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VAT news from Italy
How to plan for changes in 2020
Following the European Commission request to abolish schemes allowing VAT to be charged on reduced charter fees in case of international voyages, Italy has followed France’s lead and announced changes for 2020.

As of April, the current ‘lump sum’ percentage reduction will be dropped in favor of a pro-rata system. This system will be based either on the time spent or on the distance covered inside/outside European waters. We still don’t know which. However, the announcement mentioned within 60 days from the approval of the 2020 Budget by the Lower Chamber.
While not unexpected, the news won’t receive a hearty welcome. However, it is important to stress that whatever system applies, charters outside EU waters will continue to benefit from a lower overall VAT percentage. And, again on the upside, the announcement heralds the much called for VAT harmonization process between EU Member States.

For the sake of good order, and since we do not know how charters signed before April 1, 2020 will be treated, we recommend brokers ask client’s to pay VAT on the entire charter fees. The amount can be kept in escrow pending further clarification.