Stop subsidized nautical leasing also in France, as in Italy

It is not only Italy that is giving the stop to the subsidized VAT for nautical leasing. As of Nov. 6, France also abolishes for nautical leasing, in practice, the 10 percent “flat” TVA (their VAT) concession for those flying white, blue, red flags.

Thus ends the era of VAT reduction for those who buy the boat by taking a lease. And it also ends a more than decade-long war between Italy and France to attract customers by securing discounts on value-added tax (VAT or TVA).

It should be pointed out that in both Italy and France, those who have a leasing contract in place are not affected by this legislation. Existing conditions remain legal.

For those with current nautical leases, nothing changes

But rest assured those who are planning to buy a boat, interest rates today are so low that they offset the VAT discount guaranteed until yesterday by nautical leasing, whether Italian or French.

What the European Union says

How did this “mess” over VAT relief come about that led the European Commission to open serious infringement proceedings in 2019?

European lawmakers argue that it is completely arbitrary to determine a VAT reduction as a lump sum, taking for granted the principle that a boat sails for a certain period of time in waters outside Europe and is therefore entitled to a reduction in the value-added rate. Logical, the principle doesn’t make a wrinkle!

How the Italy/France war over nautical leasing came about

The origin of the war on nautical leasing between France and Italy originated some 20 years ago. The French, on the strength of the fact that they have Overseas Territories (Martinique, Guadeloupe, Polynesia) where much of the boat leasing activity is concentrated, in order to stimulate the market, came up with a rule that takes for granted, without proof, that a boat sails a certain period of its life in non-EU waters. On the strength of this bizarre theory, they halve the amount of VAT payable if you buy a boat.

The result is that Italians are jumping at this opportunity. Italian ports are filling up with French-flagged boats even though they belong to Italians. And as a result, Italian flags are drastically reduced.

Massimo D’Alema, then prime minister, decided to go after the French vice of form. The ploy to reduce VAT in Italian leasing hinges on the assumption that the larger a boat is, the more, hypothetically, it resides outside European territorial waters. And therefore does not have to pay, for the period when it is not in EU waters, any value-added tax (VAT).

It is not always possible to prove the period of stay in territorial waters. In these cases, leasing companies can proceed to apply the value-added tax in a flat rate manner. It goes up to a 70 percent VAT reduction.

Not participating in this subsidized leasing war is the other major European nation associated with the sea and nautical chartering, Spain, which has applied the normal rate, currently 21 percent.

The Internal Revenue Service’s VAT-cutting ploy.

There remains a possibility with the Italian lease to have a reduced VAT calculation during the period when the boat is subject to the Italian lease. This has been established by the Internal Revenue Service which says, that the Italian nautical leasing VAT regime remains as it is, just sign the contract. But there remains the sword of Damocles of the burden of proof, as the agency says: “including on the basis of the declaration made by the user of the unit itself” but it must be supported by specific means of proof (those of ship points, invoices, AIS points to be kept on file and upon request shown to the appropriate authorities (which ones?).

Why not equate the facility with tourism facilities?

In our opinion, why go forward with a “save goats and cabbages” measure that is unenforceable and subject to possible civil lawsuits involving Internal Revenue Service, boat user (de facto owner) and owner (leasing company)?
Why not change the system and instead of trying to ideally prove that you have sailed out of EU waters, consider equalizing VAT benefits with those adopted in tourism. What is boating if not a tourist activity? We await concrete actions from government and industry entrants. Lest we Italians always be accused of circumventing regulations. With some reason this time.

HELP US KEEP YOU UP TO DATE

The journalists of the Sailing Newspaper, strive every day to ensure quality, up-to-date and correct information about the boating world free of charge through their websites. If you appreciate our work, support us by subscribing to the magazine. The annual subscription costs only 49 euros and we also give you two gifts!

DISCOVER THE SAILING NEWSPAPER YOUTUBE CHANNEL

Daily interviews, boat trials, webinars. The whole sail, minute by minute. But on video! CLICK HERE To sign up, it’s free!

SIGN UP FOR OUR NEWSLETTER

To stay up-to-date on all the news from the world of sailing, selected by our editorial staff, sign up for the Sailing Newspaper newsletter! It’s super easy, just enter your email below, agree to the Privacy Policy and click the “Sign Me Up” button. You will then receive on your email, twice a week, the best sailing news! It’s a free service and you can unsubscribe at any time, with no obligation!