MYBA: Good News on APA VAT Issue

Posted: 1st July 2016 | Written by: Pat Sakellari

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There has been a lot of confusion over whether or not VAT is payable on the Advance Provisioning Allowance (APA) when a yacht is chartering in and out of Italian waters and this week we have clarification and more good news from MYBA, The Worldwide Yachting Association.

On the initiative of MYBA, and with fruitful cooperation between Carla Bellieni and Benedetto Santacroce, the Italian Tax Authority has laid a cornerstone in the tax regime affecting yacht charter, overturning a previous interpretation and issuing a prompt, smart response to a request for legal consultancy on the issue of VAT on the APA. 

APA is the advance payment made by a charterer and transferred to the captain, effectively an advance charter budget managed by the captain before and during the charter, for food, beverages, transport, etc.

After detailed analysis, the Italian Tax Authority determined that the APA is not acquired by the owner but remains the legal property of the charterer, entrusted to the captain and intended to be spent on the purchase of goods and services for the charterer.  

Therefore, even if the APA funds pass through accounts held by the owner (for onward transmission to the Captain), it is merely a financial transfer, and not relevant for VAT purposes, as per article 2, paragraph 3, letter (a) of Presidential Decree N. 633/1972. 

In accordance with regulations, the APA is also used to pay what is known as “the variable part of the charter price”, typically fuel and oil, purchased by the owner and charged to the charterer on the basis of actual consumption. 

With regards to specific sums, consistent with the above framework, the Italian Tax Authority has stated that they are part of the actual price of the charter and are therefore subject to VAT under the same regime as the charter fee. 

The Italian Tax Authority has also stated that the tax due on this higher price, because it is linked to actual consumption, can only be assessed and included in the tax basis at the end of the charter.

The conclusions of the Italian Tax Authority reflect and respect the articulate legal and economic framework set by the provisions of the MYBA Charter Agreement, the relevant guidelines of the claimant association and the good practice of the yachting market, together with legal principles that aim to prevent tax avoidance and double taxation.   

The outcome of this legal consultancy requested by MYBA safeguards the tax principles governing the matter and the fiscal rights of the Italian Authority, as well as the rights of the yachting industry to fair taxation. 

It should be noted that this interpretation only applies to the standard MYBA Charter Agreement with no modifications regarding the APA or its disbursement.

 

 

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