VAT clarity on APA in Italy
The Italian Tax Authority has confirmed that guests chartering in Italian waters will not be exempt from taxation on their advanced provisioning agreements.…
Following a successful period of cooperation and consultation between various superyacht businesses, MYBA and the Italian Tax Authority, a consensus has been reached with regards payment of VAT on advanced provisioning agreements (APA) for charters in Italian waters.
APA refers to the funds transferred by a vessels charterer to the captain on board, in order for said captain to purchase goods and services for the charterer and its guests during the charter period. Confusion has, at times, often been expressed as to whether or not the charterer is required to pay VAT on purchases made during the charter.
The confusion stemmed from the transfer of funds to the captain. Understandably, some believed that this transaction allowed for APA purchases, such as alcohol and fuel, to be classed as tax exempt – provided that the yacht itself is tax exempt – because the payments were being made by the vessels controlling – tax exempt – entity.
“Italian law does not actually provide for this,” explains Alex Mazzoni of SOS Yachting. “In reality the law outlines that the charterer is required to pay VAT on engine fuel and oil if purchased duty free at the same rate as VAT paid on the charter fees (either 22% or 6.6% in case of an international voyage”.
These costs are considered to be an actual part of the charter and are therefore subject to the same taxation scheme use to determine tax due on the charter. All the purchases made by the vessel for the charterer and its guests (if the charter is for pleasure not business) are subject to Italian taxation and must be duly documented.
The conclusions reached by the Italian Tax Authority have now set aside any confusion in relation to necessary VAT payments on charters in Italian waters.
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