The European Commission has announced it is implementing infringement proceedings on tax breaks applied in the yacht and aircraft sectors in Italy and the Isle of Man. The procedure is related to the investigations of last year’s so-called Paradise Papers leaks which revealed widespread value-added tax (VAT) evasion in the yacht and aviation sectors of various member states.

Brussels has decided “to send a letter of formal notice to Italy for not levying the correct amount of VAT on the leasing of yachts. The Commission also decided to send a reasoned opinion to Italy because of its illegal system of exemptions for fuel used to power charted yachts in EU waters. Finally, a letter of formal notice was sent to the UK concerning the Isle of Man’s abusive VAT practices with regard to supplies and leasing of aircraft,” the Commission said in a statement.

In particular, the infringement procedures are related to the reduced VAT base for the lease of yachts in the Italian tax law, the excise duty rules for fuel in motor boats in Italy, and the VAT practices in the Isle of Man, according to the EC.