Aircraft importation in the EU: what does various EU VAT authorities require to accept an aircraft as VAT exempt?
- The result
- OXFAM tax haven states lead
- Figure: Aircraft used by an exempt international airline imported in various EU-member states
- Many advantages with Temporary Admission
- What to do for an EU based entity or aircraft registered in the EU customs territory
- Always ask first
A European Court of Justice (ECJ) judgement from 2012 often referred to as “the Finnish case” have set the standard in 2012. The judgement said that the aircraft must be used by an accepted international airline – but how has this term “used” been interpreted. We have therefore commissioned a verification survey in various EU member states known for aircraft importation. The survey has been made by an international consulting firm.
The result is muddy
The result is muddy as could be expected. All EU member states basically agree that an AOC is mandatory, and the majority of all traffic must be international. But when it comes to the “usage” requirements for a specific aircraft the result varies. The mentioned judgement did not mention anything about a requirement for commercial usage, but this requirement is specified in a later EU working paper 762 from the European Commission VAT Committee and their published guidelines, so we expect that this usage issue eventually will end up at the ECJ for a new interpretation – as such a huge variation in the preconditions is not acceptable in the long run.
OXFAM tax haven states lead
The two OXFAM tax havens states Ireland and the Netherlands have the lowest thresholds for an aircraft to be accepted as VAT-exempt. The Netherlands also accept aircraft as VAT-exempt for certain company groups even though no AOC/charter certificate has been acquired. The latter do not have any foundation in the mentioned ECJ judgement or EU working paper and is clearly illegal in our opinion. Again, we see these low thresholds as an abnormality that the EU Commission will not accept in the long run. If you opt for procedures offered in these EU tax havens you MUST ask for a written approval available from all authorities in all member states.
Figure: Aircraft used by an exempt international airline imported in various EU-member states
What are the local preconditions for respectively the importer and the specific aircraft?
|Questions||Denmark||Germany||UK||Isle of Man||Ireland||The Netherlands||Malta|
|Must importer be the holder of an AOC certificate?||Yes||Yes||AOC is advisable||Yes||Yes||Yes||Yes|
|What is the minimum required international traffic for an importer in order be accepted as VAT-exempt?||55%||>50%
|What is the minimum continuously required charter/commercial use of a specific aircraft in order to have the aircraft accepted as VAT-exempt?||100%
(This is the answer received from an international consulting firm however this may be wrong)
|None – only the complete airline structure matters||>50%
|100%||None||None, if aircraft is defined within TARIC code 8802||>50%
(Chiefly). However, no specific percentages have been set
|This table contains the results of our examination in seven EU-countries of how an aircraft operator can be accepted as an international airline and thus be VAT-exempt during an aircraft importation. The answers are based on the answers received from an international consulting firm in the respective countries. All the above answers do only relate to VAT – not the customs duty part.|
Many advantages with Temporary Admission
Most non-EU operators already use Temporary Admission. Full importation includes a lot of potential VAT/tax liability which nobody wants, and which typically requires 5 years of correct economic activity and 7 years of recordkeeping. All these factors are eliminated with the use of Temporary Admission and most non-EU operators will in fact have the same flying privileges as under full importation. Temporary Admission will give the declarant more flexibility and extra advantages such as unrestricted personal, family and guest usage also for EU-resident passengers.
What to do for an EU based entity or aircraft registered in the EU customs territory
The Temporary Admission procedure cannot be used by EU based entities or for aircraft registered in the EU customs territory. The only option is to use full importation. It is important to analyze your usage of the aircraft and eventually consult your local VAT adviser for a verification of the exact usage.
Always ask first
Our advice has always been to ask the local tax authorities for a binding advance tax ruling prior to any importation/admission in order to eliminate any doubt about the outcome. All cases have different details and a binding advance tax ruling will also consider all new European Court of Justice (ECJ) judgements. Even if you have a fully working set-up, we believe, an importation/admission without a binding advance tax ruling from the EU member state into which the aircraft is to be imported, is too great a risk to take.
This update relates only to a full importation into the EU where the aircraft is exempt as being used for commercial flights with an AOC/Charter certificate. It does not apply to Temporary Admission with total relief from import duties or where full importation is used combined with reclaiming the VAT imposed during the importation