New Italian VAT rules apply after Oct. 31

Oct 16, 2020 by Guest Writer

By Sara Ammannati

New VAT rules on chartering that were expected to come into effect in Italy and France on April 1 were postponed due to the COVID-19 health emergency.

These new VAT rules refer to the European principle of taxation on the use of the yacht. As a result, the lump sum VAT criteria would no longer apply. The European Union Commission’s goal was to harmonize rules abolishing the laws that were in place in Italy, France, Malta and Cyprus for the reduction of VAT on the taxable base for charter contracts.

It is still unknown when the new rule will be applicable in France. In Italy, however, the Italian Tax Authority confirmed on Sept. 30 that the previous lump sum VAT scheme (6.6% for yachts of length overall more than 24m) will remain applicable only on charter contracts signed and deposit paid by Oct. 31. 

The new VAT law will be effective from Nov. 1 to all Italian charter contracts signed and deposit paid after Oct. 31. 

This means that for charters executed (signed and first instalment paid) from Nov. 1 onwards, the ordinary Italian VAT rate of 22% will be due on all charters starting in Italy according to the effective use of the yacht outside the EU territory that will allow the owning company not to charge the Italian 22% VAT on such portion of use of the yacht spent in non-EU and international waters. 

As a result, the time spent in international waters and/or outside Italian and EU territory will be VAT exempted. The owning company will have to demonstrate the actual use and enjoyment of the service outside EU waters by providing at the end of the charter period official proofs in paper or digital (official logbook, GPS photos, AIS/ECDIS positions and photo of the COR, etc.) indicating the cruising routes followed by the yacht during all the charter period outside the EU territory in terms of time.

SOS YACHTING works with its in-house VAT experts, Ezio Vannucci and Thierry Voisin, respectively consultant and president of the main yachting associations in the two jurisdictions (Confindustria Nautica in Italy and ECPY in France), who have been involved from the start in the discussion with authorities to put in place the new rules in both countries.

Sara Ammannati is operations manager with SOS Yachting in Italy, an independent firm specialized in delivering fiscal agency and representation services to EU and non-EU owning companies chartering commercial yachts in the EU. Comments are welcome below.