Italian VAT on yacht charters/leasing: the proof regime of the effective use of the service outside the European Union

  • Posted By Domenico Rinaldi
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  • 22 July 2020
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Italian VAT on yacht charters/leasing: the proof regime of the effective use of the service outside the European Union

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Further legislative changes

Introduction
The Italian Budget Law for 2020 (Law no. 160 of 27 December 2019) has amended the rules regulating the application of the Italian VAT on short term charters (within 90 days) of yachts, regulated by Article 7-quarter, paragraph 1, lett. e) of the Italian VAT Code (Italian Presidential Decree no. 633/72). Specifically, paragraph 725 of Article 1 of the Budget Law recognises “the delivery of the services” of the short term lease or charter of yachts outside the European Union (and VAT exempted) only if the sailing outside the EU is proved adequately. Therefore, the “lump sum VAT criteria” related to the length of the yachts (ex. 6.6% VAT for the charter of yachts over 24 meters) will be no longer applicable, and ordinary VAT rate of 22% will be due unless it will be proved the sailing outside EU waters. This rules should have applied to lease contracts, and other similar short-term contracts executed after 15 June 2020.

The latest legislative amendments
The new applicability date
With the entry into force of Legislative Decree 16/07/2020 N. 76 (the “Decree”), the rules described above will apply to contracts executed since the 1st November 2020.

Leasing and long term charters
Article 48, paragraph 7, of the Decree, has extended the rules described above also to long term charters and leasing (financial leasing included) of yachts, ruled by Article 7-sexies, par. 1,  lett. e-bis) of the Italian VAT Code (Italian Presidential Decree no. 633/72).

Proof regime
We remind that on 15 June 2020, the Italian Tax Authority – Agenzia delle Entrate  has issued the Provision n.234483 that clarifies how and by means of what the sailing outside the EU can be proved adequately (see our Yachting News Alert n. 1 of 1st June 2020). In our opinion, the means of proof specified in this measure will also apply in respect of long term charters and leasing of yachts.

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In the light of the regulatory changes described, it should be noted once again that, starting with the contracts executed since the 1st November 2020, the ordinary VAT rate (22%) will be due on fees for short/long term yacht charters and also for yacht leasing (financial leasing included), unless it will be proved the sailing outside EU waters according to rules of Agenzia delle Entrate Provision n.234483, enjoying VAT exemption.

For more on this please contact:
Domenico Rinaldi
Partner

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