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Italian Tax Authorities Clarify VAT on APA Issues

Italian Tax Authorities Clarify VAT on APA Issues

The Italian Tax Authorities have confirmed that no VAT is due on advanced provisioning allowance (APA) for charters starting in Italian waters following a formal request for legal interpretation by MYBA - The Worldwide Yachting Association.

The question of whether or not VAT is payable on APA when a yacht charter starts in the waters of Italy has recently been causing much confusion in the superyacht industry. However, following a request for legal interpretation by MYBA, the Italian Tax Authority has finally reached a consensus.

APA is an advanced payment made by the Charterer and transferred to the Captain, who manages it on behalf of the Charterer in accordance with their needs before and during the charter vacation. Among the services and goods covered by this transaction are food, beverages and transport.

Following the recent dialogue with MYBA, the Italian Tax Authority has determined that the APA is not acquired by the Owner but remains the legal property of the Charterer.

Therefore, even if the APA funds are transferred through accounts held by the Owner – before reaching the Captain – it is merely a ‘financial transfer’ and, as such, exempt from VAT.

The APA, however, is also used to pay the variable part of the charter price, which typically consists of fuel and oil purchased by the Owner and charged to the Charterer based on consumption.

MYBA took this initiative because we considered it vital to clarify the issue of VAT on APA for charters starting in Italy.

Fiona Maureso, President, MYBA
two superyachts and smaller boats lined up in Portofino Harbour
Statue on roof in Rome, Italy
Colourful hilltop town on the Amalfi Coast, Italy

In regards to these costs, the Italian Tax Authority has confirmed they are part of the actual price of the charter, so are subject to VAT under the same taxation rules as the principal charter fee.

Plus, as the total cost of the fuel is linked to consumption, the tax burden on this cost can only be worked out and included in the tax declaration at the end of the charter.

Fiona Maureso, President of MYBA, said: “MYBA took this initiative because we considered it vital to clarify the issue of VAT on APA for charters starting in Italy. We were prepared to devote considerable time and resources to securing a favorable outcome, and safeguarding the interests - not only of our members - but of the superyacht industry as a whole.”

These conclusions reached by the Italian Tax Authority reflect and respect the MYBA Charter Agreement together with legal principles that aim to prevent tax avoidance and double taxation.

For further information, please contact your preferred charter broker.


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