Italy and France VAT on short term charters (less than 90 days) and COVID measures

What will be the new regulation landscape for this summer season in the French and Italian Riviera as far as VAT on charters and new measures imposed by the COVID health crisis are concerned?
Following the infringement procedures made against Italy in 2019, Italy and France had originally decided to align their positions on the way they apply the reduction of the taxable basis in relation to the calculation of the VAT applicable on charter revenues, as it was made clear by the Commission that no more fixed lump sum reductions on the taxable basis will be accepted starting from 2020 for such vessels.

As far as France is concerned:
We were expecting the publication of the new French BOFIP (French official Tax Bulletin) by the end of March laying down the new rules applicable starting from 1 April 2020.
French Tax Authorities finally decided at the end of March 2020 due to the Covid 19 crisis to postpone the reform until further notice.
Therefore no changes shall occur this summer season in France and Monaco: the “50% lump sum reduction of the taxable basis” applicable to vessels navigating in the high seas during the course of a charter is still applicable.

As far as Italy is concerned:
Italy initially confirmed in June that the new rules relating to the VAT on charters will be in force already during this season, and would apply to all charters signed after 15 June 2020.
Nevertheless Italian Tax Authorities have changed their initial position and have decided through Decree 76/2020 (in force since 17 July 2020) to postpone until 1 November 2020 the entry into force of the new provisions regulating VAT on short term charters starting in Italy

Therefore the previous taxation system allowing the application of a lump sum VAT reduction (i.e. 6.6% for yachts over 24 meters) on charter fees will continue to be applicable this charter season.

After that date and according to Decree n.234483/2020, the “lump sum VAT criteria” will no longer be applicable.
The ordinary VAT rate of 22% will be due on the charter fee unless sailing outside of EU waters is validly proven. As a logical consequence of this, the taxable basis for the calculation of the applicable VAT will be subject to a pro-rata reduction based on the sailing time spent outside of EU territorial waters in international waters, ie in the high seas. Some clarifications are still expected though.
Until further clarifications are announced, the below documents shall be considered in addition to the charter contract  to calculate the VAT due and any reduction based on a pro rata basis of the time spent outside of EU territorial waters:
  • trip route cartography;
  • Copy of logbook;
  • data/info extracted from satellite and/or navigation systems (ie: GPS Screenshot or digital photographs (made by any device) of the “vessel's position” for each week of navigation and detected at least twice a week);
  • data/info extracted from transponder systems (ie  AIS system) (or any other system to prove the itinerary)
  • Copy of the documentation (invoices, contracts, tax receipts) proving the mooring of the yacht in ports located outside of EU waters;
  • Copy of the documentation (invoices, contracts, tax receipts) proving purchases of goods and/or services (relating to the use of the yacht outside of EU waters), from providers established outside of the Customs Territory of the Union.
The charters and supporting documentation shall be kept for a minimum of 5 years in case of control.

Charters and Covid
Since June Italian, Monaco and French borders are opened to EU citizens without quarantine, ports are also opened and it is possible to sail freely around the Italian and French coasts.

While navigation has been liberalised, certain measures are still required on board and on shore to protect the virus spread. These can be briefly summarised as follows:
  • Avoid close contact;
  • Social distancing of a at least one meter to be respected between guests on board unless they live together;
  • Proper sanitization of all vessels areas including the engine room and services;
  • Personal protective equipment to be provided to passengers to cover nose and mouth;
  • Obligation to put hand and surface sanitizer at disposal on board;
  • Obligation to display informative notices, signs, written in several languages, to inform charterer and guests about the necessary hygienic measures to be respected;
  • Obligation for crew to use masks and gloves and any other protective equipment depending on the type of vessel, during mooring, unmooring, bunkering and towing operations;
  • Crew to undergo a preventive (before boarding) and periodical first aid CoVid-19 tests, the results of which shall be kept on board;
  • Obligation to take the crew temperature on a daily basis;
  • Prevent access to the vessel by strangers while in port or at sea.
  • Obligation to declare the vessel’s sanitary situation to the Coast Guards prior to arrival in port and to report any suspected or confirmed case of COVID-19 on board to the relevant Authorities.
  • Marinas are also adopting best practices guide to prevent the spread of the virus and respect social distancing on land which shall be consulted.
Rosemont will continue to keep you informed of any further developments. Continue to be strong and stay safe!

For more information, please contact Janet Xanthopoulos:

06.20 updated 07.20