Keeping your tax affairs in order is smart for two reasons: it will help you to avoid falling foul of tax authorities and it can help you save money by taking advantage of certain tax benefits. But first, let’s start with why it’s wise to stay on the right side of the law when it comes to declaring your revenue and paying taxes.
Tax authorities in most countries will take action — including issuing fines against anyone who fails to declare bank accounts or pay tax. This includes superyacht crew. International rules, known as Common Reporting Standards, exist to ensure the banking industry is more open about sharing financial information with tax authorities across borders.
Tax authorities in most countries will take action — including issuing fines against anyone who fails to declare bank accounts or pay tax.
The amount of tax you must pay every year is regulated by your tax location, which isn’t always the same as your nationality. Therefore, it’s essential that you know your tax location. Often yacht crew believe they have successfully changed residency, but it can often be more complicated than you think — it isn’t as simple as a passport change.
If you’re unsure of your tax location, speak to an experienced tax adviser, preferably one who has experience working with seafarers (including yacht crew). This is especially important because, depending on your nationality, there are often tax allowances available to you as a seafarer. For example, if you are a UK resident for tax purposes and are employed aboard a yacht operating outside UK waters, you may qualify for what’s called the Seafarers Earning Deduction, commonly known as the SED.
The SED is an allowance that helps UK taxpayers working in the superyacht industry reduce their tax bill. It allows seafarers to claim up to 100 percent tax exemption on their earnings. In other words, it could reduce your tax bill to zero.
To be eligible for the SED, you must meet certain criteria. To start, you must be working on board a qualifying vessel or superyacht and also meet criteria related to the length of your contract and the number of days you spend at sea during the calendar year. Applying for the SED can be confusing, which is why many crewmembers don’t apply. However, the SED is one of the best tax-relief systems available, so it makes sense to understand it and apply for it.
Next, we’ll take a look at the tax requirements for South African yacht crew. But know this: regardless of your nationality and tax location, and whether you’re at the start of your yachting career or a seasoned professional, ensuring you are tax compliant is one of the most important things you can do when it comes to your finances.
This column is taken from the February 2021 issue of Dockwalk.