Changes to VAT legislation applicable to yacht charters in Italian waters, which were introduced at the beginning of the year appear to have had the negative impact that the industry had feared. And recent modifications to Italian VAT rates mean that the situation could be similarly grim in 2013.
EU law dictates that VAT is paid at the rate set by the jurisdiction the charter begins in. For Italy this was, until recently, set at 21 per cent of the income from the charter. The legislation introduced at the turn of the year required foreign-flagged vessels intending to charter in Italy to have registered with an Italian fiscal agent, as a means of policing the process.
According to Fraser Yachts CEO Hein Velema, “After a very nervous start to the year with lots of uncertainty about the VAT on charters in Italy we have seen the industry calm down somewhat.”
However, despite the industry doing its best to allay the fears of charter clients, and offering various professional solutions that would allow foreign-flagged vessels to pay VAT on charters in Italian waters, charter numbers for the 2012 summer season were down.
As Velema acknowledged, “many yacht owners still preferred to avoid Italy this summer. Sardinia saw 30 per cent less yachts visiting the island in comparison with last year.”
Alex Mazzoni, director of Italian fiscal consultancy SOS Yachting, was even more blunt in his assessment of the impact of the ‘charter tax’. “This year was a disaster”, he said. “This was for two reasons – the first being that the big charter companies told people not to go to Italy – and we also have to consider that the economic situation has affected everyone in Europe so, generally speaking, it was a very dry season.”
Mazzoni says that the negative connotations associated with Italian charters “broke the chain”, of port stops that many Mediterranean charterers historically follow.
With charter brokers no doubt looking to summer 2013 already, there could be more unwelcome news for the superyacht industry. Italian authorities have approved a VAT rate increase applicable to yacht charters commencing in Italy, to the new figure of 22 per cent.
For those charters that operate outside of Italian territorial waters (12 miles or more) for more than 30 per cent of the trip, this will mean an actual rate of 6.6 per cent, up from 6.3 per cent. So although these increases might appear negligible they are unlikely to lure charterers back to Italy.
Credit: William Mathieson for Superyacht News