Late afternoon scene at Zaitunay Bay, Beirut, Jan. 19, 2023. (Credit: João Sousa/L'Orient Today)
BEIRUT — In the midst of one of the worst economic depressions in the modern world, 53 motor yachts were imported into Lebanon in 2022. They were valued at almost $8 million. $4.6 million of that value belonged to six large yachts, escaping the 15 percent duty applied to smaller vessels.
Had they been taxed at 15 percent of their real value, it would have brought the state $690,000.
It’s not much, but the tax revenue missed on those six boats would be enough to fund the Directorate General of Antiquities for over a year and a half, based on its 2022 budget.
From 2013 to 2022, the date range available on the website of Lebanon’s customs administration, duty-free yachts over 15 meters made up most imported value in every year except 2013, 2019, and 2020, when smaller boats comprised the majority of imports by value. In 2016 and 2018, over 90 percent of imported value was exempt from customs duties. In 2021, in the midst of state bankruptcy, 77 percent of yacht import value was customs exempt.
Over the past nine years for which we have data, $55 million in imports was exempted from customs duties. Had the same duties been applied to them as those imposed on smaller boats, and had the state collected the real dollar value of imports, it would have received $8.4 million in customs revenue. In comparison, the 2022 budget for the Ministry of Public Works and Transport is worth less than $2 million, at the current lira-dollar market exchange rate.
Despite the customs exemption, all yachts are subject to an 11 percent VAT on their total sale price. However, a short-lived VAT exemption for yachts over 15 meters was implemented around 2019, tax expert Nada ElSayed says.
It's unclear why larger, more expensive yachts would be customs exempt compared to smaller boats. Raymond Khoury, director of the Customs Administration, said he did not know the reasoning behind the decision but noted that it is a longstanding law. A Finance Ministry spokesperson said the policy dated back to the beginning of the 2000s and reasoned that it had something to do with encouraging the wealthy to come to Lebanon. A 2017 report in Al-Akhbar said the customs duty on smaller boats is intended to protect domestic boat makers, who do not produce boats longer than 15 meters.
In terms of the effect on the retail market, boat trader Mustafa Chehab, of Chehab Marine, said the 15-meter cutoff encourages potential buyers to reach above the length threshold in order to avoid the duty.
Opulent skyscrapers rise behind yachts moored at Zaitunay Bay, Beirut, Jan. 19, 2023. (Credit: João Sousa/L'Orient Today)
A slow market
The once-booming yacht market has not been immune to the country’s economic depression, though it is slowly recovering. The 53 motor yachts imported in 2022 are a far cry from the 141 imported in 2013, but more than double the low of 25 in 2020. In dollar terms, the market bottomed out in 2019 with a low of just $630,000 worth of imports.
It’s a small market, all things considered, but it’s a notable instance of tax relief skewed towards the wealthy in a state that uses flat taxes on goods and services to bring in a third of its revenue.
Chehab said they haven’t imported new boats in the past two years. In fact, there’s been something of an exodus according to reports.
Between 2019 and summer 2022 Turkish buyers purchased over 150 yachts at relatively cheap prices, according to Annahar newspaper, as Lebanese owners feeling the squeeze of expensive mooring and maintenance costs were eager to sell, almost no matter the price.
“In the last three years, the Lebanese market was invaded by all sorts of international brokers trying to buy as many boats [as possible] at a low price,” says Chehab.
The buying frenzy has slowed in the past months, Chehab says. “Mid-2022 the market reached stagnation. All international brokers moved on and now we have very few Lebanese [employed or based outside the country] who are coming back in very small numbers trying to buy boats for personal use and to keep for family and vacations.”
As this story went to press, 42 Lebanese yachts were listed on the online marketplace yachtworld.com, with asking prices ranging from $74,000 for a 10-meter boat to $10.5 million for a 35 meter vessel.