Italian leases under challenge

We have for many years expressed our reservations as to the validity of Italian leases under EU law. These leases offer a reduced rate of VAT based on the premise that the yachts involved are outside of the EU for a proportion of the year. In reality the majority of these vessels are used exclusively within the EU so the application of a reduced rate of VAT is not valid. Whilst the VAT authorities in many EU states looked on these leases with a jaundiced eye, the Italian authorities themselves turned a blind eye to this fundamental flaw and supported their own scheme. As a result they were effective in Italian waters. Now a combination of economic need and pressure from other Member States has forced an Italian review of the situation and it seems that where vessels have not actually spent the required time outside of the EU, the reduction in the rate of VAT charged on these leases will no longer be possible. This development, combined with the fact that using this structure all yachts are owned by central leasing companies rather than through individual special purpose vehicles, poses a real danger to vessels operating through this scheme. The use of these schemes should only be undertaken after proper advice on all the rules and limitations.