With the article 1 paragraph 725 L. 27 December 2019, n. 160, (“Legge di Bilancio 2020”) the legislator recently intervened by enacting a provision aimed at avoiding double taxation, the non-imposition or distortion of competition to regulate the place of taxation for VAT purposes of the services of renting, leasing, short-term chartering of recreational craft.
Previous laws and regulations
With regard to the rules on VAT territoriality (Art. 7-quater of DPR 633/1972), the provision of rental services, including financial, rental and similar, in the short term, of means of transport shall be deemed to have taken place in Italy when:
- the means of transport shall be made available to the consignee in the territory of the State and used within the Union territory;
- the means of transport shall be made available to the consignee outside the Union territory, but used in the territory of the Italian Republic.
Thus, if means of transport are not used in the European Union, leasing, leasing and short-term rental services are not territorially relevant in Italy.
In order to demonstrate the actual use of a vessel in the territorial waters of the European Union, the taxpayer could have referred to percentages of likely use determined on the basis of the propulsion of the vessel (sail or motor) and, depending on the length of the same (circulars nn. 43/2002; 38/2009; 37/2011;43/2011).
However, in the context of a request for information to the Italian State (dated November 2018)the EU commission has evidenced as a general flat-rate reduction is not admissible without a verification of the place of effective use.
The novelty introduced by the Budget Law
The “new”framework, applicable to operations carried out since 1°April 2020, refers to the issue of a specific measure (“measure”) by the ‘Revenue Agency’, shall be issued within sixty days from the date of entry into force of the 2020 Budget Law (i.e. 30 December 2020).
This measure will identify the technical modalities and the means to demonstrate the effective use and use of the means of transport outside the European Union. In view of the rationale of the rule, it is reasonable to assume that the Financial Administration will review its approach where VAT liability in the transport sector is linked to criteria for the use of“means of transport” flat rate and not actual.