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Editor in chief: Angelo Scorza
02/10/17 11:14

Navigation on the ‘high seas’: the guidelines

Clarifications regarding the application of VAT in the nautical sector as emerged from the presentation of the guide "Nautica & Fisco" elaborated by the Italian Tax Authority and UCINA

Operations relating to the naval sector fall into the scope of export-related transactions and, therefore, they are not taxable for VAT purposes if the naval unit meets both of the following requirements: it is used for navigation on the high seas; it is intended for commercial, industrial or fishing activities or is used for transportation of paying passengers, coastal fishing or rescue or sea-going operations (article 8 bis letter a) of DPR 633/1972).

The new edition of the guide "Nautica & Fisco" is the fruit of a collaborative effort between the Italian tax authority and UCINA (Confindustria Nautica) and examines the legal requirements, allowing the application of the non-taxable VAT scheme - ex article 8 bis of DPR 633/1972 - for naval vessels used on "the high seas".

As already explained in our previous articles, according to the resolution no. 2/2017 issued by the Italian tax authority, in order to benefit from the above tax benefit the ship-owner must prove that the actual use of the ship on "the high seas" exceeds 70% of total trips made in the previous year. The meaning of "high seas" is that part of the sea exceeding the maximum limit of twelve nautical miles measured from the baselines prescribed by international sea law (article 3 of the Montego Bay Convention on the Law of the Sea). Compliance with this condition must be verified for each year on the basis of the official documentation submitted by the ship-owner or the one who has the responsibility on the ship.

Given the many difficulties and doubts in interpreting the application of the resolution, the review “Nautica & Fisco” provides the first definitions concerning the notion of "travel" and "official documentation", both relevant to meet the requirement of sailing on " the high seas" for over 70% and thus resulting in enjoying of the VAT exemption.

According to the above publication, "voyage" (on the high sea) means "any commercial voyage between two ports situated in national, Community or international territorial waters where goods loading / unloading operations are carried out and / or passengers". Consequently, all those journeys made for non-commercial reasons (i.e. "technical journeys") are excluded from the calculation of the percentage of 70%, for example, sea tests, transfers to a yard, unit repositioning, etc. The literal interpretation of the notion of "journey", as explained by the Entrance Agency during the conference taken at the latest Nautical Exhibition in Genoa, is even more restrictive, since it could lead to exclude from the calculation of the 70% share even circular routes, if done for commercial purposes.

The guide also provides a definition of "official documentation", meaning any documentation from the ship-owner or the person having responsibility on the ship (e.g. the captain) and who is able to indicate the maritime routes made by the ship. Such documentation includes: the navigation or board log kept by the ship captain, on which all data and facts relating to navigation are recorded;  the mapping of travel; data and information extracted from any satellite navigation systems; commercial contracts and invoices.

In relation to the documentation to be submitted for “testing” navigation “on the high sea” for each supply, in practice, the ship-owner may issue a declaration to the suppliers containing its general data, legal status in relation to the naval unit, the time period to which the same declaration relates, (possibility currently provided for by resolutions n. 2/2017 and 69/2017 only in relation to ships under construction and the import of commercial ships, including units used exclusively for commercial purposes under the terms of a rental contract.

After the clarifications outlined in the guide it would be best to have an official resolution by the tax authority, which ratifies the concepts contained in the guide, which could be subject to further changes.


Fabrizio Moscatelli

Chiara Vurruso

PKF - Studio TCL Tax Consulting Legal  –

Genova  –  Milano


TAG : Tax corner