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Navigation on the high seas – Italy follows France’s lead

Navigation on the high seas – Italy follows France’s lead

The Italian tax authorities have published new VAT exemption guidelines for commercial yachts.

The EU VAT directive states that only vessels used to navigate on the high seas can benefit from VAT exemption. In 2013, the European Court of Justice (ECJ) found that French legislation did not comply with the provisions of the VAT directive and that VAT exemption (on fuel, supplies, services and equipment) was granted to all yachts, even to those not used for navigation on the high seas.

Almost two years later in May 2015, the French tax authorities amended the legislation (BOI-VAT-CHAMP-30-30-30-10) to include additional criteria which vessels had to meet in order to qualify for VAT exemption. The new criteria stated that the overall length of the vessel must be at least 15 meters and that 70% of navigation must be outside French national waters. This requirement became known throughout the industry as the 70% Rule. 

Two years later another EU Member State has followed suit.  On the 12th January 2017, the Italian tax authorities published Resolution 2/E (attached). The Resolution states that in order to qualify as a vessel “used for navigation on the high seas” at least 70% of the voyages carried in one calendar year must be on the high seas.

Although the Resolution fails to specify what is intended for a voyage, it states that exemption will be granted on the basis of navigation carried out during the previous year (i.e. exemption in 2017 will depend on navigation in 2016 ).

The Resolution also mentions new constructions and yachts which have just been launched but not yet started cruising. In Italy like France such yachts can benefit from VAT exemption “by anticipation”.

 

The industry is waiting for further clarification concerning the implementation of the new guidelines. We will keep you posted. 

 

LAST PUBLICATION FROM THE BULLETIN OFFICIEL DES FINANCES PUBLIQUES

There are new rules to benefit of French tax exemption for commercial yachts : Suite à l'arrêt de la Cour de justice de l'Union européenne le 21 mars 2013 dans l'affaire C-197/12 pour manquement aux obligations issues de l'article 148 de la directive 2006/112/CE du Conseil du 28 novembre 2006 relative au système commun de taxe sur la valeur ajoutée (TVA), de nouveaux critères ont été mis en place pour l'application des exonérations de TVA à certaines opérations afférentes aux navires de commerce affectés à la navigation en haute mer prévues aux 2°, 3°, 6° et 7° du II de l'article 262 du code général des impôts (CGI).