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Italian authorities provide clarity on dates for new VAT system

Charter contracts in Italy signed before 1 November will benefit from the 'old' VAT lump sum reduction…

On 30 September, the Italian Tax Authority (Agenzia delle Entrate) issued an update (Resolution no. 62/E) to its announcement from 17 August (no. 47/E) that clarifies the specific meaning of a passage contained in the last paragraph of Resolution no. 47/E and how this pertains to the application of the traditional VAT reduction scheme on charters in Italy.

In 2019, the European Commission announced that the application of VAT on charters as practised in Italy, France, Malta, Cyprus and Greece would no longer be applicable in 2020. In other words, merely cruising into international waters and benefitting from a lump sum reduction in VAT would no longer be possible.

Instead, VAT reductions were to be determined on a strictly pro-rata basis. These rules should have been applied to superyacht charter contracts in Italy executed after 15 June 2020, however, in Resolution no. 47/E the Italian authorities announced that, because of the economic damage caused by the COVID-19 pandemic, the new system would in fact be applied to all “operations executed before 1 November”. It was assumed, therefore, that the Italian authorities were allowing for charters executed before 1 November 2020 to benefit from the traditional VAT scheme.

However, in Resolution 62/E the Italian authorities have since clarified this statement, explaining the traditional lump sum VAT scheme (6.6 per cent for yachts over 24m) will now remain applicable on charter contracts signed before 1 November 2020, regardless of the dates of the actual charter period.

Italian Charter contracts signed from 1 November onwards will be subject to the “new” VAT scheme, meaning that 22 per cent Italian VAT will be due by the charterer according to the effective use of the yacht outside the Union territorial waters. The yacht must provide means of proof in paper or digital form to prove the cruising routes followed by the yacht in non-EU and International waters and 22% will be applied on the portion of charter performed within Italian and EU territorial waters only.

“Eventually all the Mediterranean countries will have to comply with the new system,” explains Thierry Voisin, president of ECPY and partner of SOS Yachting. “I believe that clients will be more than happy to accept the new regulations, but what they really want is clarity. The delays to the new system have added another degree of confusion, I would have much preferred that the Italian authorities and French authorities communicated with one another and implemented or delayed the new system together. What is best moving forward is that nations work together because the consistent implementation of regulations is good for the owner, it is good for the guests and it is good for yachting as a whole. Confusion is always damaging.”

The argument from the Italian and French authorities, who have both chosen to delay the implementation of the new VAT system, is that the delays have been designed to help stimulate the market in light of a poor Mediterranean summer season. However, with constant implementation date changes and delays, is the medicine at risk of killing the patient? If the Italian and French authorities continue to chop and change, do they risk driving owners and guests to other locations?

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Italian authorities provide clarity on dates for new VAT system

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