Since September 2021, a decision of the Court of Justice of the European Union confirms that Italy has infringed on EU law by providing duty free fuel to charter yachts.
VAT on the charter
Back in 2020, Agenzia delle Entrate had issued Provision n.341339/2020 effectively putting an end to the “lump sum VAT criteria” that was reducing the effective rate of charter’s VAT to 6.6%. Since then, any charter contract for a yacht departing Italy is submitted to the standard VAT rate of 22%. As in France, a reduction can be obtained on the time spent navigating outside EU water but in most cases, the benefit is very limited as most of the navigation remains coastal.
Duty on the Fuel
The EU court decision on case C-341/20, now being applied, effectively doubles the price per liter of fuel bunkered in Italy.
The directive seeks to tax energy products in accordance with their actual use. In that regard, the tax exemption is linked to the fact that the energy products are used as fuel for navigation within European Union waters for commercial purposes, that is to say, where a vessel is used directly for the supply of services (for example, transportation) for consideration.
Court of Justice of the European Union
The Court concludes from this that the grant or refusal to grant the exemption depends on the manner in which the vessel is used by the end user (thus, in the case of chartering, by the charterer), that is to say, whether the vessel is used for commercial purposes (grant) or for other, non-commercial purposes (refusal to grant). The fact that the chartering of a vessel is a commercial activity for the owner is irrelevant in respect of the tax exemption in question.
PRESS RELEASE No 157/21
Luxembourg, 16 September 2021
The Wolfgang solution
Wolfgang legal framework is based on the transport service of passenger at sea, which fits the definition of the use of the yacht for a commercial purpose. This results in the possibility to bunker duty-free fuel and apply a reduced “transport VAT” rate (down to 0% on international cruises) on the contract. This framework is the solution to unify the yachting industry in Europe and we are working on expanding it to Italy too!