The Italian Council of Ministers has approved new anti-crisis measures that include an increase in the standard rate of VAT from 21% to 23% and the reduced rate from 10% to 12%.  We understand that the increased rates are effective from 1st September 2012.  The decree also envisages a further increase in the standard rate of 0.5% from 2014.  The measures have not yet been approved by Parliament and could be subject to change.

The EU Commission has referred Italy to the ECJ regarding the VAT exemption for ships. Under the VAT Directive, a VAT exemption can be granted, subject to certain conditions, to supplies for the fuelling and provisioning of vessels used on the high seas. A VAT exemption can also be granted for the supply, modification, repair, maintenance, chartering and hiring of such vessels.

However, the exemption in the Italian legislation is not in line with what is allowed under the Directive. It extends the scope of what is permitted in the VAT Directive by granting a VAT exemption to commercial vessels not sailing on the high seas and vessels intended for public bodies. It also fails to implement the exemption correctly in that it excludes some services that should be covered by the exemption such as for example the loading and unloading of vessels sailing on the high seas.