EU Commission refers Italy to Court of Justice

The EU Commission has referred Italy to the European Court of Justice for its failure to address fuel duty exemptions for charter yachts operating in EU waters.

On 25 July, the EU Commission issued a press release warning that it would be ‘taking further steps to end illegal tax breaks in the yacht industries of Italy and Cyprus, first brought to light in the Paradise Papers leaks.’

The press release makes references to the Commission’s attempts to tackle ‘tax avoidance and tax evasion’ and ‘VAT fraud’. It also states that all EU Member States would benefit from uniformity of VAT legislation and application. 

The Commission highlights what it claims is Italy’s attempt to apply commercial status to ‘pleasure crafts…even if they are for personal use.’

In its ‘reasoned opinions’, the Commission goes on to state that, while exemptions are in place for usage outside of EU waters, ‘the rules do not allow for a general flat- rate reduction without proof of where the service is actually used.’

‘If Cyprus and Italy do not act within the next two months on these reasoned opinions, the Commission may decide to bring the cases before the Court of Justice of the EU’, the statement concludes.

Ezio Vannucci, of Viareggio-based law firm, Moores Rowland Partners, contacted SuperyachtNews outlining that key stakeholders, all the way up to the government, are already in talks to address the reasoned opinions. He also said the French Ministry of Finance had received similar correspondence a month earlier.

“If a Member State fails to ensure compliance with EU law, the Commission may then decide to refer the Member State to the Court of Justice”, Vannucci explained. “If the Court rules against a Member State, the Member State must then take the necessary measures to comply with the judgment.

“The above ‘news’ does not impact the current VAT provisions and scenario of Commercial Yachts with Charters with departure place from an Italian port/marina, considered that Italian VAT law will remain fully in place until the final step of a decision of the infringement’s. It’s also important to point out that the formal Notice of last November and the new ‘reasoned opinion’ of the Commission, of July 2019, is not referring to the Italian leasing scheme.” 

A full summary of the July ‘infringements package’ can be found at INF/19/4251.

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