VAT Applied To Leasing Of Yachts. Critical Issues Relating To The Definition Of Actual Use

We have already addressed the issue of VAT treatment of leasing contracts entered into by private shipowners (so-called B2C transactions) on several times. The relevant legislation, which regulates non-short-term leasing contracts for yachts to private individuals in general, is contained in Article 7-sexies, paragraph 1, letter e-bis) of Presidential Decree No. 633/1972, and in Revenue Agency Provisions No. 341339/2020 and No. 151377/2021. On the basis of these provisions and subject to certain conditions, including the fact that the yacht is made available in Italy, Italian VAT is applied to leasing contracts to the extent that the yacht is used in EU waters.

The recent Ruling No. 159 of 2025 from the Italian Revenue Agency revisited the subject and, among other things, the concept of using the yacht outside Community waters. In particular, in a brief overview of the relevant legislation, the Italian Revenue Agency points out that Italian legislation was adopted in application of the option provided for in Article 59-bis of Directive 2006/ 112/EC to move the place of taxation outside the European Union if the actual use and enjoyment of the services take place outside the Union, by way of derogation from Article 56 of the same VAT Directive, which identifies the place of the rental service as the place where the yacht is actually made available to the recipient.

In the mentioned document (see answer to question no. 2), the Revenue Agency clarifies that, for the purposes of non-applicability of VAT in Italy, it is necessary, with reference to a yacht that has left territorial waters and is usually moored in a non-EU port, that “the shipowner proves that he has made two trips in international waters during the same week”.

This position, which was supposed to help clarify some critical issues that had arisen in interpretation, actually created even more confusion.

To fully understand the confusion created by this practice, it is necessary to first recall that the aforementioned Provision No. 341339 had established that the use of a yacht ‘means the weeks in which the yacht has travelled between ports (including journeys to and from the same port), excluding journeys between shipyards or ports for technical reasons’. This definition made – and makes – clear reference to the periods of actual use and navigation of the yacht.

Everything seemed clear until 2023, when, with Ruling No. 430, the Italian Revenue Agency decided to extend the definition of use to include mooring in port. The Ruling states that “if ... the yacht is equipped or stationed, at the lessee's choice, at its usual place of shelter in Italy or in another EU country, whether at berth or in dry dock, this constitutes use within the EU. Use is not considered to occur only if the yacht is in the shipyard for maintenance or for technical reasons that prevent its actual use. On the other hand, following the Company's argument, since it is normal for the boat to be in storage “for most of the duration of the contract” in financial leasing, the taxpayer would pay VAT (in Italy or abroad) only when the boat is in navigation, even though the lease payment is always due for the same amount. In other words, this would mean making the payment of VAT dependent on the lessee's willingness to use the boat or not, even though it is available, or linking the payment to the cycle of the seasons”. Notwithstanding that, in its interpretation, the Revenue Agency intended to extend the definition of use as established by the aforementioned Provision, it is absolutely clear that the Revenue Agency acted in the erroneous conviction that adding weeks of navigation meant adding VAT revenue to the treasury, as if the VAT applicable to leasing fees were determined by adding up the VAT referable to each week, and forgetting that the Provision establishes that the VAT due is determined by defining the percentage of use in Community waters in relation to total use, both inside and outside Community waters.

That interpretation – which, although criticised by many, has inevitably influenced the interpretations of operators in the sector – is now followed by Ruling No. 159, which, where possible, has further created confusion in interpretation. It seems that the Revenue Agency has decided to backtrack, adhering to the concept of use that is more in line with the definition given in the Provision, but only with regard to use in non-EU waters, which – it reiterates – must be “effective”. In this, it seems that it has been forgotten that Provision No. 151377/2021 approving the model for declarations of use of leasing services, including financial leasing, rental and similar services not of a short-term nature in the EU territory, expressly states that section A must be used to certify the percentage of “actual use” in the European Union territory of leasing services by users of the yacht.

Now, if it is true that in law every word has a very specific meaning, we find ourselves in the strange circumstance where actual use is different and has a substantially different impact depending on whether we are inside or outside the community.

This conclusion is even more significant if we consider that, using a numerical exercise – which we will omit here so as not to bore the reader – it is clear that it is not at all clear what the Revenue Agency means. In fact, referring to the same situation, the calculation of the percentage of use of the boat within or outside EU waters would lead to a different percentage depending on whether the criteria set out in Ruling No. 430/2023 (which looks at use in EU waters) or Ruling No. 159/2025 (which looks at use in non-EU waters) are used.

In light of the above and the obvious conflicting – and irreconcilable – positions of the Revenue Agency, which also appear to violate the relevant provisions, there are many arguments in defence of the taxpayer in the event of a possible assessment, at least to obtain exclusion from the possible application of penalties.

In any case, it is considered absolutely necessary for the Revenue Agency to issue a circular that systematically resolves these doubts and enables operators in the sector to operate peacefully without running the risk of engaging in incorrect behaviour induced by unclear and, in any case, irreconcilable interpretations.