New Clarifications Regarding VAT on Charters/Yacht Leases

  • Posted By Domenico Rinaldi
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  • 16 September 2020
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On August 17, 2020, Italian Tax Authority has issued a Resolution to give a further explanation on how the new VAT rules must be applied to pleasure yacht chartering, leasing and other similar short-term and long-term contracts according to Article 48, paragraph 7 of Decree-Law n.76 issued on July 16, 2020. As you have been informed in July, the VAT rate of 22% will be applied to yacht leasing, yacht chartering and similar short-term and long-term agreements since November 1, 2020, only if you don’t prove the actual use and enjoyment of service outside the European Union through adequate means.

APPLICABILITY OF THE FLAT RATE CRITERION TO TRANSACTIONS OCCURRED BEFORE NOVEMBER 1, 2020

In relation to this, as it was not evident in the text before, the Italian Tax Authority has clarified that, as to the contracts signed before November 1, 2020,  the indicative percentages of the presumed use of vessels outside the territorial waters of the European Union – set up by the Circular Letter of Italian Tax Authority n. 49/E of June 7 2002, supplemented by Circular Letter n. 38/E of July 22 2009, and subsequently confirmed by Circular Letter n. 43/E of September 29 2011 – may continue to apply.  Therefore, as to the contracts signed until October 31, 2020, charter/leasing fees may continue to be subject to reduced effective rates depending on the characteristics of the vessels (e.g. 6,6% for yachts longer than 24 m).

THE PROOF REGIME OF USE OUTSIDE THE EUROPEAN UNION

As you have been informed in June, the Tax Authority has identified – in the Provision n. 234483 of June 15, 2020 – the methods and means to prove the effective and actual use of the service outside the European Union as to the performance of yacht leasing, charter and similar services. However, according to the Resolution of August 17, 2020, mentioned above, the Provision n.234483 concerns only short-term contracts, while the Tax Authority is expected to provide with further indications concerning the specific proof regime for long term contracts.

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