Regulations

Overall, in the event of a financial leasing agreement for a pleasure craft (and the same applies to rental and hire) stipulated between an Italian leasing company and any Italian or foreign person or company, VAT will apply only to the use of said craft within the territorial waters of the European Union.

However, it is usually difficult as a rule to follow the movements of pleasure craft in order to establish the period of time they spend within or outside EU territorial waters.

As a result, the Central Direction of the Revenue Agency has stated that, in the event of problems in assessing the actual amount of time spent by a pleasure craft outside EU territorial waters, the leasing companies (or lessors) may establish a flat-rate payment for this period of time, using percentages set according to the propulsion of the craft (engine or sails) and to its length.

According to this method, the applicable VAT rate remains as per the standard rate (20%), but the taxable portion is reduced or, in other words, the amount payable for the rental to which it is applied. Thus the actual incidence of the VAT is reduced.