Cayman Islands: Yacht Registration - What's in a Flag?

Last Updated: 14 December 1998

The following article addresses the most frequently asked questions on yacht registration. Topics include:

  • Statistics
  • Establishment of title
  • Prevailing law
  • Privacy
  • Tax
  • Yacht financing
  • Flag state restrictions
  • Assistance in foreign ports
  • Protection at sea
  • Insurance considerations
  • Representation at international maritime conventions

The Cayman Islands are now the number one offshore register for superyachts, with about 150 yachts over 100 ft LOA and some 250 yachts over 75 ft LOA. Although the average length for all yachts on the register is 76 ft, the incidence of peak registration lies between 40 ft to 55 ft, marking the register's attractiveness to smaller yacht owners as well. So, why do owners, over such a broad range, choose the Cayman Islands?

In essence, the purchase of a yacht comes down to a question of money and how best to safeguard the asset purchased with that money.

For a start, registration of a yacht provides proof of ownership. Clear title in international waters and foreign ports is obviously very important. Once registered, the vessel is subject to the laws of the country of registration. Therefore, the quality of the registry and the applicable legal system could be vital in a number of ways. The chosen flag state should not only have an internationally recognised system of admiralty law, but also a legal infrastructure that embraces the many other needs of yacht owners.

Privacy and confidentiality are usually important to owners. Some jurisdictions, especially those with tax treaties and information exchange protocols, are entirely unsuited to privacy. Other countries, such as the Cayman Islands, protect confidentiality by law.

Tax is always a major consideration. On purchase of a yacht, the ability to avoid VAT, sales tax, use tax, import duty and other taxes on purchase can save as much as 40% of the purchase value, depending on the country in which the yacht is sold. Generally speaking, when a yacht is sold for export (to a foreign register) these taxes on purchase are waived. Of course, one has to ensure that the country chosen for registration does not impose taxes of its own.

The absence of income tax, personal property tax, estate tax, wealth tax, corporation tax, or other ongoing taxes will be a further objective in selecting a flag state. Crew taxes may also be important. A jurisdiction that enables the crew to be paid salaries free of income tax, social security tax, unemployment tax and other overhead charges, may be very attractive, both for the crew and for the owner.

Ideally, the flag state selected should impose no taxes whatsoever and, to cater for this objective, offshore jurisdictions generally impose little or no tax on non-resident owners. However, the absence of tax alone may not be enough. For example, since the introduction of the unified system of VAT in the EU, many owners registered in tax havens close to the EU such as Malta, Gibraltar, and the Channel Islands, have elected to shift registration further afield to tax haven countries that are not subject to EU pressure and have no tax or other treaties that could relate to the EU. Some EU countries have said that they will look to the port of registry as a determinant for VAT, which is payable on the full value of the yacht. Hence, a yacht registered in the Channel Islands or Gibraltar, but with a hailing port of London or Southampton, could find that it is assessed for VAT on entering EU waters. On a US$10m yacht this could amount to US$1.75m

Where a yacht is to be financed, the lender will want to know that his mortgage is secure, and that he has powers of repossession in the event of default. This requires a jurisdiction with well established admiralty law. British admiralty law, which extends to its Dependent Territories, has a very high reputation worldwide and has provided a model for many other countries including the US.

Restrictions imposed by the flag state will also require careful consideration. Some countries, such as the US, require crew and bareboat charterers to be citizens of the country of registration. Other countries, such as France and Japan, require yachts in commercial use (chartered) to be built to passenger ship standards with all the added expense that implies. There are countries that limit the movement of their registered yachts together with exchange control restrictions on where the yacht can be sold and in what currency. Some countries make it difficult to transfer a vessel off their register or to export the proceeds of sale to a country of choice. In certain flag states, import duty or other taxes may be imposed if the vessel sails into home waters, or stays in those waters beyond a given length of time. Rights and likelihood of requisition should also be checked.

Assistance in foreign ports is rendered by the consular and diplomatic networks of the flag state. States with very small networks will not be able to give much assistance, especially in remote areas where it might most be needed. Knowing that there is a local representative you can call is very comforting, especially in the event of loss of documents, a medical problem, a death, crew repatriation, crew replacement, the need to expedite import of vital spares, or even a misunderstanding or dispute with local authorities.

Protection is normally provided by military vessels of the flag state. The effectiveness of such protection will depend on the size of that country's navy or coast guard. Many flag states are not equipped to offer any protection outside own coastal waters, if at all. Other flag states, with strong naval presence, have been used specifically because of their ability to offer protection in hazardous waters. For example many Arab owned tankers have transferred registration to the British flag in times of difficulty in the Persian Gulf.

The reputation of a flag can even affect insurance costs. Where perceived risk is higher, insurance premiums, which are based on risk, will also be higher. In addition, vessels flagged in countries with poorer reputations are far more liable to boardings and inspections as part of the drugs war or other official patrol work.

Finally, owners who wish to have a voice in maritime affairs may best do so through a flag state that has strong representation in international shipping circles, including membership of such organisations as the IMO and the major shipping conventions.

So, what does all this tell us? Evidently, the object is to find a flag state that addresses all the above issues in a way that gives maximum benefit to the yacht owner. The central question then is, which are the flags in greatest demand by owners? This is best answered by looking at the statistics. A report by Malcolm Wood of Wood's International Yacht Register shows that 40% of the world's super-yachts over 100ft are British registered, 22% are US registered, with the remaining 38% split up amongst a further 55 countries.

British registration includes certain British Dependent Territories in what is called the Red Ensign Group of registries comprising: Great Britain, Bermuda, Cayman Islands, Hong Kong, Isle of Man, Channel Islands, Gibraltar, British Virgin Islands and Turks & Caicos Islands. These are further divided into Categories 1 and 2. Category 2 registries are limited to vessels up to 150 gross tons. Hence, the large yachts will need a Category 1 registry and these reduce to Great Britain, Bermuda, Cayman Islands, Hong Kong and Isle of Man. Hong Kong will cede to China in 1997 and is subject to special provisions. Great Britain is a high tax jurisdiction and not normally chosen. Due to problems associated with EU VAT, there is a migration away from registries in close proximity to the EU. Of all the jurisdictions, the Cayman Islands has arguably the most secure asset protection law.

As a result of their approach taken to address all these and numerous other factors, the Cayman Islands now stand in a pre-eminent position as the offshore registry of choice*. Of course, there are conditions that occasionally warrant the use of other registers, which we also handle from this office. A good example was when Canada engaged in its fishing dispute with the US and EU. One of our fishing vessels was drawn into the dispute with the result that Cayman registered vessels were temporarily refused sport fishing licences by Canada (along with many other countries). The matter has since been resolved and the ban lifted.

So, when you next stroll along a quay and admire the yachts, pause to examine their flags. You will be able to look knowingly and understand why people of one country so often choose to place their yachts under the flag of another.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions