For the past two months, the Italian Revenue Agency (Agenzia delle Entrate) has been evaluating and working on two proposals submitted by UCINA Confindustria Nautica and by ANPAN (Association of Ship-owners and Ship Contractors). A supplementary directive that clarifies the definition "operations on the high seas" is expected within a few weeks following a series of meetings between the parties.

Legislation governing navigation on the "high seas", and in particular how Article 8-bis of Presidential Decree No 633/72 should be enforced, is crucial to the competitiveness of the charter industry and the entire Italian maritime sectors. The Article established VAT exemption for operations related to "vessels navigating on the high seas" for transportation, scheduled ferries, fishing vessels, search and rescue craft, and for commercial yacht charters. Given that the term ‘operations’ includes the purchasing, victualing and refueling of vessels, the economic impact of the legislation is considerable.

“Our aim is to adopt European criteria in order to impact the Italian maritime industry as little as possible,” says Maurizio Balducci, UCINA Vice-President in charge of tax matters. “When preparing the proposal submitted to the Agenzia delle Entrate, we exchanged points of view with the other associations involved and we are certain they shared our position. Furthermore, on 15 May 2017 with the summer season about to kick off, together with ANPAN, we sent our comments to the Italian Revenue Agency”.

With regards to VAT exemption and Resolution 2/E/2017, the Agenzia delle Entrate has established that reference should be made to the current and effective use of the vessel and not to simply its class, length or tonnage. Hence the reference to navigation in “international or trans-boundary waters” (ie. passages with parts of the voyage beyond the 12 nautical mile limit): in order to be able to claim VAT exemption in the current year, the vessel must have navigated on the “high seas” for over 70 per cent of the total of commercial trips undertaken in the previous year.

In February and March 2017, and then in the memo submitted on 15 May, UCINA Confindustria Nautica and ANPAN asked for clarifications from the Italian Revenue Agency. In particular, they requested that:

• The new system introduced by Resolution 2/E/2017 be implemented in a non-retroactive way;

• It be possible for the owner of the vessel to present a declaration for all "discontinuity" cases in which it is not possible to reconstruct the historical data of the previous year (vessel under construction, new craft, owner or charterer change, change of route line, etc.);

• A billing adjustment of the previously issued invoice be possible without the levying of fines if the owner/user who has issued the above mentioned declaration subsequently states that the “high seas” condition has not been met;

• Only commercial trips should be taken into account, excluding their transfer and delivery;

• Expenditure on vessel transfer and delivery be explicitly acknowledged even though the nautical miles are not taken into account to reach the 70 per cent quota. As in France, these expenses are necessary for the viability of the commercial enterprise and therefore should not be subject to VAT;

• With regards to the prevalence of "high seas" navigation (or to its linked declaration), only the owner should be liable and subject to fine, not the supplier.

 Photo credit: Justin Ratcliffe

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