COMMERCIAL AND CORPORATE FLYING WITHIN THE EUROPEAN UNION

A quick overview of aircraft
importation and admission issues – mainly for non-EU operators

A quick introduction to aircraft importation and admission issues with guidance on how to choose between Temporary Admission and full importation

Updated July 2021 | VOL. 13

Operating inside the European Union?

If a non-EU operator operates inside the European Union (EU) with a non-EU registered aircraft, the operator will have to import or admit the aircraft into the EU and manage the exposure to the EU’s Value Added Tax (VAT) and customs duty. The customs procedures related to customs duty, including the handling of end-use exemption, changed drastically in 2015 and 2016 and again in late 2017. The VAT treatment has also changed in relation to leasing structures and the 0% airline exemption. The Temporary Admission (TA) procedure got a huge boost in 2014 after the EU Customs Code Committee took a stand and published a working paper that clarified many of the issues of the practical usage of this procedure. TA was earlier known as a risky option but is now a safe and flexible way to fly within the EU if applied correctly.

However, many non-EU operators are still left without a clear overview of the current EU aircraft importation and admission issues, leaving them without the necessary knowledge to choose the most effective procedure for operating with unrestricted access within the EU. With VAT rates between 17-27% and customs duty rates between 2.7-7.7%, aircraft importations and admissions are important aspects to consider before commencing or continuing EU operations. Here, compliance is always a central issue when using both the TA and full importation procedure, as non-compliance will most likely activate a direct payment of the VAT and customs duty.

Introduction

Any aircraft flying into the EU will fly under customs control using either the TA or full importation procedure. There are no other options. If the aircraft is not already fully imported, the aircraft will automatically be considered as flying under the TA procedure even though the owner or operator has not themselves taken any action to activate a TA or realized that their aircraft is actually flying under the TA procedure.

All private individuals and corporations, regardless of nationality and residence, can use the full importation procedure to realize a free circulation status and act as the importing entity, but some scenarios require full payment of the VAT, ranging from 17-27% of the aircraft’s value. The full importation procedures are available in all EU member states, but the practical handling and preconditions are often different. Full importation is mandatory for EU insiders, which includes aircraft that is either owned, registered, operated, based, or mainly used within the customs territory of the Union (just one criterion must be fulfilled) but optional for EU outsiders, also referred to as non-EU operators, which includes aircraft that is owned, operated, registered, and based outside the customs territory of the Union (all criteria must be fulfilled). See figure 1. To simplify the matter, this overview will use the terms EU and customs territory of the Union synonymously. It is important to notice that the two terms do not cover the same area, yet the differences are only relevant for strictly legal matters. 

The alternative to a full importation is to temporarily admit the aircraft through the TA procedure, which can only be used by EU outsiders or non-EU operators. The TA procedure includes certain limitations when flying within the EU, but many non-EU operators will have the same flying privileges as given under full importation as the limitations of the TA procedure do not influence the typical flight pattern.

If the aircraft has flights that start or end outside the EU and do not carry any EU residents as crew or passengers, and the crew and operator have the full understanding of the practical usage of the TA procedure in the different EU member states that the aircraft plan to visit, you will probably not need any help with documenting or clarifying compliance.

However, if the aircraft has a more complicated flight pattern, and if you wish to avoid any uncertainty when flying within the EU, we suggest using the Secure Temporary Admission procedure. The Secure Temporary Admission procedure is much more than barely handling necessary customs paperwork and works as a turnkey solution for non-EU owners and operators who wish to fly freely within the EU.

If the aircraft is not eligible for or violating the TA procedure, the aircraft could be forced into a full importation, resulting in full payment of the VAT and customs duty.

The descriptions of the TA procedure and full importation may be simplified in this publication and do not necessarily describe the full set of preconditions. For a deeper insight, please have a look at some of OPMAS’ other publications, Short Stories, and articles, such as what are the 10 typical errors and misunderstandings. For your convenience, we have included selected links to enlighten the issues mentioned on the following pages.

 KNOW MORE: The short story about Temporary Admission
 KNOW MORE: Temporary Admission: what are the 10 typical errors and misunderstandings?
 KNOW MORE: The short story about full importation
 KNOW MORE: Full importation: what are the 10 typical errors and misunderstandings?

Watch a short presentation on how to
fly within the European Union

If you wish to know how to fly within the European Union without any problems, please have a look at our new videos, briefly explaining your options. The videos are mainly targeting non-EU corporate or private operators, such as the US Part 91.
Visit our website at: www.opmas.dk/short-presentation/

Watch a short presentation on how to fly within the European Union

If you wish to know how to fly within the European Union without any problems, please have a look at our new videos, briefly explaining your options. The videos are mainly targeting non-EU corporate or private operators, such as the US Part 91.
Visit our website at: www.opmas.dk/short-presentation/

Figure 1: Flying within the European Union

The importation status’ significance for privileges and restrictions when flying within the EU

Temporary Admission

To qualify for the TA procedure and thereby be eligible for conditional relief of the customs duty and VAT, the aircraft must be registered or owned outside the EU and be used privately by a non-EU-resident person or company. It is possible to carry EU-resident persons as well as carry out commercial activities with the use of the TA procedure, but certain limitations and situations must be avoided.

The primary intention of the conditional relief is to grant EU outsiders free access to fly unhindered in and amongst all EU member states. If the preconditions are met, the TA procedure is a paperless routine, and admission is granted automatically when crossing the outer EU border. Some of the common issues surrounding the use of the TA procedure are discussed on the following pages. Please, note that our Secure Temporary Admission procedure addresses the issues mentioned below.

 KNOW MORE: BREAKING NEWS: See what is needed when arriving within the EU?
 KNOW MORE: Survey 9: Is a Supporting Document valid for one EU trip or multiple EU trips within six months?

Private or commercial use of aircraft

The definitions of private use and commercial use are specific definitions used by the EU customs authorities in relation to the TA procedure and should not be compared with similar definitions used by aviation regulators as these definitions are used in a different context.

A flight deemed private use grants many privileges when flying within the EU, whereas flights considered commercial use might be restricted.

The definition of private versus commercial use of aircraft has historically given rise to discussions within EU member states and the EU Commission. However, in 2014 the EU Customs Code Committee took a stand and published a working paper with samples of private versus commercial use. The conclusions were:

– Corporate flights may be considered private use
– Group charters may be considered private use under certain circumstances
– Marketing material and corporate documents onboard are acceptable and are not considered to be commercial freight or cargo, thus are not considered to be commercial use
– EU residents are allowed onboard but certain limitations and situations must be avoided to be considered private use

The working paper was based on four different cases and consisted of a description of each case supported by the EU Customs Code Committee’s comments and recommendations. Please, note that the working paper is only an opinion from the EU Customs Code Committee, thus not binding in any EU member state or the European Court of Justice. However, the above definition of private use is fully adapted in most EU member states, including Denmark.

 KNOW MORE: Short & Sweet mail no. 1 – Flying with the CEO within the EU
 KNOW MORE: Short & Sweet mail no. 2 – Flying commercially within the EU
 KNOW MORE: Short & Sweet mail no. 5 – What about private use of corporate aircraft?

Passenger and crew onboard

The Union Customs Code (2016) states:

“Natural persons who have their habitual residence in the customs territory of the Union shall benefit from total relief from import duties in respect of means of transport which they use commercially or privately provided that they are employed by the owner, hirer or lessee of the means of transport and that the employer is established outside that customs territory.

Private use of the means of transport is allowed for journeys between the place of work and the place of residence of the employee or with the purpose of performing a professional task of the employee as stipulated in the contract of employment.

At the request of the customs authorities, the person using the means of transport shall present a copy of the contract of employment.”

It is not set in stone who – according to the Union Customs Code – is deemed the user of an aircraft and whether there is any difference between EU-resident passengers and the crew, but the working papers from the EU Customs Code Committee mention that the above paragraph about EU residents only relates to pilots, which means that there are no restrictions for EU-resident passengers.

Some EU member states may have limitations and restrictions as to how, whom, and what may be carried within their borders, particularly with respect to EU residents. It is, therefore, recommendable that every case is verified by a customs authority well in advance.

 KNOW MORE: Short Stories: EU-resident passengers on flights within the EU
 KNOW MORE: Short Stories: EU-resident pilots on flights within the EU 
 KNOW MORE: Short Stories: Non-EU resident passengers and pilots on flights within the EU
 KNOW MORE: Short Stories: Does the owner of the aircraft have to be onboard or present in the EU?

Entity responsible for the flight in the European Union

The entity responsible for the TA entry is called the declarant and should normally be the operator. The operator is, in general, the entity that employs the crew and provides services to keep the aircraft flying. If the aircraft is managed by a third party, the management company should be the operator. This is a situation with many pitfalls as aviation structures can include many different entities such as users, owners, operators, lessees, lessors, etc. We regularly see declarants being nominated at random or simply chosen because they are the only non-EU entities in the owner, operator, user structure. However, these declarants are not valid operators. It is important that the declarant can be accepted as the real, physical operator and can prove this fact as well as claim the responsibility of the operator. The declarant must, of course, be a non-EU-resident person.

 KNOW MORE: Survey 6: Which entity is allowed to be the declarant?
 KNOW MORE: ALERT: New guidance from the EU about Temporary Admission

Aircraft registration

The aircraft must be registered outside the EU. Due to Brexit, the Isle of Man and the Channel Islands are no longer a part of the customs territory of the Union, thus aircraft registered at the Isle of Man (M) or Channel Islands (2/ZJ) are now eligible for TA. Aircraft registered in the EU are not eligible for TA, thus are not allowed to fly in the EU without paying the customs duty and VAT – not even a single entry into the EU is allowed. If not already imported, all aircraft registered within the EU must be fully imported at the first port of call in the EU. The registered owner or operator mentioned on the certificate of registration must also be domiciled outside the EU. As San Marino (T7) is not a part of the EU nor the customs territory of the Union, the TA procedure can be used.

Period of stay

An aircraft assigned to the private use category will be allowed to stay in the EU for up to six months at a time. When the aircraft crosses the EU’s outer border, a new six-month period can begin. The TA procedure cannot be used if the aircraft has its normal home base within the EU or spends the majority of the time at the same place within the EU. This would be considered circumvention and may result in payment of the customs duty, the VAT, and a fine.

An aircraft assigned to the commercial use category will be allowed to stay for the time required to carry out the transport operation, often referred to as the period of discharge.

An EU form is available for documentation purposes. This form is called the Supporting Document for an oral customs declaration (SD). Please, be informed that very few customs officials are familiar with this form and lack experience with the practical handling of the form. You should, therefore, make arrangements well in advance with a local handling agent if you wish to use this form.

 KNOW MORE: Survey 7: How is the six-month period of stay practically interpreted?
 KNOW MORE: Survey 8: What is the limit for multiple continuous stays at the same place?

Aircraft usage

The aircraft can be used for any purpose, such as private, leisure, entertainment, business or corporate use (as Part 91), and commercial group charters (as Part 135) without any consequence for the customs and VAT handling but under the condition that the aircraft will not be used for passenger transport subject to a personal ticket fee or direct payment per person.

Maintenance, Repair, or Overhaul (MRO)

The TA procedure can only be used to visit a maintenance workshop if the need for service has arisen spontaneously after flying into the EU. Services such as adjustments, Maintenance, Repair, or Overhaul (MRO), measures to preserve the aircraft or to ensure compliance with technical requirements, etc. are admissible under the TA procedure if the service performed does not lead to any permanent change of the aircraft, permanent increase in performance, or considerable added value. Alternatively, the workshop must initiate a customs procedure called Inward Processing as the TA procedure cannot be used to grant access to the EU if aircraft servicing is the purpose of entry. 

These examples are allowed under the TA procedure:
– Repair or maintenance of the aircraft by replacing the batteries, brakes, oil, wipers, or tires
– Service, guarantee, or courtesy work, such as maintenance of the air conditioning system
– Repair or maintenance of the aircraft by replacing the turbines

These examples are not allowed under the TA procedure:
– Installation of a Wi-Fi system
– Completely repainting

Inward Processing

The Inward Processing procedure allows an EU-based workshop to import the aircraft under the suspension of the customs duty and VAT with the purpose to perform work on non-EU owned or operated aircraft and eventually send an invoice without the local VAT. The procedure must be set up locally where the workshop is based. The workshop must contact local customs and ask them to initiate the Inward Processing for the specific aircraft. All international-minded workshops know about this procedure.

Aerial photos and firefighting

The TA procedure cannot be used if the purpose is aerial photos or firefighting, as the purpose of the TA procedure only relates to transporting either people or goods.

 KNOW MORE: ALERT: New guidance from the EU about Temporary Admission

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Full importation

Some operators will also have the option to fully import an aircraft into one of the EU member states and settle the VAT to fly unrestricted within the EU. The import VAT can be fully paid, deducted, or VAT-exempt at a 0 % rate – See figure 2.

Figure 2: Flying within the European Union

Examples of how the import VAT may be handled during a full importation

Option 1: Paying the import VAT

This option is the only alternative for private owners or companies with activities that are not considered correct economic activities, such as real estate, banking and finance, insurance, gaming, holding companies, etc. The import VAT must be paid and cannot be reimbursed later on.

Option 2: Deducting the import VAT

This option is available for aircraft owned or operated by a company and utilized 100% by this company for business purposes in their pursue of correct economic activities. As a rule of thumb, if a company generates a turnover at arm’s length prices and makes a profit in the long term, the VAT due on the aircraft may be deducted upon importation. Deducting is conditioned upon the company being subject to the VAT and the aircraft being linked to the company’s correct economic activities.

Aircraft must be used for the correct activities
Any importing entities using this option should initially check what kind of activities the aircraft will be used for in the future and if these activities are considered correct economic activities in the EU member state where the importation is planned. It is always a good idea to continuously make sure whether the planned usage of the aircraft is also carried out as intended and if this usage is still considered correct economic activities. The definitions of the latter can change over the years, mainly due to recommendations from the European VAT Committee, which are again based on judgments from the European Court of Justice. The VAT procedure is the same for any EU-established company in any EU member state. However, the process of implementing the EU’s VAT procedure into national legislation in each member state is subject to interpretation. Consequently, the paperwork and preconditions can differ from member state to member state.

 KNOW MORE: Short & Sweet mail no. 1 – Flying with the CEO within the EU
 KNOW MORE: Short & Sweet mail no. 2 – Flying commercially within the EU
 KNOW MORE: Short & Sweet mail no. 5 – What about private use of corporate aircraft?

Know what you are signing up for
Nobody should choose this option without knowing the full set of preconditions, risks, and ongoing demand for detailed documentation for the correct use of the aircraft. Most EU member states have a five-year period of limitation, but the relevant documentation must be filed for seven years and must be shown on demand during an audit. Written approvals by local customs authorities or legal opinions are available and recommended in most cases.

Only for business use – unless handled correctly
It is a common misunderstanding that it is acceptable to deduct all the import VAT if the aircraft is used predominately for business purposes. The general rule is that the import VAT can only be 100% deducted if the aircraft is 100% used for acceptable correct economic activities. Any person using the aircraft for private, personal, or entertainment purposes must compensate the importing entity directly for the use. Otherwise, the importing entity will have to pay back the non-business part of the imposed import VAT to the VAT authorities.

 KNOW MORE: Short Stories: Preconditions for the VAT handling
 KNOW MORE: Short Stories: Preconditions: what is meant by correct use?
 KNOW MORE: Short Stories: Preconditions: what is meant by non-business use?
 KNOW MORE: See Survey 1: Is the term predominately used for business accepted by the various EU VAT authorities?

Not compatible with imputed income and SIFL
The use of imputed income to compensate for any private, personal, or entertainment use of a corporate aircraft is generally not accepted and will not exclude an EU VAT claim. Please, also be aware that the US’s use of Standard Industry Fare Level (SIFL) will not solve the compensation problem as these values are often too low to be considered market rates.

All non-business use worldwide matters
It is also important to stress that most EU VAT authorities will not differentiate between non-business use in and outside the EU. This means that any non-business legs flown, e.g., in the US by an American Part 91 corporate operator, will impact the EU VAT handling if the aircraft has been fully imported in the EU and the import VAT has been 100% deducted.

 KNOW MORE: See Survey 3: Does the flight pattern or geography and size or type of compensation matter?

Risks when using leasing agreements and deducting import VAT
The EU VAT Directive regulates the authorities’ right to claim and the companies’ right to deduct VAT. Back in 2013, uncertainty of the correct application of the provisions of the VAT Directive in a case of a leased aircraft being fully imported gave rise to consultations with the European VAT Committee. Based on judgments from the European Court of Justice and opinions previously expressed by the European VAT Committee, the VAT Committee made it unambiguously clear that a full importation of a leased aircraft is subject to import VAT and that neither the customs representative nor the lessee is entitled to deduct the VAT. Consequently, some EU member states have declined lessees domiciled in the EU access to deduct the import VAT, arguing that the lessees have not incurred the costs of acquisition and do not own the imported aircraft.

In 2015, the Legal Division of the Danish Customs and Tax Administration published a draft administrative act, pointing out that a lessee cannot deduct import VAT. Based on input from the industry, the Danish Customs and Tax Administration identified that this approach – denying lessees to deduct import VAT – led to situations whereby both the lessee and the lessor were denied the right to deduct import VAT. The issue of the lessee’s right to deduct import VAT – or lack of such a right – was revisited by the European Commission in 2017, and once again, the European Commission made it clear that the lessee did not have a right to deduct the import VAT.

The risk of being denied access to deduct the VAT should be taken into consideration if using circular leasing agreements. Circular leasing agreements that do not change the ownership or imply any transfer of the right of disposal of the aircraft have been banned and may be considered as circumvention in the EU. Please, be cautious if the importing entity is not the real owner of the aircraft. Always ask yourself: which entity has the depreciation allowance and right of disposal of the aircraft.

 KNOW MORE: Read more about this issue on opmas.dk under June 2017 news
 KNOW MORE: WARNING: New development about a lessee’s right to deduct and defer VAT
 KNOW MORE: See Survey 4: Has a lessee been denied the right to defer the VAT imposed during an importation?

Option 3: Exempting the import VAT

This option is available for aircraft used by an international airline. No VAT is imposed as the rate is 0%.

An AOC license is not needed
An AOC license is not needed, but the importing entity or operator must have some kind of operating structure where the aircraft is used commercially, and such usage will often require an AOC license or similar structure. Other company structures may qualify as well, e.g., if an operating company delivers flight services to companies under the same umbrella company and all services are invoiced at a market rate.

What is commercial use?
It is a precondition that the aircraft is solely used for commercial use. Please, see the definition of commercial use below:

“‘Commercial operation shall mean any operation of an aircraft, in return for remuneration or other valuable consideration, which is available to the public or, when not made available to the public, which is performed under a contract between an operator and a customer, where the latter has no control over the operator.”

Who can use the airline exemption?
The airline exemption is available for operators both inside and outside the EU. There are other preconditions than the two mentioned above, so please ask for the full set of preconditions if relevant. All operators should also be aware that customs and VAT rules may sometimes conflict with aviation regulations, and it is always the responsibility of the operator to stay compliant in all areas.

Since the judgment of the A Oy case by the European Court of Justice, it has been widely accepted that a leasing company leasing an aircraft to an airline may also benefit from the VAT exemption as a supplier. Thus, the exemption is not limited to the immediate supplier. The entire chain of lessors, lessees, etc., will qualify if the end user is an international airline.

 KNOW MORE: Short Stories: Preconditions for the VAT handling
 KNOW MORE: Short Stories: Preconditions: what is meant by correct use?
 KNOW MORE: OPMAS Review: The airline VAT exemption in the European Union

Customs duty and end-use exemption

As of January 1st, 2018, a civil aircraft can be imported for free circulation with relief from customs duties if the aircraft has been duly entered on a register of a member state or a third country in accordance with the Convention on International Civil Aviation (ICAO) dated December 7th, 1944. Importation with customs relief per January 1st, 2018, is no longer conditioned upon applying for the end-use procedure. Importation of civil aircraft can be made under customs relief by reference to the valid certificate of registration in the customs declaration for release for free circulation. Please, note that the presence of the relevant certificate onboard each aircraft is mandatory.

Even though the above-mentioned preconditions are fulfilled, the customs duty can still be an issue in cases where an aircraft is smuggled in, wrongly or falsely declared through a full importation, or using the TA procedure but not eligible for or violating the TA procedure.

 KNOW MORE: Read more about this issue on opmas.dk under October 2017 news

Maintenance, Repair, or Overhaul (MRO) 

All non-EU operators should always ask an EU-based workshop to initiate a customs procedure called Inward Processing.

Inward Processing

The Inward Processing procedure allows an EU-based workshop to import the aircraft under the suspension of the customs duty and VAT with the purpose to perform work on non-EU owned or operated aircraft and eventually send an invoice without the local VAT. The procedure must be set up locally where the workshop is based. The workshop must contact local customs and ask them to initiate the Inward Processing for the specific aircraft. All international-minded workshops know about this procedure.

Sale and exportation 

The import VAT is valid as long as the aircraft is operated the same way as when imported. Below, we have stipulated three scenarios describing an eventual aircraft sale where the buyer is located within and outside the EU. It is assumed that the importing entity is a corporate owner, and the import VAT has been deducted. Please, feel free to ask us about any other scenarios, e.g., if the aircraft has been imported by an international airline or commercial operator with the 0% VAT exemption. 

Scenario I
If the aircraft is sold and delivered within the EU to an EU VAT-registered company, the best option is, most likely, to register for VAT and to deliver the aircraft in a different EU member state than the one of the buyers. This is done to arrange the transaction as an intra-Community acquisition, using the EU’s Reverse Charge rules, thus avoiding having to charge VAT based on a cash payment. The use of this scenario will require intensive and correct documentation of the delivery process. Please, always consult the VAT authority at the agreed place of delivery.

Scenario II
If the aircraft is sold and delivered within the EU to a private person or a non-VAT-registered company, the sale is subject to the local VAT in the EU member state where the delivery will take place. The seller must register for VAT at the place of delivery and charge the VAT from the buyer to later pay the VAT share over to the VAT authorities.

Scenario III
If the aircraft is sold to an entity outside the EU, it is automatically considered exported, and the aircraft is not VAT-free or VAT paid if entering the EU again. If the aircraft is not eligible to fly under the TA procedure, customs authorities in any EU member state will require a new importation and VAT payment when the aircraft eventually re-enters the EU.

Please, be aware that the EU VAT is not a one-time transaction. Any change of ownership will often mean that the VAT must be accounted for again.

 KNOW MORE: Short & Sweet mail no. 4 – What does VAT paid mean?

The best documentation is a customs exportation form from one of the EU member states in connection with the delivery of the aircraft to the new owner. Indirect documentation could be a copy of the executed sales agreement and proof that the aircraft have hereafter immediately left the EU. It is not mandatory to use the customs exportation procedure, but it is recommendable whenever possible.

A customs exportation is a separate customs procedure where an exportation form is issued by the local customs. The aircraft must be psychically present at the EU exportation location during the exportation process. The importation form should be removed from the aircraft when the aircraft has been exported.

Any export sale of an aircraft where the seller is a company domiciled within the EU should always ensure a customs exportation form to secure proper documentation to their local VAT authority.

Importation of returned goods

An exported aircraft can eventually re-enter the EU as returned goods, often referred to as grandfathering, if the aircraft returns within three years and has earlier been correctly exported using the customs exportation procedure. The returning aircraft will be imported free of customs duty, but a new owner will have to account for the correct VAT. Importation of return goods will require intensive and correct documentation, and the terms may vary pending on the EU member state chosen for the entry. The return goods procedure is often not used as any imported aircraft will be granted the 0% customs duty if the aircraft has a valid certificate of registration. Only an aircraft correctly exported and returned by the original owner within the three-year limit can take advantage of both the 0% customs duty and VAT. However, the 0% VAT requires the same usage of the aircraft, which means that the returning owner must be the very same entity as the original importing entity.

Differences between Temporary Admission and full importation

If you wish to know more about the differences between Temporary Admission and full importation, we suggest that you have a look at OPMAS’ publications, Short & Sweet articles, and Quick Guides on our website: www.opmas.dk. Here, we demonstrate the differences, limitations, potential liabilities, and no-goes of both procedures and introduce setups and operations that must continuously be handled correctly. Everything is listed point by point, showing short and precise what is and is not allowed.

 KNOW MORE: See our Quick Guides for deeper insight and comparison
 KNOW MORE: Short & Sweet mail no. 1 – Flying with the CEO within the EU
 KNOW MORE: Short & Sweet mail no. 2 – Flying commercially within the EU

The figures below are based on the Union Customs Code and various EU working papers. This is, in our opinion, the correct interpretation of the regulations, but all EU member states may not necessarily have implemented all regulations at present.

Most non-EU operators will practically have the same flying privileges using the TA procedure as given under full importation as the few limitations do not influence the typical flight pattern – See figure 3.

Figure 3: Advantages and disadvantages

Simplified pros and cons list for non-EU operators

Full importation includes many potential risks and liabilities without providing any advantages for the typical non-EU operator. An aircraft using the TA procedure can be used for any purpose, such as private, leisure, entertainment, business or corporate use, and commercial group charters without any consequence for the customs handling – See figure 4.

Figure 4: Risks and liabilities

Simplified pros and cons list for non-EU corporate operators

Flying to the UK in 2021

The EU27 and the UK have now signed the Brexit agreement, and the UK has left the EU ultimo 2020.

The post-Brexit situation

The UK has now left the EU and must be seen as a separate jurisdiction, just like Norway, Switzerland, Russia, the US, Canada, etc. Any UK outsider can fly into, e.g., London Biggin Hill, and leave again without any restrictions by following the simple TA rules for a customs entry. Internal UK flights can happen by complying with the same TA procedure and adhere to the same limitations and restrictions as earlier enforced within the EU28; when the EU included the UK. Please, remember not to confuse this with immigration and passport issues.

The EU has traditionally been more complicated than other jurisdictions due to the size of the area and the different opinions of the various member states. This is the reason why an aircraft owner or operator will often want to have some kind of approved customs paperwork when operating within the EU; in our opinion, this is not needed for the UK. The UK has, post-Brexit, fully adapted all aspects of the earlier EU28 TA procedure, allowing corporate flights and UK residents as passengers onboard internal flights. Consequently, there are no known grey zones when using the TA procedure on the British Isles. Following the same guidelines as before Brexit, mirrored to the UK as a jurisdiction instead of the EU, will keep the aircraft operation 100% compliant with the future UK post-Brexit rules.

The TA procedure is meant to be paperless, and the use of the UK Supporting Document (SD) is not mandatory, nor is it a free pass for flying without restrictions within the UK. A customs stamp on the SD is only valid until the aircraft exits the UK again; click here for more information about validity. Such a stamp only acknowledges that the aircraft has arrived in the UK, however it does not grant the aircraft a free circulation status for a six-month period, which is a common misunderstanding when using the TA procedure. The SD is only meant as a tool to document entries and exits, which can alternatively be handled easily by the flight logs; for further information, you can see the UK customs (HMRC) website where they state that the act of crossing the UK border counts as a customs declaration and the operator does not need to fill out any forms, including the SD.

When is a full importation needed in the UK?

A full importation into the UK will only be needed if the aircraft will be based, registered, or spends the majority of its time within the UK or is owned, operated, or registered by a UK entity.

We often hear the following questions from operators: “We have earlier chosen to fully import our aircraft into the EU – will we now have to fully import the same aircraft into the UK?” and “Shall we fully import a potential new 2021 aircraft into both the EU27 and the UK?”. The latter is often referred to as dual importation.

There is no logic behind fully importing an aircraft into every new economic zone or country to which the aircraft will fly. A full importation should only be performed within the EU27 or the UK if you absolutely must, as by doing so, you commit to only use the aircraft for correct economic activities for the next many years while operating the aircraft. Please, try to imagine the scenario when trying to comply with two or three different and conflicting sets of regulations on how to handle non-business use correctly, which will be the situation if, for example, a US part 91 operator chooses to import in both the EU27 and the UK. The FAA and IRS rules are often conflicting with the EU27 and UK rules on how to pay for non-business use and how much pay. An example: imputed income is commonly used by US operators but is not accepted within the EU27 and the UK as a compensation method. It is often simply not possible to comply correctly with the rules in all jurisdictions at the same time. The EU27 and the UK rules are aligned as they have the same EU28 origin but will eventually differ.

Is a full importation easy to process in the UK?

The answer is no. Only a UK entity can be the importing entity, and this entity must also be the real economic owner to deduct the UK VAT imposed during the importation, which is only possible if the aircraft is used for correct economic activities. 

We are, of course, always ready to discuss and check specific UK flights for TA compliance and guide you. The TA procedure will probably be the only viable option for many UK visitors.

Summary

Many non-EU operators can benefit from the TA procedure without any help from customs experts. We will, of course, be glad to assist in more complex cases, and you are always welcome to contact us and hear about your options at no charge. We will happily send you our input to any questions the same day, often within 1-2 hours.

We recommend using the TA procedure if possible. If your intended flights involve multiple legs within the EU and you wish to carry EU residents onboard, we provide a Secure Temporary Admission (STA) procedure where all risks are eliminated.

Many non-EU operators will have the same flying privileges using the TA procedure as given under full importation, as the limitations do not influence the typical flight pattern. In addition, the TA procedure offers the declarant more flexibility and extra advantages, such as unrestricted personal, family, and guest use without consequences and no tax and VAT liabilities. Please, see the list of benefits that the TA procedure provides below:

– No cash payment of the VAT or customs duties is required
– No VAT liability anywhere in the EU
– No customs duty liability anywhere in the EU
– No VAT and import registration are required in Denmark or anywhere in the EU
– No bond or security for import duties are required
– No ongoing economic activity or activity subject to VAT is required anywhere in the EU for the next many years
– No fiscal liability anywhere
– No tax or VAT consequences when visiting other EU member states – you can fly freely within the EU
– No need for formal exportation of the aircraft when eventually sold or when the lease or operating agreement is terminated (EURO 5-7,000 saved)
– No VAT consequences when a corporate aircraft is used for non-business activities (entertainment or personal use) by executives.
– No need for due diligence to verify the ownership structure of the aircraft
– No change of the current aircraft registration or setup of other contractual agreements, such as circular leasing structures, etc.
– Less record-keeping compared to a full importation based on an EU VAT and import registration

Many of the above points are often an issue when using full importation. To eliminate any doubt, our advice has always been to ask for a binding assessment ruling from the local authorities before an importation or admission. All cases consist of different details, and the EU member states may have different opinions. Having all case details approved by a competent customs authority in advance might take extra time but is meant to protect you from any unpleasant surprises.

If you have any questions or comments, please do not hesitate to email me directly at info@opmas.dk

Best regards
OPMAS

Please, do not hesitate to contact us if you want any further explanation
about your options, should you consider flying within the EU.

Please, do not hesitate to contact us if you want any further explanation about your options, should you consider flying within the EU.

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