Update (8 October 2020): The VAT increase on Superyacht charters in Italy has been delayed until November 2020.
See our new article for up-to-date details.
As of 16th June 2020, the Italian Tax Authority has imposed new changes to VAT on superyacht charters. The new changes mean that yacht charters in Italy will be subject to the country’s 22% VAT (Value Added Tax) rate, and that flat-rate reductions will no longer apply.
Until now, yacht charters commencing in Italy (as well as other European countries) were eligible for a reduction if they entered into international or non-EU waters (12 nautical miles off the coast) during the charter period. In Italy these lump sum tax bands were based on the yacht’s size and type so, for example, the charter contract of a motor yacht over 24 meters was subjected to a rate of 30% of the standard VAT (so 6.6%). In France, a simpler 50% reduction of the taxable base of the charter contract was granted to yachts cruising into international waters for any length of time.
The new laws, which were put in motion in December 2019, now mean that only time spent in international waters is eligible for the tax reduction, whilst the rest of the charter is subject to full VAT rates.
Other Countries to Follow Suit
The European Commission put these changes forward, asking countries such as Italy, France, Cyprus and Malta to change the long-standing simplified VAT structures, and while Italy is just the first, the others are expected to follow suit soon. France announced a delay to the VAT changes in April in light of COVID-19 and its effect on the charter industry, but it’s a matter of watch this space as to how long that lasts.
How is the new yacht charter tax calculated?
Instead of a flat rate tax reduction for yachts which entered into international or non-EU waters during their charter, the new VAT rates only account for time spent in those waters. Therefore, if a yacht spent 12 hours in international waters out of a 7 day charter, 6.5 days would be taxed at Italy’s standard rate of 22%, and the 12 hours would not.
In order to comply with the new regulations, yachts will need to maintain a record of time spent in international waters including documentation such as travel cartography data, a navigational log book kept by the captain, digital photographs showing the yacht’s location throughout the charter, or documentation showing the yacht moored outside EU territory. These must be kept for a minimum of six years.
The new tax changes are now in place, and for those chartering in Italy full VAT will be applied to both new contracts and those which have been signed even prior to April 1st. However, while it’s important to be aware of the changes, your broker will be able to explain precisely how this will affect the final price you pay for your charter based on the itinerary you choose. With Europe now open for superyacht charters in 2020 and lots of beautiful yachts poised to whisk you off on a socially distanced luxury holiday (plus throw in some reassuring new charter contracts), there’s never been a safer or better time to plan a family yacht charter.
For more information, get in touch with our team of expert brokers who have all the latest information on travel, tax, contracts and of course the best destinations and yachts for your charter.