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Changing "flags" and Tax implications on crew salaries
Posted: Monday, November 19, 2012 7:28 PM
Joined: 27/11/2008
Posts: 2

I am master of a foreign flag vessel that was initially to be on a 'round-the-world itinerary.  Owner has since remained in Canadian waters and after some time US Captain was told by Canadian immigration to either leave or apply for permanent residence (which has just been granted.)

Owner has now decided to make employer-sourced tax withholding rather than continue with crew as "self-employed", thereby negatively impacting the crews take-home salary.

Crew feels it is appropriate to renegotiate salaries to reflect "in-country" tax rates.
Owner feels he is not responsible for anyone's taxes.

Please share your story if you've been in a similar situation and what arguments you felt were the most effective in pleading your case.

I've got quite a list already but would like to hear from people in our industry.

Posted: Tuesday, November 20, 2012 7:36 PM
Joined: 03/03/2009
Posts: 8

My guess is if the issue is non-negotiable the crew will start to make their own decisions about whether they are prepared to do the same job for less money and if they won't the owner will lose crew member and have to hire people who will. This then DOES effect him and the service he receives.
My guess based on the majority of crew I know is that they will be looking for other jobs and if one comes up you might have a problem.

Posted: Tuesday, November 20, 2012 7:37 PM
I cannot remember enough of my business & law but from what I do remember a lot depends on the wording of employment contracts, vessel flag - if the owner has changed flag to Canadian you have to comply with the laws of that state? A change in contract though without consent is a case that may possibly battled - it again depends on the original flag and the law in Canada if the vessel is to remain there? The best advise is talk to Nautilus - if you have membership which you should as they will help you with legal advice for free and back your corner if you are in the right. It is very difficult to fight tax if you are not a registered tax payer somewhere, UK allows UK seamen to register as a seafarers in the UK, one completes a tax return every year and provided one can prove one has been off shore for 183 days in any year no income tax is payable. As a tax resident it makes it more difficult to be taxed elsewhere. If one has no tax residency elsewhere the country one resides/works in has every right to claim as well as insist on residency applications which it has a right to refuse. I don't think I have helped much - it's a tough one...
Posted: Tuesday, November 20, 2012 9:48 PM
Joined: 19/10/2008
Posts: 38

Money is where it is at...don't fight it. But you can ask the owner if his lawyers could help you get the best deal for the tax area your in...most owners have a staff of lawyers and it is a perk the owner may allow you to address if your nice and polite. There is no free ride, even as an American if I live in England and have a tax break for being out of the US for over 330 days on contract I would still have to pay English tax...strange rules all over the world. You are in the game so learn all you can...Maritime is a tough job with great rewards...God Speed - Page
Posted: Tuesday, November 20, 2012 10:38 PM
what is the point of being away from your love ones, ready to travel at any time and basically give up your personal life if there is no compensation! I rather work at the gas station!!! The owner change the flag of the yacht for personal convenience and very likely with the savings he could pay the taxes for everyone!!! On the other hand people pay taxes to collaborate with the country and eventually retire or have benefits. Witch benefit could you possible get if you pay taxes in many countries for short periods???? I will search for another yacht right away!
Posted: Wednesday, November 21, 2012 1:01 AM
Joined: 03/03/2011
Posts: 100

In essence, you have taken a paycut somewhere between 25 and 50% depending on local laws. Now, at that point, I would be voting with my feet and looking for another job unless there is a reason it suits you to stay on that you haven't told us about?
Posted: Wednesday, November 21, 2012 6:53 AM
Joined: 11/01/2012
Posts: 7

I'm from Italy, and we are use to pay lot of taxes when you work on board an Italian flag ship, yacht etc. An European Community law of few years ago, make compulsory for EC citizens to pay for social security and taxes when employed on board of a EC flag vessel. But it is not indicated in this law who has to pay ( owners or crew ? ), and for this reason this law is mostly not respected. MLC will require to seafarers the payment for the social security and consequently, taxes. I believe that mostly of the yacht's Owners will not be happy to spend more money for their crew. So, unfortunately I guess that we should be ready to a dramatic reduction in crew salaries in the next future. This job will not be attractive anymore for the financial aspects.
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