VAT DUE ON CHARTERS
How to calculate the VAT due on Italian Charters
The new Italian Budgetary Bill contains anti-avoidance provisions which specifically regard the VAT on the short hire of a boat.
These provisions, which have entered into force on 1st April 2020, involve any charter having fiscal relevance in Italy, commencing from that date onwards.
The VAT reduction on charters as practiced in Italy, France, Croatia, Malta, Greece and Cyprus would no longer be applicable as done up to now (i.e. cruising into international waters to obtain the application of VAT on just a portion of the Charter Fee).
The above as a consequence of the infringements proceedings started on 8th November 2018 and continued on 25th July 2019 (with the “July Infringement Package”) by the European Commission (more info at this link: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_4265).
The EU Commission’s purpose is to harmonize the rules between all the EU Member States applying the general criteria contained in articles 56 and 59-a of the EU VAT Directive 2006/112/CE and so the reduction of VAT on charters will need to be calculated according to new criterion and method.
On this end it is strongly recommendable for each Charter executed to always fulfill and provide your Fiscal Agent with a specific form that includes all the essential info and proofs regarding your navigation.
Please find a copy of our PPNRF at this link (you can inquire a copy of the original one via email to firstname.lastname@example.org)
Which one ? What is the method ?
The method consists in a pro-rata reduction based on the cruising outside the European territorial waters, according to the real time spent at “high sea” (international waters), pursuant to the hereinbefore mentioned article 59-a (MORE INFO BELOW).
Is the new rule applicable for 2020 or starting from 2021?
As of 1st January 2020, both the Italian and French Authorities have long and insistently cooperated with the EU Commission in order to outline the new guidelines to be provided before the date of 1st April 2020.
Yacht Welfare has brought to the Authorities’ attention that the new rules to apply should have been released before the above date as the charter market was in the need of receiving responses and guidance in the shortest
time, in order to plan the upcoming 2020 Med charter season.
For a variety of reasons, including the disorders by COVID-19, unfortunately no guidelines have been provided by them within the set deadline of 1st April 2020.
Right after the COVID-19 lockdown phase (which has involved also the Public Administration too), the Italian Revenue Office decided to put under Public Consultation (see link: https://www.agenziaentrate.gov.it/portale/web/guest/consultazione-pubblica-del-25-maggio-2020) a draft concerning the provisions for the application of the VAT reduction on Italian charters (according to the EU’s articles 56 and 59 of the EU VAT Directive 2006/112/CE) which was open to the professionals’ review and contributes until the date of 3rd June 2020.
NEW RULES IN ITALY
June 15th 2020
The new regulations have been finally issued with Provision N. 234483/2020 by the Italian Revenue Office.
Therefore, as of June 15th 2020, it is confirmed that the VAT due on Italian charters must be calculated on the basis of the actual time spent by the charter into the EU territorial waters.
As a logical consequence of this, the taxable amount will be subject to a pro-rata reduction based on the cruising outside the European territorial waters (international waters), according to the real time spent at “high sea” (international waters).
The new rule does not apply to any Italian charters signed before 15 June 2020 (date of release of the official Provision by the Agenzia Delle Entrate).
What do we need to do now on ?
Let’s put it quite simply.
Firstly Captains/Officers on board need to split the Charter time into two parts:
a. total hours spent into EU Waters (Italy, France, Spain, etc.).
b. total hours spent at the High Sea (International Waters).
Secondly, and particularly important, the following evidences/proofs must be collected, kept on file and submitted
in case of inspections by the Authorities:
1. trip route cartography.
2. data/info extracted from satellite and/or navigation systems.
3. data/info extracted from transponder systems (e.g. AIS system).
4. logbook (ship’s log) and/or navigation log.
5. papers attesting any berth stay in non-EU ports (e.g. berth invoices, berth contracts agreements, arrival/departure formalities, etc.).
6. papers attesting any purchase of goods and/or services in non-EU shops/businesses.
7. the short-term Charter Agreement and/or analogue Contracts regarding the hire of the yacht.
The evidences collected must prove the maritime routes sailed by the yacht with extreme accuracy and coherence.
All the evidences/proofs collected must be kept on file for a period of time according to Art. 57, paragraphs 1 and 2, of the Presidential Decree N. 633/1972 (therefore, until 31st Dec. of the fifth year subsequent to the year
in which the Declaration has been filed or – in the event that the Declaration hasn’t been filed – until the 31st Dec. of the seventh year subsequent to the year in which the Declaration should have been filed).
To simplify the procedures and reduce the burden we – at Yacht Welfare – have set up a special form (called PPNRF – Passage Plan & Navigation Report Form), made in editable pdf file, to summarize all the necessary data and info (find a fac-simile of the form at this link).
The PPNRF needs to be fulfilled in all its parts and sent back to us along with the necessary pictures, mini videoclips, logs, etc. annexed. Yacht Welfare will keep assisting you by double checking the info provided.
Please feel free to inquire the PPNRF form emailing us to email@example.com
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