Known as noleggio occasionale, the ‘occasional leasing’ scheme has technically been on the books in Italy since 2005, though in its previous iteration the limit on non-commercial charter was calculated as anything up to €30,000 in revenues—a level well below any that could be of use to the superyacht industry, where one week’s charter typically starts at over twice that value. Under the scheme, owners paid the lower ‘substitute’ tax rate of 20 per cent on charter revenues, up to the €30,000 limit. Otherwise, charter revenues would be taxed under the more burdensome regime applied to personal and corporate income.
But on 17 December 2013, the Italian Tax Revenue Office issued a legal decree that set out simplified rules for filing the taxes due on the occasional chartering of recreational vessels, and at the same time changed the rules under which the substitute tax would need to be paid. The €30,000 limit was removed and replaced with a time limit of 42 days or less a year. This in effect meant that any sized yacht—including those with weekly charter rates in the millions of Euros—could charter without registering as a commercial operation.
But experts at the intersection of Italian law and the superyacht industry have confirmed that, well into the summer charter season in the Med, few yachts over 30m have yet taken advantage of the scheme.
Ezio Vannucci, partner with Moores Rowland Partners srl - YACHT DIVISION in Viareggio, Italy, says that some Italian flagged superyachts he is aware of have taken advantage of the scheme—though for privacy reasons, they cannot be named. He advises that only Italian and European residents can take advantage of the rule. “At the moment only Italian owners or Italian owning-companies can take advantage of the change in the law, but from our point of view the rules could also be applied to European residents, both individuals and companies. For Non-EU owners there is no official confirmation that the occasional leasing rules can be applied.”
Italian occasional leasing still of course comes with its own set of rules and restrictions beyond the amount of tax payable. If crew are employed, a filing needs to be made with the Italian National Institute for Social Security (INPS) and with the National Institute for Insurance against Labor Accidents (INAIL). Crewing must be complaint with RINA requirements and, finally all charters must remain within Italian waters.
Alessandro Mazzoni, CEO of SOS Yachting, which was set up in 2012 to meet the increasing challenges posed by the application of VAT on charters in EU waters, says the occasional chartering scheme hasn’t gained traction because what little filing requirements there are, are still seen as too much for Italian private owners. “Although taxation is relatively low (20% flat rate), ‘occasional chartering’ has not gained traction in Italy since taking advantage of the scheme entails making a filing to the Italian Tax Authorities as well as to the Harbor Master’s office,” Mazzoni says. “This is tantamount to setting yourself up for a tax audit. So most large yacht owners who might qualify are steering clear of it preferring a low profile to the additional income. As often happens in Italy, the tangible downside far outweighs the perceived advantages.”
Gianfranco Puopolo, partner with the Italian firm PR Legal and a recognized superyacht industry expert on tax matters, points out that the inability to deduct expenses from the tax applicable on charter hasn’t helped the situation either. “In the case of noleggio occasionale it is not possible to deduct expenses and costs related to the occasional charter activity,” he says. “That makes it is less interesting for the owners of large yachts who would prefer chartering their vessel on a ordinary charter basis rather than using the occasional charter scheme.”
Italian occasional leasing however does present an initial—though as yet unperfected—example of the kind of option that brokers and tax advisers have suggested could be brought to the European Commission, as was suggested at The Superyacht Group’s Fiscal Management Meeting in Monaco. Though since the Italian scheme is in contravention of current EU tax regulations which prohibit charter for any amount of time unless the vessel is commercially-registered, it would seem to be an uphill battle.
Current Italian VAT on commercial charter is charged at the ordinary rate, currently 22%, and applied on the amount of time the yacht remains within European waters. VAT is excluded on portions of a cruise that take place outside EU waters (which the EU deems is 12 miles from the coast).
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