Italy: a simplification of the procedure to apply the VAT exemption regime under discussion
The Italian Budget Law 2021 will contain a simplification of the procedure to apply the VAT exemption regime for yachts cruising in high seas.
We are pleased to inform you that the draft of the Italian Budget Law 2021, that will enter into force at the beginning of January 2021 upon approval by the Italian Parliament, is now under discussion.
The Italian Budget law will contain a specific rule to simplify the procedures currently in place for the so-called ICE* to certify the actual cruising in high seas, to allow commercial yachts to obtain VAT exemption on:
· Purchases of goods and services related to on-board equipment or provisioning;
· Construction, refit, maintenance and repair services.
This new rule will contain the following:
A confirmation of the meaning of “high seas cruising” for the calculation needed to apply the VAT exemption regime: when a vessel during the past year (or in the current year for yachts delivered during the same) performed more than 70% of trips between two ports in which the yacht passed the EU territorial water limits regardless the route followed. The limit of territorial waters is internationally recognized by article 3 of Montego Bay Convention as 12 nautical miles from the coastal line of mainland and islands. Therefore, exceeding this limit during a trip will be considered as a high sea’s one, including also trips with the same port of arrival and departure.
The VAT exempted regime will be requested only on the condition that the owning company will issue a specific declaration certifying the actual cruising of the yacht on the "high seas". The declaration, unlike what is currently in place, must be filled in on a specific declaration form approved by the Italian Tax office (AGENZIA DELLE ENTRATE). This must be electronically transmitted to the Italian Tax office (and therefore no longer in paper format directly to the supplier). The details of the protocol of a successful transmission to the tax office must be indicated in the invoices of the suppliers.
Before transmitting electronically, the declaration form to the Tax office, the owning company will have to carry out the necessary calculation to confirm the exceeding of 70% of trips on the high seas as well as keeping the related evidence documentation in case of control or official audit (contracts, copy of the logbook, AIS data or data extracted from any other electronic on-board navigation, invoices and receipts).