Offshore Crew Solutions

Its a way to reduce liability and exposure to claims if the employing entity is not related to the vessel other than on a commercial basis.

It wasn't widely used in yachting but is now becoming used more often.

There are actually two aspects to the answer to your question. The first is the country doing the hiring and flag of the boat itself. These may be selected to avoid more rigid employment laws and to reduce tax obligations. Cruise ships are a prime example in this regard. And it often does mean fewer rights for the employee. Now it should not mean less safety since there are universal maritime laws regarding safe operation but it sometimes does.

The second aspect is what K1W1 addresses as a second entity. This is a practice used in many businesses. Reducing exposure to liability is a major reason. Providing more freedom to change personnel is also since the boat owner isn't actually firing but just telling the employment entity it wants to change out contracted personnel. Now it can also have benefits in terms of benefits and processing of payroll simply by grouping these emplyees into a larger entity or one more capable of administering these things. Often a yacht owner really isn't that prepared to handle employment directly as he's always had a human resources department to do that for him, so this becomes his human resources department.

Personally we're flagged US so all employees are covered under US laws. However, we do employ them technically through a separate entity, which we also own. But we employ all of the employees in our businesses through an employment entity we also own. This allows grouping for the purpose of benefits and for payroll administration and in our case more benefits than an entity with only a few employees might have. We have not however chosen to flag elsewhere and employee offshore as we want to provide full coverage and protection under US employment laws and pay wages appropriate for the US.

Now, as to the ad you saw offering solutions, there are companies that do a good job of providing support services including staffing of crew, but there are also many that promise a lot and deliver very little.

As a potential employee the potential of abuse and poor conditions exists in every potential job and you can extend that far beyond careers in boating. It's important to interview the employer as they do you.

Also, many of the offshore situations are designed in a way to assist crew in avoiding tax obligations. Be very careful and do not depend on tax information from them, other crew, or employers. Get your own tax advisor.

As an employer, I think generally one needs to have employees working for some legal entity other than them as individuals. As to it being offshore, every place off shore is local somewhere. I think location should fit the specific situation.

Before going off at a tangent you should be aware that seafarers of many nations can and do file perfectly legal tax returns in their resident countries and are tax exempt on the money they earn overseas. In some you keep paying your social charges and you stay part of the regular system no mater how long you work "offshore".

Excellent point. There are many who are honest and also want to maintain their status in their homeland. As to being exempt on foreign income, each country has their own rules.

Tax management is one thing, but the efforts some go to in order to avoid taxes can be very dangerous.

Just looking at US residents, you are not tax free when abroad, you are just allowed exclusion of income up to a certain amount (97,600 last year) if you meet certain requirements. Now many have misconceptions. For instance they think as long as you're not in the US more than a certain number of days you qualify. That's not how it reads. It states you must be physically present in a foreign country at least 330 days of the year. And here is where it comes to haunt boat crew. Being in transit on the water is not considered being in a foreign country. Let's say you're in the Bahamas on June 1. Then you decide to cross to Portugal. You leave the Bahamas on June 1 and arrive in Portugal on June 16. None of those 16 days count as being present in a foreign country. Now the other way to get the exclusion is to be a bona fide resident of another country. In both cases too your tax home must be established as a foreign country. The US does not accept the "man without a country" situation for tax purposes. If you're a US citizen and can't establish elsewhere as your tax home, then it remains the US.

My advice to people is live your life as you desire, where you desire and then let tax experts advise you of the tax treatments and consequences. At that point if you can them make a small adjustment that saves you money, then fine.

Final point is don't get your tax advice online or from other non-professionals, myself included as I don't keep up with all the changes. We may know just enough to be dangerous.

Olderboater is generally correct as to hiring USA crew. However, a American Citizen crew member who is resident in a country that has a tax treaty with the US does have a choice. Those crew members can decide to pay the taxes in their country of residence.

The bug-a-boo is if the Yacht is USA flagged then it becomes very challenging... unless it is home ported in the USA or its Territories and only hires American Citizens. It is very dangerous to hire any foreign crew and operate routinely in US waters particularly with a USA flagged vessel. I have posted on this before and people that are well meaning but do not understand the rules, regulations and the law will get into trouble when it is very simple just hire USA resident crew in those cases... facts of law and life.

Of course, do I need to say it hire professional, qualified and certified crew only. Doing otherwise is not sane or safe.

Personally I would love to fly the Stars and Stripes but it is just not possible because of where we operate.

It is tragic that the US tax rules basically put US citizens working on Yachts outside the USA at a take home pay disadvantage.

That's why I made sure I used the words "US resident".

As to flag and crew, we chose US flagging since that's where we live, where we will do the majority of our boating and therefore where we would naturally hire. So hiring all US crew is a non-issue for us.

Olderboater... you are both correct to do so and smart.

Why I mentioned the situation as to the USA is that often it is easy to hire some undocumented (both immigration and basic crew certification) likable person... in the islands and live to regret that because the maritime, tax, immigration and even customs regulations and law are complex and interrelated. Awhile back someone posted about hiring such an islander on his US flagged boat and the thread became contentious particularly after I started posting about the rules, which are very complexly interrelated.

Why I know these things is I have wanted to have a boat home ported in American waters for use in the Caribbean for many years... and fly the US flag during the winter months... and the boat in SOF could just stay put... as it has for couple three seasons. But that has not happened I suppose because I careless as time goes on. Its like waiting 4 years to build a boat... I might not see it done... of course I think I will... but if you ask the family they are not so confident... and you ask God he would likely say I am more expendable than I think... Mon Dieu!

Now back to the real point of this thread:
As to the Med... well that is an interesting place... used to much more interesting too but the European Union did homogenize it quite a bit. But management companies exist because of the complications and setting it all up for one boat even a big boat is expensive and complex.

Management companies or other business structure schemes are a service to navigate this tangle.
Now you wonder if your Captain can really run I think not. Why do these management companies exist is that all of it is very complex ... maritime law and reg.; customs law and reg.; employment law and reg.; immigration or visa law and reg. .... so on etc. etc....

As an example in the Med it is possible to do some choices by trading off each countries picadillos (probably spelled wrong). Monaco contrary to popular assumption is likely the most expensive and regulated. The "social security" taxes in Monaco are 40% of total compensation not 15.6% as in the US or about 20% as in France, see as posted below in Anglo for YF user connivence posted below just so you can see how fun it is to figure out these things:
http://www.cleiss.fr/docs/regimes/regime_france/an_a2.html

WARNING.... The real French version is not understandable unless one you are a "Francophone"... that means being born, educated, speaking in the French system and two you are naturally a bureaucrat attorney... love the term "solidarity autonomy insurance".... who but a Francophone knows what in the hell that means. Now add in all the countries you can touch you might get overwhelmed... except for the good old Euro Union guys in that bureaucrats dream Belgium.

Solidarity Autonomy Insurance... means you have met the requirements of the "fraternal obligations to your fellow Francophone" and are therefore at "liberty" to do as you please... with whatever is left.