Yacht investment programs have existed for a very long time and are extensively utilized. I do not wish to delve into the motivations behind them; everyone must decide that for themselves. The focus here is on a realistic calculation of the financial situation. What can be expected, where are gray areas to be anticipated, and what is absolutely not acceptable.
I am not a tax expert, and therefore everything I write here is without guarantee. The assessments of the tax authorities are also not truly predictable. The best approach is to prepare well, make a personal appointment at the tax office (Finanzamt), and present your plan.
Preparation and the Tax Office
If I have no intention of generating a profit, then the matter is relatively simple. However, the financial outcome is then sobering. To put it in one sentence:
During the time, you have sailed a few times and ended up with a heavily used boat
for which you spent a lot of money to enable others to go on vacation.
If I want to achieve real profits with a yacht investment program, regardless of whether I use the boat as a charter customer for a few weeks a year, then completely different rules apply.
- A business case is required that shows how the profit forecast develops over the duration of the program. The term itself must already represent a clear intention to generate a profit. A 4-year calculation followed by the takeover of the boat will only be recognized by the tax office for appointments held on December 25th.
- Proof of professionalism is usually provided by the yacht investment charter company. It will be assessed whether the representations are realistic, charter prices within market range, etc. The tax office has a thoroughly reliable database and yes, tax officials use AI as well.
- If a loss is incurred during the program, for whatever reason, you must prove that you and the charter company have initiated countermeasures. If you cannot do that, you will be accused of “hobby status” (Liebhaberei) in no time. Ideally, you should document everything discussed during the term and everything sent or received (email´s).
What can go wrong during recognition before and during the program?
- Figures are exaggerated and not robust If you think you are starting with an intention to generate profit and then take over the yacht anyway after, for example, 5 years, the tax office can retroactively reclassify your calculation as “hobby status” (Liebhaberei). That can be quite painful. To counter this, only a “hardship case” representation helps. Illness or a lack of occupancy due to Corona was, for example, such a hardship case, or whatever else you can invent here. In any case, it is unpleasant.
- The charter company turns out to be a “not professional” The boat ages rapidly, charter numbers decrease, etc. Then a hardship case might apply under certain circumstances, but the profit model is still ruined.
Calculation Table
I have created a table in which I attempt to facilitate the calculation. I must point out that this table may certainly contain errors and usage is at your own risk.
I know there are still a few options available to enjoy further tax advantages once the intention to make a profit has been recognized. But that’s a job for a tax advisor.
DOWNLOAD the table
If you have suggestions for improvements – feel free to comment
But don´t forget! This are the financial numbers, at the end, you will have a Yacht if you like.
