailand. Tax treaties and foreign VAT regulations have to be taken into consideration as well. The situation is different for commercial charter providers that operate via their own legal structure in Thailand or via local charter agencies. Commercial yacht owners and owning companies might evaluate to have a VAT and fiscal representative in Thailand. Private guests on private yachts can be embarked and disembarked in Thailand and should consider the tax implications as well.
TAT License: Thailand’s travel business is regulated by the Tourist Business and Guide Act. To do a charter business requires a license by the Tourism Authority of Thailand. The TAT license is granted by Thailand’s Tourist Business and Guide Registration Office. The applicant has to be a Thai individual or a Thai Co., Ltd. with the appropriately registered business purpose that covers the charter business. Thai yacht companies are regulated by the Thai Vessel Act. Trading in Thai waters is generally restricted to the owner of a Thai licensed vessel with a Thai national crew. Foreign vessels can be licensed on a yearly basis under certain conditions.
Superyacht charter license under the 2015 legislation is currently a merely hypothetical option. It requires a VATable import of the superyacht into Thailand and the financial burden involved with this can be hardly compensated by the charter business. Also, it does not contain a pragmatic business visa and work permit solution.
Professional yachting legal services from Bangkok
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. The law firm advises and assists international clients on the legal and tax aspects of the construction, sale, purchase, registration, and operation of superyachts and vessels. It guides and handles the whole process, as well as coordinates and communicates with the Thai or international participants through the whole life cycle of the yacht.
TYBA: PUGNATORIUS Ltd. is a member of the Thai Yachting Business Association, formerly the Thai Marine Business Association. The TYBA is a non-profit marine leisure industry association, serving yacht builders, yacht charter operators and brokers, marinas, yacht repairs and refitters, yacht management, and other yachting related companies throughout Thailand.
The scope of professional work in the maritime and yachting sector is described at “Legal and tax advice in Thailand’s maritime and yachting industries”.