Introduction and Regulatory Background
In the yacht-leasing sector, Italian VAT law lays down a special regime for pleasure yacht used outside the European Union. Under Article 7-sexies(1)(e-bis) of Presidential Decree No 633/1972 (introduced by Law No 160/2019), only the portion of the leasing service corresponding to use within the EU is territorially relevant and therefore subject to Italian VAT, whereas the portion relating to use outside the EU is out of scope (lack of territorial nexus). In essence, the place of supply is deemed to be outside the EU where the lessee can demonstrate, with suitable proof, that the service (e.g. yacht leasing) is actually used and enjoyed beyond EU waters.
To implement this rule, the Italian Revenue Agency issued Provision No 341339 of 29 October 2020, which sets out the evidentiary means required to prove effective extra-EU use and differentiates between short- and long-term contracts. A key notion is the definition of “use” of the yacht for VAT purposes: for long-term contracts, “use” means the weeks in which the vessel has undertaken movements between ports (including round-trips), excluding purely technical transfers.
Against this backdrop, the Agency’s Response to ruling request No 159/2025 (18 June 2025) revisits the matter, providing practical criteria for calculating the VAT-exempt portion of lease rentals attributable to extra-EU use and for compiling the necessary evidence.
Summary of the Case Examined
A private owner signed, on 4 July 2024, a ten-year finance lease for a 23.9-metre pleasure yacht for exclusive private use. The lease—granted by an Italian leasing company—was accompanied by a 40 % upfront maxi-instalment, with delivery of the vessel in Italy. In line with the new rules (Art. 1(708-712) Law 178/2020), the taxpayer promptly filed the “Declaration of use of leasing services within EU territory” in order to claim non-taxability of lease rentals for any extra-EU use of the yacht.
To substantiate such use, the lessee:
- registered the vessel in the Central Telematic Register of Pleasure Yacht (ATCN);
- kept a notarially endorsed navigation log recording every voyage, together with engine-hour readings;
- installed an AIS satellite tracking system and subscribed to services (e.g. Astrapaging/VesselFinder) capable of producing digital reports (date, time, GPS co-ordinates, speed);
- produced additional evidence such as daily geo-tagged photos and documentation of berthing in a non-EU port (berth contract, invoice and proof of payment for Tivat, Montenegro, 28 July 2024 – 1 May 2025).
The yacht left Olbia at the end of July 2024 and entered Tivat on 28 July 2024, remaining habitually moored there, with only sporadic day trips into EU waters (e.g. Croatia). The taxpayer therefore asked the Agency three main questions:
- Sufficiency of evidence – Are the records kept adequate to prove extra-EU use?
- Calculation method – How should the VAT-exempt portion of each lease rental be determined where EU and non-EU use alternate? The taxpayer suggested a “majority” rule by week as follows:
- if, for the majority of the days in a given week, the yacht is located outside the EU (even when lying idle in port), the entire week must be treated as extra-EU;
- lay-days: time spent berthed alongside at Tivat or at anchor in the roadstead—provided the vessel is fit and ready for navigation—constitutes “use” and should be included in the numerator of the extra-EU ratio;
- brief incursions into the EU: a return to Union waters of less than 12 hours does not alter the extra-EU qualification of the day, nor therefore of the week.
3. Start date for counting – Should weeks prior to 24 July 2024 (when the MMSI – Maritime Identification Digits radio code was issued) be excluded, given that the vessel could not legally navigate before then?
Key Points of Revenue Agency Response No 159/2025
- Adequacy of Evidence
The Agency recalled that his Provision 341339/2020 already lists the minimum evidentiary requirements for long-term yacht leases:- copy of the lease contract;
- an official ship’s log or, failing that, a validated navigation register showing all movements and corresponding engine-hour readings; plus at least one of the following supplementary items:
- AIS or comparable satellite-tracking data;
- at least two geo-referenced digital photos per week of navigation;
- commercial documents proving berthing in a non-EU port.
In the case at hand, the taxpayer provided all of these, even exceeding the minimum. The question was therefore inadmissible, as it concerned factual evidence rather than interpretative doubt.
2. Method for Calculating the VAT Non-Taxable Portion
This is the crux of the ruling. The Agency rejected the taxpayer’s “majority-of-days” approach and endorsed an objective “week of effective use” ratio, already implicit in the 2020 Provision. For each calendar year the following ratio must be calculated:
3.
- Numerator – the number of weeks in which the vessel sailed outside EU territorial waters (i.e. crossed the EU boundary at least once);
- Denominator – the total number of weeks in which the vessel was actually under way (movements between ports, including round-trips).
Weeks with no navigation (e.g. lying idle in a port) are excluded from the calculation. This means that weeks in which the yacht remains entirely stationary, with no material movements, are disregarded when calculating the non-taxable percentage. A single crossing beyond EU waters during a week suffices to classify the entire week as “extra-EU”; daily or hourly weighting is irrelevant—only the binary weekly test applies—so the computation is transparent and symmetrical, consistent with the anti-avoidance intent of the rule.
4. Commencement of the Relevant Period
The Agency confirmed that weeks before 24 July 2024 (when the MMSI was issued) are not taken into account, because the yacht was not yet legally usable. Week counting therefore starts with the week containing 24 July 2024.
Practical Implications
Although Response 159/2025 addresses a specific case, its principles have general application. Lessors and yacht operators wishing to benefit from the described exemption regime should apply the objective weekly test at year-end to compute the VAT-exempt percentage of lease rentals.
We remain at your disposal for any further clarification.