Lawyer on Board Archivi - Barche Magazine ISP

What’s new in the Decree

BARBARA BORGONOVO — Wed, 17 Apr 2024 07:47:22 +0000

Let’s take a look at what’s new in the Made in Italy decree for the pleasure boat sector

by Federico Santini*

Law no. 206/2023 on “Organic provisions for the valorisation, promotion and protection of Made in Italy”, which includes the so-called Nautical Package 2023, has been published in the Official Gazette. The “package”, which consists of four different simplification measures, intervenes in the text of the Recreational Boating Code (Legislative Decree no. 171/2005) and is the result of a fruitful dialogue between Confindustria Nautica and the Ministry of Infrastructure and Transport.

A first amendment concerns article 58, “Duration of procedures”, where a new paragraph 1-ter is added, reducing the duration of the administrative procedure for the provisional registration of pleasure craft from 60 to 7 days. This is a very important and long-awaited innovation, obviously aimed at making the registration process in the Italian register quicker and smoother, thus making the Italian flag more competitive.

CONFINDUSTRIA NAUTICA HAS CARRIED OUT IMPORTANT WORK WITH THE ITALIAN LEGISLATURE. THIS HAS LED TO THE ADOPTION OF THE MADE IN ITALY DECREE.

A second innovation, equally important, concerns the method of registration in the Italian register of small pleasure craft (i.e. pleasure craft up to ten metres in length). In fact, the procedure for registering small pleasure craft in the Central Telematic Archive of Pleasure Craft (ATCN) is simplified in the sense that, pursuant to art. 27 of Legislative Decree no. 171/2005, as amended by Legislative Decree no. 206/2023, it is possible to proceed by means of a declaration certified by the Telematic Service for Motor Vehicles (STA), through which it is possible to self-certify the ownership of the boat that the owner intends to register.This option is intended to facilitate owners who wish to register under the Italian flag but who have lost or do not have a formal title of ownership. It should be noted that registration (ATCN) is not obligatory for small pleasure craft, but only an option. Exercising this option has the effect of applying to a small pleasure craft the same legal regime as that applicable to pleasure craft up to 24 metres in length, thus transforming it from a mere movable asset (not registered) to a movable asset subject to the rules applicable to registered assets (after registration). This difference in legal classification has certain consequences, particularly with regard to the circulation of rights relating to the asset, for which, among other things, the ownership of the boat must be proven by means of specific official documents (e.g. certificate of ownership or extract from the Pleasure Craft Registry) and the corresponding transfers must be recorded in the Registry.

The procedure for registering recreational craft in the Central Telematic Archive of Recreational Craft has been simplified with a declaration in lieu of an affidavit and a signature authenticated by the Automobile Telematic Service.

A third innovation, introduced in the new paragraph 2-bis of the same article 27, describes the documentation that must be produced in order for Italian owners of unregistered small pleasure craft to be able to sail in the territorial waters of other European Union countries, in particular those (such as Croatia, Slovenia and Greece) where registration is also required for boats less than 10 metres in length. This new provision allows Italian owners of unregistered small boats, when navigating in foreign territorial waters, to certify the ownership, nationality and technical data of the boat by means of the declaration of construction or importation (DCI) provided for in article 13, paragraph 5, of the Presidential Decree of 14 December 2018, no. 152 (Regulation on the SISTE – Central Telematic System of Recreational Boating), accompanied by the declaration in lieu of an affidavit, in this case also authenticated by a motorist’s telematic counter.

Paragraph 2-bis also stipulates that these documents must be kept on board during navigation in foreign territorial waters. The declaration will be made according to a model to be defined by the Ministry of Infrastructure and Transport by the end of February. Finally, the latest news on recreational boating, contained in Law 206/2023, concerns the creation of a fund of 3 million euros for the year 2024, to be paid in the form of contributions for the purchase of electric engines and the simultaneous scrapping of endothermic engines powered by fossil fuels. All this with a view to ecological transition and the reduction of polluting emissions. This fund will be implemented by means of a decree of the Ministry of the Economy and Made in Italy (Mimit) to be adopted in agreement with other ministries within sixty days of the entry into force of the Made in Italy law.

(What’s new in the Decree – Barchemagazine.com – April 2024)

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The new version of the MYBA Memorandum of Agreement

BARBARA BORGONOVO — Thu, 21 Mar 2024 07:57:58 +0000

In this issue, we complete the analysis of the main changes to the MOA that will be introduced in 2021, which we commenced in the two previous issues of this magazine, 1 and 2 – Third Part

by Federico Santini*

An important innovation introduced in the MOA is the express reference to the commission agreement contained in Clause 37 (Brokers), which was not mentioned at all in the previous 2008 version. This clause now provides that upon completion of the sale by the MOA, the Seller will pay to the Broker(s) out of the sale price the Broker’s remuneration in accordance with the terms of a separate and confidential commission agreement to be entered into between the Seller and the Broker(s) at the same time as the MOA.

The new Clause 40 is certainly appropriate to ensure full compliance with due diligence and anti-money laundering regulations, also given the increasingly stringent controls imposed on banks by national and international authorities.

Clause 37 further provides that in the event of any conflict between the terms of the MOA and those of the commission agreement, the latter shall prevail, provided that the Buyer, who is not a party to the commission agreement, shall not be affected and/or prejudiced in any way. This amendment simply implements a consolidated practice, namely the signing of the commission agreement between the seller and the broker. Another important change is the introduction of a brand-new clause, Clause 40 (Due Diligence Documentation), which sets out the terms and deadlines within which each party must provide its due diligence and anti-money laundering (KYC) documents, and within which these documents must be approved.

PARAGRAPH 37 STATES IF THERE IS ANY INCONSISTENCY BETWEEN THE TERMS IN THE MEMORANDUM AND THE COMMISSION CONTRACT, THE COMMISSION CONTRACT SHALL TAKE PRECEDENCE.

The documents to be provided by the seller and the buyer to the interested party are set out in a specific list forming Annex A to the MOA and are, in general, for natural persons, a copy of the passport and a document proving the address of residence, such as a copy of a utility bill or an official certificate of residence; for companies, a copy of a certificate issued by the competent authority of the country in which the company is incorporated, certifying the existence of the company, its registered office, the names of the shareholders and ultimate beneficiaries and of the directors, together with a copy of their passport and a document proving their residential address. These documents must be submitted within two working days of the signing of the MOA and the stakeholder must notify whether or not they have been approved within the following two working days, with the provision that if they have not been approved within eight working days, the MOA will be cancelled. This clause provides that if such documents are not provided or have not been approved, the Stakeholder is not required to provide its bank details, nor is it required to receive the deposit and/or transfer funds. It is also provided that in case it appears that the bank of the Stakeholder refuses to receive the deposit from the Buyer, albeit with the consent of the Stakeholder, the Stakeholder shall notify the Parties, in which case the Stakeholder may use another of its bank accounts or the Parties may appoint a new Stakeholder within four working days of receipt of the aforementioned notification, and that in the absence of such agreement, the MOA shall be terminated without any recourse to the Parties.

The new Clause 40 is certainly appropriate in order to guarantee full compliance with due diligence and anti-money laundering regulations, also in view of the increasingly stringent controls imposed on banks by national and international authorities. A further amendment relates to Clause 29 (Cancellation), which now expressly provides that if the Buyer rejects the yacht pursuant to Clause 26 or Clause 27, the cost of fuel incurred during the sea trial in respect of the condition survey and the transport of the yacht to and from the launching facility will be deducted from the deposit (together with the cost of any special sea trial requests and the cost of the condition survey, unless paid directly by the Buyer) before the deposit is returned to the Buyer. The final change of note is that introduced to Clause 42 (Assignment), which clarifies that any assignee of the MOA, nominated by the Buyer for the purchase of the Yacht, must be in the same beneficial ownership as the original Buyer or, if a natural person, owned by the original Buyer and that the transfer must be notified to the Seller no later than seven days before the Completion Date. It is also clarified that the transfer is in any event subject to the terms and approval of the nominee’s KYC documents referred to in Clause 40 for compliance with due diligence and anti-money laundering requirements.

(The new version of the MYBA Memorandum of Agreement – Barchemagazine.com – March 2024)

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The new version of the MYBA Memorandum of Agreement

BARBARA BORGONOVO — Thu, 15 Feb 2024 08:55:04 +0000

In this issue, we continue our analysis of the main changes to the 2021 MOA – Second Part

by Federico Santini* – photo by Guillaume Plisson

We reported in the previous issue on the introduction of the seller’s warranty in respect of the yacht’s VAT status. A second significant change concerns Clause 16 (INVENTORY), which relates to the inventory, i.e. the list of equipment, goods and spare parts included in the sale and which must therefore be delivered on board at the time of delivery of the yacht. In the previous version of the contract, the parties had 7 days from the signing of the MOA to agree the inventory, whereas in the new version the inventory must be agreed and signed by the parties together with the MOA, to which it becomes an annex. This change is certainly appropriate in order to avoid subsequent disputes, which are quite common in practice, concerning the absence on board of goods which the buyer has inspected on the occasion of the first visit on board.

CLAUSE 25 DEALS WITH THE DEPOSIT TO BE MADE
BY THE BUYER INTO THE DEPOSITARY’S BANK ACCOUNT AFTER THE SIGNING OF THE MOA.

Another amendment concerns Clause 17 (SEA TRIAL/CONDITION SURVEY), which has been incorporated with the provision that neither the sea trial nor the condition survey may commence until the interested party has confirmed to the seller and the buyer the receipt of the deposit. This amendment is also appropriate – and has often been included in the Special Conditions or in a separate addendum – particularly in cases where the date of completion of the sea trial and dry survey referred to in clause (9) is very close to the date of signing the MOA, so that the seller is indemnified for any damage to the yacht at sea or on shore that may be caused by the buyer’s actions, or for any expenses incurred by the buyer. Closely related are the amendments to Clause 25 (DEPOSIT), which governs the deposit to be paid by the Purchaser into the Participant’s bank account upon execution of the MOA.

Firstly, the reference to 10% of the sale price has been removed so that the parties will negotiate the amount of the deposit as any other commercial term. Second, the stakeholder’s obligation to inform the buyer and seller of the receipt of the deposit is introduced. Thirdly, the time limit of four working days within which the deposit must be paid by the buyer has been maintained, but the condition of prior compliance by the buyer and seller to provide the stakeholder with the anti-money laundering documentation referred to in Clause 40 – a new clause which will be discussed later – which is necessary for the stakeholder to legally receive the funds, has been added. Important changes have then been made to Clause 27 (CONDITION SURVEY), which sets out the terms and conditions of the survey and the notification of any defects found during the survey, for the purposes of any subsequent claim for rectification or reduction of the purchase price, or for the purposes of any rejection of the yacht.

photo by Guillaume Plisson for Imperial

Clause 27 governs the manner in which the dry check is to be carried out and the manner and time limits in which any defects discovered during the dry check are to be reported.

Firstly, the new wording clarifies the definition of the relevant “defect”, providing that it must be a defect (i) not disclosed in writing to the purchaser prior to the date of the MOA (and therefore accepted by the purchaser) and (ii) which, in the professional opinion of the surveyor, renders the yacht unseaworthy and/or affects the operational integrity of the yacht or its systems or machinery. Secondly, the new clause requires that any defects found must be certified in writing by the surveyor in a special statement (“Surveyor’s Statement”) to be attached to the buyer’s notice requesting their rectification or a reduction in the purchase price or, where appropriate, the rejection of the yacht. Thirdly, the right of the buyer, provided that the deposit has already been paid, to appoint an expert to take and analyse oil samples from the yacht’s main engines and generators in the presence of the yacht’s captain and/or chief engineer is expressly added. This is a practice already in place and is now expressly required as part of the Condition Survey. We will complete the analysis of the main changes introduced in the MOA in the next issue.

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The new version of the MYBA Memorandum of Agreement

BARBARA BORGONOVO — Wed, 24 Jan 2024 08:14:17 +0000

Let’s look at the key points of the new version of the MYBA Memorandum of Agreement – Part One

by Federico Santini*

The Myba Memorandum of Agreement (also known as the Moa) is a contract form approved by Myba (Mediterranean Yacht Brokers Association) and most commonly used internationally for the sale and purchase of used yachts. It is a standard contract governed by English law, which consists of a first part, corresponding to the first two pages, to be filled in with the description of the yacht and the specific conditions of sale that are the result of negotiations between the parties, and a second part consisting of standard clauses governing the Seller’s rights and obligations, and finally the general conditions of the sale. Having been widely used and respected by brokers and lawyers for many years, the Moa has been an essential instrument in the buying and selling used yachts.

THE MEMORANDUM OF AGREEMENT HAS FOR MANY YEARS BEEN AN ESSENTIAL INSTRUMENT IN THE BUYING AND SELLING
OF USED YACHTS.

Not everyone knows, however, that a new version of the Moa was launched in 2021. It is an update of the model that has been used since 2008 with the aim, on the one hand, to bring it more in line with current market practices and with changes in regulations and, on the other hand, to prevent a number of contractual aspects that are in practice susceptible to disputes between the parties. However, almost two years after the introduction of the E-Moa 2021, the previous version of the contract is still predominantly used, and this is undoubtedly due to the fact that the new version is electronic and can only be completed and used by brokers registered with the Myba. Therefore at least for the time being, brokers who are not members of the association and, above all, lawyers who normally assist the parties in drafting the Moa and its addenda are, at least for now, excluded from accessing this document.

The decision not to allow lawyers to prepare the contract directly and to be able to exchange the drafts prior to signing, except with the broker’s constant intervention on the text, inevitably represents a major obstacle to the dissemination of the new version and the application in the practice of the changes introduced. Therefore, it is hoped that the Myba will approve a widening of the audience of users who can have access to the E-Moa 2021, certainly by adding lawyers active in the yachting sector. This requirement has been expressed several times by many of the most established international law firms and is certainly to be welcomed since the changes made are undoubtedly useful and opportune in the light of the experience and market practice. We therefore begin our examination of these changes which we will continue in the next issue.

A first amendment, and also the most significant, concerns Clause 15 (Seller’s Warranty) which has been extended in two respects, compared to the previous version which only provided for the warranty regarding the Seller’s ownership of the yacht and the absence of mortgages, debts and claims over the yacht. On the one hand, a specific guarantee has been inserted regarding the absence of liability for the payment of Vat on the yacht until the date of completion of the sale in relation to the Vat status of the yacht which, in fact, must be declared in the new box (L) Eu Vat Status, introduced on the first page of the Moa. On the other hand, a specific guarantee has been inserted regarding the absence of debts and/or liabilities deriving from previous charter contracts operating in the case of commercial yachts, which in fact must now be declared in the new box (K) Plesure or Commercial Yacht, introduced on the first page of the Moa.

Of particular importance is the introduction of the Vat guarantee, as this is an absolute change in perspective with obvious consequences in terms of liability. In fact, under the previous regime, the seller did not provide any guarantee and the buyer had the burden of verifying the seller’s correct application of Eu Vat law before signing the Moa and/or completing the sale, with no recourse against the seller in the event of subsequent disputes by the tax authorities. We will continue our analysis of the changes introduced in the Moa in the next issues.

(The new version of the MYBA Memorandum of Agreement – Barchemagazine.com – January 2024)

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Customs confiscation

BARBARA BORGONOVO — Mon, 18 Dec 2023 07:42:14 +0000

Several recent rulings by several territorial tax courts have affirmed that confiscation, in addition to a fine of 2 to 10 times the evaded VAT, is entirely disproportionate to the infringement committed

by Federico Santini*

In the paper published in the August 2023 issue, we analysed the penalty regime provided for in Italy for smuggling in violation of customs regulations on temporary importation (so-called non-inspective smuggling) for which the owner of a non-EU pleasure yacht who fails to comply with the 18-month deadline given for clearing the yacht in EU waters is liable.

THE COURT AFFIRMED THAT A PENALTY IN THE OBLIGATION TO PAY A SUM EQUAL TO 480% OF THE DUTY EXCEEDS THE LIMITS NECESSARY TO ENSURE COMPLIANCE WITH CUSTOMS LEGISLATION AND IS NOT PROPORTIONATE TO THE EVADED DUTY.

We explained at the time that, in addition to the fine ranging from a minimum of 2 to a maximum of 10 times the evaded VAT (in addition to the possible penalty of imprisonment of up to 3 years when the evaded VAT exceeds € 100,000), the yacht’s mandatory confiscation is provided for as an additional penalty, whereby the shipowner loses ownership of the yacht, which is then acquired by the State and subsequently resold at auction. The previous article pointed out that, as an additional penalty over and above the above-mentioned harsh fine and, in the most serious cases, imprisonment, confiscation of the yacht is excessive and does not, on the whole, comply with the principle of proportionality of penalties, which is expressly established at both national and EU level.

Several recent rulings by several territorial tax courts have finally affirmed this thesis, namely that the penalty of confiscation, in addition to the fine of 2 to 10 times the evaded VAT, is entirely disproportionate to the violation committed. Of particular note is ruling No. 94 of 4 July 2023 issued by the first-degree Tax Court of Imperia, with which – in a case of smuggling (the offence had been committed under the previous legislation which had decriminalised smuggling if the evaded VAT was less than € 50,000) – the seizure order was annulled on the grounds of an alleged breach of the principle of proportionality between the fine and the legal offence, under Article 42 of EU Regulation. No. 952/2013. The court held that a penalty amounting to 480% of the tax exceeds the limits necessary to guarantee compliance with customs legislation and is not proportionate to the evaded tax.

A RULING BY THE IMPERIA TAX COURT ANNULLED THE SEIZURE ORDER FOR ALLEGED VIOLATION OF THE PRINCIPLE OF PROPORTIONALITY BETWEEN THE PENALTY AND THE INFRINGEMENT.

We also mention, although it refers to cases of smuggling of a sports car, ruling No. 42 of 27 February 2023 of the second-degree Tax Court of Friuli V. Giulia Gorizia, in which – again in the case of smuggling (the offence had been committed under the previous legislation which had decriminalized smuggling if the evaded VAT was less than € 50,000) – the seizure order was annulled because it was unquestionably excessive and disproportionate to that strictly necessary to implement the interests of the tax authorities, where the offender had already paid the tax and the mandatory fine.

The most interesting ruling, albeit interlocutory, is Order No. 21917 of 21 July 2023 issued by the Tax Section of the Supreme Court of Cassation, through which the Court remitted the proceedings to the First Presiding Judge for a possible ruling by the United Sections – the highest judicial body in Italy – on the issue of whether criminal and administrative customs confiscation is mandatory or not depending on the severity of the offence in terms of damage to the Treasury and the proportionality of the penalties based on European principles.

We must now await the outcome of the ongoing proceedings to know whether the United Sections of the Supreme Court of Cassation will take up the matter and, if so, which principles of law they will adopt on this issue of particular importance due to its significant practical implications in the specific sector of non-EU yachts in Italian waters.

(Customs confiscation – Barchemagazine.com – December 2023)

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The Italian International Registry

BARBARA BORGONOVO — Mon, 13 Nov 2023 14:57:56 +0000

In this issue, we conclude the examination of the Italian International Registry about commercial yachts – Part three

by Federico Santini* – photo by Blue iProd

After having analysed its creation and characteristics and the relevant tax and social security benefits that registration offers to owners, we move on to examine the problematic issues for which the Italian International Registry has never gotten off the ground and on which Italian authorities should focus with a finally structured intervention that would make this institution truly attractive at a national and international level. From a technical point of view, the eligibility requirements for the registration of commercial yachts in the Italian International Registry provided for in the Decree of the Ministry of Infrastructure and Transport No. 95 of 2006 (the Safety Code) do not seem particularly onerous or in any case different from those required by main foreign commercial regulations (REG Large yacht Code, Malta Commercial Yacht Code). On the contrary, the administrative, operational and management obligations imposed on yachts registered in the International Registry are particularly burdensome to, at present, discourage owners.

THE PROCEDURE IS STILL VERY SLOW AND SOMETIMES EXCEEDS 3-4 MONTHS DURING WHICH THE YACHT CANNOT SAIL.

However, thanks to the efforts made by Confindustria Nautica and the main Italian trade associations, certain simplifications have already been introduced, first with Legislative Decree No. 229 of 3 November 2017 and then with the subsequent Legislative Decree No. 160 of 12 November 2020, which partially modified the Yachting Code (Legislative Decree, No. 171/2005), but they have not been sufficient to attract owners. These simplifications include, in particular, the elimination of the one-thousand-ton limit for the registration of large yachts in the International Registry, the establishment of the single logbook to replace the numerous registries and journals previously provided, and the exemption from arrival and departure requirements. Nonetheless, numerous problematic issues remain:

1) Registration procedure: despite some simplifications, the procedure is still very slow and sometimes takes more than 3-4 months during which the yacht cannot sail. A first phase of authorization for registration is envisaged under the responsibility of the Ministry of Infrastructure and Transport, for which the presentation of the relevant request by the shipowner must be preceded by an agreement with the main trade union associations. Once authorization for registration has been obtained from the Ministry, the actual registration phase follows under the responsibility of the Port Authority. Until the procedure is completed, the owner cannot use the yacht.

From a technical point of view, the eligibility requirements for the registration of commercial yachts in the Italian International Registry do not seem to differ from those required by main foreign commercial regulations.

2) Crew list: despite the simplifications introduced by Legislative Decree No. 160 of 11/12/2020, only seafarers registered in the seafarers’ registries are allowed to embark, and the shipowner must first request the competent authority for a specific document drawn up by the model approved by the Ministry of Infrastructure and Transport. This procedure is also quite slow and may take up to 1 month.

3) Equivalent solutions and exceptions: the approval of any equivalent solutions and/or exceptions to the safety requirements referred to in Ministerial Decree 95/2005 requires a particularly cumbersome process which may take more than 1 month and the final decision is left to the discretion of the Maritime Authority. Until the equivalent solution and or exceptions are approved, the yacht is not registered in the International Registry and, therefore, cannot sail.

Once registration authorization has been obtained from the Ministry, the actual registration phase follows, which is the responsibility of the Harbor Master’s Office. Until this procedure is completed, the owner cannot use the yacht.

4) Visits and inspections: an initial visit and annual periodic visits are imposed to verify the existence and permanence of safety requirements, as well as inspections involving the simultaneous intervention of various public administrations to check the state of the yacht about the aspects of work organization on board, and occupational health and safety.

5) Navigation: although the formal exemption from the arrival and departure formalities referred to in Articles 179 and 181 of the Navigation Code has been introduced, there is still an obligation on the part of the captain to notify the maritime authority, both in advance and on arrival of the yacht, of a series of information relating to arrival and departure times, crew list, passenger list, insurance policies and safety certifications. Although these communications are done electronically, there are still frequent visits on board by the tax and customs authorities. A definitive intervention that would introduce, in a unified and systematic manner, a decisive simplification of the aspects described above and, above all, allow a substantial reduction in registration times is certainly advisable.

(The Italian International Registry – Barchemagazine.com – November 2023)

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The Italian International Registry

BARBARA BORGONOVO — Wed, 04 Oct 2023 07:25:39 +0000

Let’s look at the benefits of registering in the Italian International and Commercial Yachts Registry. Part two

by Federico Santini* – photo by Jeff Brown/Breed Media

In this issue we take up the subject of the Italian International Register with reference to commercial yachts, analysing the relevant tax and social security incentives and benefits that such registration entails according to the rules provided for in Law No. 172 of 8 July 2003. The legislator has reserved a favourable tax regime for IRES (Corporate Income Tax) and IRAP (Regional Income Tax) purposes in relation to income from the use of yachts entered in the International Registry. For IRES purposes, income deriving from the use of yachts entered in the International Registry, which includes commercial chartering, must be determined on the basis of the ordinary rules contained in Title II, Chapter II, of the Income Tax Consolidation Act, but contributes to the formation of taxable income for IRES purposes to the limited extent of 20 per cent. As a corollary of this partial income tax relief regime, any tax losses realised in the exercise of the activity in question are relevant to the limited extent of 20 per cent. The exemption in question also applies to any capital gain realised through the future sale of the yacht, provided that the same has remained registered in the International Registry, prior to the sale, for an uninterrupted period of at least three years.

FOR IRAP PURPOSES, THE PORTION OF THE NET PRODUCTION VALUE ATTRIBUTABLE TO THE USE OF YACHTS LISTED IN THE INTERNATIONAL REGISTRY IS DEDUCTED FROM THE RELEVANT TAX BASE
AND, THUS, EXCLUDED FROM TAXATION.

For IRAP purposes, the portion of the net production value attributable to the use of yachts registered in the International Registry is deducted from the relevant tax base and, thus, excluded from taxation. The portion of net production value that can be deducted is determined by making reference to the positive and negative components relevant for IRAP purposes and specifically referable to the activity carried out through the use of yachts registered in the International Registry. So, if the production value of the shipowning company is made up exclusively of the chartering of the yacht, the company will be entirely excluded from IRAP taxation. Shipowning companies chartering yachts entered in the International Registry are also entitled to a tax credit equal to the IRPEF due on income from employment and self-employment paid to crew members on board these yachts, to be used as set-off when paying withholding taxes on such income. This tax credit, by express provision of the same law, does not contribute to the formation of the employer’s business income.

We also wish to mention that yachts registered in the International Registry are by definition vessels used for a commercial activity and, therefore, provided they are actually used for navigation on the high seas, the VAT non-taxable regime pursuant to Article 8-bis of Presidential Decree 633/1972 applies for the transfer, lease and charter operations (but only if the charterer is a VAT taxable person who uses the yacht for commercial purposes), the purchase of equipment, engines, components and spare parts, the purchase of goods intended for onboard equipment, supplies intended for refuelling, including bunkering and the serving of food and drinks on board, the purchase of services relating to such yachts, including the use of dry docks as well as relating to construction, maintenance, repair, modification, transformation, setting up and furnishing, and finally demolition.

photo by ©Guillaume Plisson.

Shipowning companies chartering yachts registered in the International Registry are entitled to a tax credit equal to the IRPEF due on income from employment and self-employment paid to crew members on board such yachts, to be used as compensation for the payment of withholding taxes on such income.

However, as mentioned above, in order for the non-taxable VAT regime to be applicable, the actual use of the yacht on the high seas must be assessed, i.e. whether the yacht makes more than 70 per cent of voyages (excluding those for technical reasons) with routes that exceed the 12-mile limit measured from the baselines established by international maritime law. In addition to the above-mentioned tax benefits, Italian legislation provides, as mentioned above, for specific tax relief for companies owning yachts entered into the Italian International Registry, in relation to Italian and EU personnel meeting the requirements for being listed in the Italian seafarers’ registry. These reliefs concern both the social security and welfare charges directly borne by the company and the part that the same companies pay on behalf of the employee. However, it should be noted that, while initially the relief was provided in full, and was, therefore, a real exemption, starting in 2020 the aforementioned benefits are granted within the limit of 44.32 per cent.

As is evident, that tax and social security benefits granted to companies owning commercial yachts listed in the Italian International Registry are extremely significant and should be such as to make this registry extremely attractive. Nevertheless, during these 20 years, only a few yachts have been entered in the International Registry and most of these have since abandoned it. In the next issue, we will try to identify the possible causes of this lack of competitiveness and the possible remedies to make the Registry effectively attractive at national and international level.

(The Italian International Registry – Barchemagazine.com – October 2023)

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The Italian International Registry

BARBARA BORGONOVO — Wed, 13 Sep 2023 06:52:26 +0000

Let’s take a look at the rules governing the activities of commercial yachts registered in the Italian International Register. Part one

by Federico Santini*

With article 3 of the Law no. 172 of 8 July 2003 for the reorganization of the nautical sector, the Italian Parliament introduced the possibility for commercial yachts to be registered in the International Register referred to under article 1 of the decree-law no. 457 of 30 December 1997 (International Register bis), which was previously open exclusively to cargo and passenger ships. In order to be registered in the International Register, yachts must have the following characteristics: they must be used in international navigation exclusively for chartering for tourism purposes; they must have a hull length greater than 24 metres.

photo credit Blueiprod.

UNDER NO CIRCUMSTANCES MAY A VESSEL IN THE INTERNATIONAL REGISTER BE USED FOR ANY PURPOSE OTHER THAN CHARTERING
(I.E. PRIVATE PLEASURE BOATING).

With regard to the first characteristic, it has been clarified that the term “exclusively” refers only to the use by charter for tourism purposes, and not to international navigation as well. This means, on the one hand, that the yacht registered in the International Register cannot, under any circumstances, be used for purposes other than chartering (i.e. pleasure boating), and, on the other hand, that the yacht must not necessarily or predominantly be used for international navigation, but must have the technical safety requisites that allow it to carry out the various types of international navigation as foreseen by the Safety Regulations approved by the Ministry of Infrastructure and Transport with Decree no. 95 of 4 April 2005. The International Register is open to: yachts belonging to natural or legal persons or entities from Italy or other European Union countries; yachts from non-EU foreign registers belonging to non-EU natural or legal persons or foreign entities which operate the vessel directly through a permanent establishment within Italy; and yachts belonging to non-EU subjects under suspension from non-EU foreign registers following a bareboat charter provided to legal entities based in Italy or other EU countries. The registration of the yachts in the International Register implies that such yachts are (i) authorized to carry a number of passengers not exceeding 12, excluding the crew, (ii) have a class certificate from one of the classification societies recognized in Italy, and (iii) are subject to the specific technical and management standards outlined in the aforementioned Safety Regulations.

photo credit Blueiprod.

YACHTS REGISTERED IN THE INTERNATIONAL REGISTER
ARE ONLY LICENSED TO CARRY UP TO 12 PASSENGERS, EXCLUDING CREW.

It should be emphasized that commercial yachts are not subject to the limitation concerning cabotage services, which is applicable, however, to other vessels registered in the International Register, and eliminates the possibility of carrying out more than six monthly voyages or voyages whose individual distances exceed 100 nautical miles, under certain conditions. The Safety Regulation specifically regulates the technical safety requirements that yachts registered in the International Register must possess and maintain, which concern the following aspects: construction and robustness, requirements relating to maximum load lines, compartmentation and stability, fire protection, life-saving equipment, radio communications and navigation equipment, shipboard work safety management, marine pollution prevention, and ship safety management. The aforementioned Safety Regulations also regulate the types of checks (which consist of an initial inspection) to which commercial yachts are subject, before entering the charter business for tourism purposes, or, for existing ships, before obtaining safety certificates; annual renewal inspections; occasional inspections, as deemed necessary.

Commercial yachts are not subject to the cabotage restrictions applicable to other ships in the International Register.

The opening of the International Registry to commercial yachts is aimed at counteracting the progressive reduction of the national fleet engaged in chartering activities, and at attracting vessels from foreign registers, by offering shipowning companies significant benefits and tax and social security incentives. The aim was naturally to create the conditions necessary to encourage investments in the pleasure boating sector and to favour the growth of employment, while at the same time safeguarding of the national fleet. Already during the second half of the 1990s, it was evident that Italy produced an extremely large portion of the best pleasure craft in the world, but did not have a “hospitable” flag for the numerous owners navigating the Mediterranean, who, for various reasons, found it more convenient and appealing to register their vessels abroad. In the past, these locations were mainly in the United Kingdom and in the Red Ensign Group Registers, and have more recently moved to Malta, France, Luxembourg, and Spain: countries that have long offered simplified bureaucratic processes and significant tax advantages. This competitive disadvantage was strongly felt by the Italian nautical industry, which, through its most representative body at that time, UCINA, (now Confindustria Nautica) launched studies and initiatives aimed at bridging the existing gap, and made a decisive contribution to the enactment of law no. 172/2003, as well as the subsequent Safety Regulations. Unfortunately, for certain reasons which will be analysed in detail, the International Register has not yet managed to reach its goal.

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(The Italian International Registry – Barchemagazine.com – September 2023)

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Non commensurate penalties

BARBARA BORGONOVO — Fri, 04 Aug 2023 07:59:32 +0000

A review of the penalty system would be desirable in light of the European principles on the proportionality of penalties for offences related to temporary admission and related smuggling of yachts

by Federico Santini*

In the past, we have analyzed the temporary admission regime of non-EU pleasure yachts in Italy, underlining the extreme importance for owners to strictly comply with the discharge deadline of 18 months of permanence in EU waters. We have clarified that, if within the discharge period, the pleasure yacht is not transferred outside the customs territory or the means of transport is not bound to another customs regime, the owner will be responsible for smuggling and punished as a crime by Article 292 of Presidential Decree 43/1972 as amended by Legislative Decree 75/2020 (Consolidated Customs Law or TULD) when the border duties evaded are greater than € 10,000. Therefore, anyone liable for this violation will be subject to criminal proceedings for smuggling and, if found guilty, will be sentenced to a fine ranging from a minimum of 2 to a maximum of 10 times the VAT evaded, to which the penalty of imprisonment up to 3 years is added if the VAT evaded exceeds € 100,000. The mandatory confiscation of the yacht, which is an auxiliary penalty resulting in the loss of ownership of the yacht, which is acquired as state property to be resold at auction, is added to these penalties, which are already very severe.

If within the discharge period, the pleasure yacht is not transferred outside the customs territory or the means of transport is not bound to another customs regime, the owner will be liable for smuggling if the customs duties evaded exceed 10,000 euro.

With regards to smuggling, Article 301, paragraph 1, of the TULD provides that “the items that were used or intended to be used to commit the offence and the items that represent the product or benefit of the offence will always be confiscated”. In the opinion of the writer, confiscation appears to be completely disproportionate to the severity of the violation. As an auxiliary penalty in addition to the above-mentioned fine and, in the most serious cases, to imprisonment in prison, we doubt that the confiscation of the yacht can, on the whole, be included in the lists of the proportionality of penalties principle, which is expressly established both at domestic and EU level. First and foremost, reference should be made to Article 49 ECHR (European Convention on Human Rights) which states that “the penalties imposed shall not be disproportionate to the offence”.

photo by Nicolas Claris.

THE COMPULSORY CONFISCATION OF THE YACHT IN ADDITION TO THE MAIN PENALTY FOR THE OFFENCE IS LARGELY DISPROPORTIONATE FOR A VIOLATION COMMITTED MOSTLY WITHOUT MALICE AND, IN ANY CASE, NEVER WITH VIOLENCE.

It is now known that, from a guaranteed point of view, both the ECHR (European Court of Human Rights) and the European Court of Justice have adopted a broad notion of a criminal offence, stating that the criminal nature of the proceedings and penalties must be assessed according to three criteria, such as the legal classification of the offence in national law, the nature of the offence and, finally, the degree of severity of the penalty (see case C-537/2016, of March 20, 2018, Garlsson Real summer and a). Therefore, the penalty to be imposed cannot exceed the extent necessary to achieve the objectives set (on this point, see also C. Cost., October 23, 2019, No. 222 in which it is stated that “to be legitimate, the overall result of the combined administrative fine and penalty must not be excessively severe for the offender in proportion to the severity of the offence”) and, to assess the conformity of the penalties with the principle of proportionality “it is necessary to bear in mind, in particular, of the nature and gravity of the infringement which that penalty aims to penalize, as well as the methods for determining the amount of the penalty” (case C-384/201, October 04 2018, Link Logistik N&N).

Still, always at the supranational level, Article 42, paragraph 1 of the ECHR expressly establishes that the penalties “must be effective, proportionate and dissuasive”, while, domestically, Article 7 of Legislative Decree 472/1997 provides that “in determining the penalty, consideration shall be given to the seriousness of the violation”, as similarly provided by Article 11 of law 689/1981. Given these regulatory guidelines, the system of compulsory confiscation of the yacht in addition to the main penalty for the crime (fine from 2 to 10 times the VAT evaded as well as, if the event that the VAT evaded exceeds € 100,000, imprisonment up to 3 years) appears largely disproportionate in terms of excessive severity of the overall penalty imposed, in the face of a violation committed most often without malice and, in any case, without violence. If the confiscation was justified historically and is still justified today concerning intentional cases of smuggling of goods that are per se illegal and/or unlawfully brought into the national territory, it is excessively and unreasonably severe concerning a yacht that remains in EU waters beyond the 18-month term. Therefore, reconsidering the penalty system in light of the European principles of proportionality of penalties would be desirable.

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(Non commensurate penalties – Barchemagazine.com – August 2023)

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Competitiveness is improving

BARBARA BORGONOVO — Fri, 14 Jul 2023 08:00:20 +0000

Some provisions have been issued to improve the competitiveness of pleasure boating in Italy

by Federico Santini*

Thanks to the activity carried out by Confindustria Nautica, the Italian association that brings together yacht builders and operators, and the discussions with the Ministry of Infrastructure and Transport, a number of provisions have recently been issued to improve Italian competitiveness compared to the standards applied by other European registers.

The first of these provisions procedure for registering yachts for the first time, and is aimed at drastically reducing registration times, considering that the long registration time has always been a competitive obstacle for both foreign and Italian yacht owners to opt for the Italian flag. The Head of Department of the Ministry of Infrastructure and Transport (MIT) officially wrote to the competent offices of the UCON (Central Conservatory Office of pleasure craft) note No. 0013801 dated 8 May 2023, which instructed the offices to ensure that the first registration, whether definitive or provisional, be processed within 7 days from the date of submission of the complete documentation. If this provision is effectively applied in practice, the times for issuing the navigation license would certainly be comparable, if not faster, to those of European competitors (Malta, France, Spain, Poland).

The Head of the Department of the Ministry of Infrastructures and Transport has officially written to the Central Registrar’s Office of pleasure craft to give instructions so that the first registration practices are processed within 7 days from the date of submission of the complete documentation.

Another important measure concerns the leasing and hire of boats, i.e. pleasure craft of less than 10 meters in length, and jet skis which, as known, are not subject to compulsory registration in Italy the commercial use of which, due to the characteristics of the Italian coasts and islands, represents a flourishing business sector. The requirements, formalities and obligations to be fulfilled for the exercise of leasing and charter of small boats and jet skis are currently governed by the Decree of the Ministry of Infrastructure and Transport of 1 September 2021 (published in the Official Gazette, General Series No. 11 of 15 January 2022). With the Decree of 6 April 2023 (published in the Official Gazette, General Series, No. 106 of 8 May-2023) the Ministry corrected the relative discipline in some relevant respects.

The Ministry has removed the obligation to enclose a copy of the type-approval certificate or the EC declaration of conformity to the
Start of Business Notice for the leasing and rental of boats.

Firstly, the amendment to Article 2, paragraph 2 removed the obligation to provide a copy of type-approval certificate or the EC declaration of conformity for boats to be attached to the Start of Business Notice, if the boats do not have this document. This amendment serves to overcome the difficulties in using all boats, such as historical fishing and speed boats, built and placed on the market before the adoption of the CE certification. Secondly, with the amendment to Article 7, paragraph 1, it removed the ban on water-skiing for leased boats, effectively making charter more attractive for consumers and more profitable for operators. Thirdly, by amending annex 2, letter f), it reduced the area where an 8-knot applies from “5,000 meters from the coastline” to “500 meters from high sea cliffs and 1,000 meters from the beaches”. The previous limit, which was impossible to enforce, would have been completely incompatible with the practice of water skiing. These measures are not only useful but also important, as they are a sign of the current government’s increased attention to pleasure boating and the needs of its operators. Hopefully they will continue along these lines.

Lawyer on Board, other news

(Competitiveness is improving – Barchemagazine.com – July 2023)

L'articolo Competitiveness is improving sembra essere il primo su Barche Magazine ISP.