Full importation: is the term “predominately used for business” accepted by various EU VAT authorities?
The survey was made before Brexit in 2020, which is why the UK, and the Isle of Man are included. The UK part is still relevant for aircraft flying to the UK under a UK full importation.
It is a common misunderstanding that it is acceptable to deduct all of the import VAT, even if the aircraft is only used predominately for business purposes. Therefore, we have commissioned a verification survey in various EU member states known for aircraft importation.
The general rule is that the import VAT can be deducted 100% only if the aircraft is used 100% for correct economic activities. Any persons 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 the non-business part of the imposed import VAT back to the VAT authorities. The use of imputed income to compensate any private, personal, or entertainment use of a corporate aircraft will not exclude an EU VAT claim.
The result
The result is as expected and the feedback unanimous: The term “predominantly used for business” is not accepted anywhere, and it is simply not allowed to deduct import VAT 100% if the aircraft is used for any uncompensated private, personal, or entertainment use. The only twist is that two EU member states allow the VAT to be deducted 100% up front if the importing entity’s VAT declaration is later corrected to exclude the non-business part, which must eventually be paid back to the VAT authorities.
Figure 1: Corporate aircraft imported in various EU member states
How much may an aircraft be used privately if the importing entity has deducted all the import VAT paid?
| Questions | Denmark | Germany | UK | Isle of Man | Ireland | The Netherlands | Malta |
| Do local VAT authorities accept that the VAT is deducted 100% if the aircraft is used up to 10% for private use by the management or owner’s family? | No | Yes 1) | No | No | No | Yes 1) | No |
| Do local VAT authorities accept that the VAT is deducted 100% if the aircraft is used up to 20% for private use by the management or owner’s family? | No | Yes 1) | No | No | No | Yes 1) | No |
| Do local VAT authorities accept that the VAT is deducted 100% if the aircraft is used more than 20% for private use by the management or owner’s family? | No | Yes 1) | No | No | No | Yes 1) | No |
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1) Any non-business part of the import VAT must be paid back to the local VAT authorities. The results are based on answers from international consulting firms in the respective countries. |
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The feedbacks are based on the following premises:
– The VAT imposed on the importation has been deducted 100% by the importing entity.
– The aircraft is used predominantly for business purposes, meaning for correct economic activities.
– The importing entity is not compensated by the person using the aircraft for private purposes.
– Private use could be, for instance, private holidays, family trips, or family/friends flying along on a business trip but without any legitimate business purpose, etc.
– The ratio of the private usage is known at the time of importation.
– The corporate aircraft is owned and operated by the importing entity.
Important things to know about full importation
Operators should be aware that full importation includes a potential VAT and tax liability, requires onwards continuous correct worldwide economic activity as well as correct handling of any potential worldwide non-business use and or non-commercial use; requirements that the TA procedure does not have. The statute of limitations is five years for full importation, and the use of the aircraft must worldwide stay fully compliant with current EU regulations until the end of this period.
How can we help?
If you have questions about the above, please do not hesitate to contact us.