Good News on the VAT on APA Issue


It has in the past been enough to drive a saint mad. The vexing question was is VAT payable on APA when a yacht is chartering in and out of Italy. Some say it was others claimed no.

On the initiative of MYBA The Worldwide Yachting Association, and with a fruitful cooperation between Carla Bellieni and Benedetto Santacroce, the Italian Tax Authority has finally 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 Advance Provisioning Allowance (APA).

APA is an advance payment made by the Charterer and transferred to the Captain, who manages it on behalf of the Charterer in accordance with his needs prior to and during the charter (e.g. for food, beverages, transport, etc.).

On the basis of a detailed analysis, the Italian Tax Authority determined that the APA is not acquired by the Owner but remains, legally, the property of the Charterer, entrusted to the Captain and intended to be spent on the purchase of whatever the Charterer requests.

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

In accordance with relevant 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 these specific sums, in full consistency 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.

For these reasons, the results of the legal consultancy requested by MYBA safeguards the tax principles governing the matter and thus the fiscal rights of the Italian Authority, as well as the rights of the yachting industry to a 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.