Budget Law for 2021 – changes relating to “navigation on high seas” VAT regime

  • Posted By Domenico Rinaldi
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  • 12 January 2021
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Budget Law for 2021 – changes relating to “navigation on high seas” VAT regime

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With the approval of the Law no. 178 of 30 December 2020, hereinafter the “Budget Law”, the Italian legislator has introduced some amendments to Article 8-bis), paragraph 1, letter a) of DPR n. 633/72, concerning the VAT regime for the so called “navigation on the high seas”. In particular, this relief allows a VAT exemption on both the purchase of a yacht and the operating expenses related to its use, when the following conditions are met: a) the yacht is intended for commercial activities; b) the yacht is intended for “navigation on the high seas”.

The “navigation on the high seas” definition

Within the Italian Legal System, a definition of “navigation on the high seas” has never been specified by any regulation, although the Italian Tax Authority (Agenzia delle Entrate) had previously provided its official explanations on the matter. Therefore, article 1 paragraph 708) of the Budget Law has converted the fundamental principles, already identified by Agenzia delle Entrate, into law. In fact, the following paragraph was added to Article 8-bis) DPR: n. 633/72 “….. a vessel is considered to be engaged in navigation on the high seas if it has made in the preceding calendar year or in the current year, in case of its first use, more than 70 per cent of the voyages on the high seas. A voyage on the high seas means a voyage between two landing points during which the limit of territorial waters[1], calculated from the low-tide line, is exceeded, regardeless of the route followed…”.


The above referred provision apart from “institutionalizing” established principles, also introduces specific compliance.

Indeed, according to article 1, paragraph 708 of the Budget Law, the purchaser who benefits from VAT exemption of art. 8-bis) shall certify by a special statement (in compliance with the form approved by Agenzia delle Entrate) that the criteria required for the navigation on the high seas have been satisfied. The statement shall be submitted electronically to Tax Offices, which in turn will issue an electronic receipt showing the reception protocol number.

The statement may also involve other transactions between the same parties, and additionally the receipt protocol number shall be indicated on the VAT exempt invoices, or entered by the importer in the customs declaration.

Consequently, by providing a copy of the statement (and the filing receipt), suppliers can issue a VAT- free invoice without acquiring any further documentation proving the actual navigation on the high seas.


On the other hand, purchasers who have benefited from this VAT relief, other than the above-mentioned statement,  are required to keep evidence of the navigation on the high seas conditions.

In this regard, the new provision, as a matter of fact, does not introduce any novelty, and therefore the indications provided by the Agenzia delle Entrate are still considered fully valid[2]. In the event of a tax authority’s assessment, art. 1, paragraph 709, of Budget Law provides for a penalty ranging from a minimum of 100% to a maximum of 200% of evaded VAT if the navigation on high see condition is not proven.

The documentation proving the navigation on high sea shall be kept until December 31st of the fifth year following the one in which the VAT annual statement was submitted (or, in case of failure, until December 31st of the seventh year following the one in which the VAT annual statement should have been submitted).

Implementing Provision

According to art. 1, paragraph 711 of the Budget Law, by March 2, 2021 the Director of Agenzia delle Entrate is required to issue an implementing provision to identify criteria and modalities for applying the new regulations described above.

Entry into force

The new rules apply to transactions carried out from the sixtieth day following the adoption of the implementing provision described above.

[1] As highlighted also by the Agenzia delle Entrate in its official interpretations,  the Montego Bay Convention states that each State is free to determine the extent of its territorial waters, up to a maximum width of 12 nautical miles, measured from the “baseline”. The baseline corresponds to the low-tide line along the coast, as indicated by large-scale charts officially recognised by the coastal State.

[2] Resolution of Agenzia delle Entrate n. 6/E 2018: “…The verification of the condition of the high seas shall be carried out on the basis of official documentation. Official documentation means any documentation provided by the shipowner or the person in charge of the ship (e.g. the Captain) and capable of indicating, with accuracy and consistency, the sea ship voyages. By way of example, this includes: – the navigation log or logbook kept by the ship’s Captain, in which all the data and facts relating to navigation are recorded (see Articles 169, 173 and 174 of the Code of Navigation); – voyage charts, data and information extracted from any satellite navigation or transponder systems (e.g. data provided by the AIS system, “Automatic Identification System”, for ships that adopt it); – commercial contracts, invoices and payment receipts.

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