Short & Sweet no. 1
Flying with the CEO

• What are the consequences and pitfalls of using Temporary Admission or full importation?

• How do you achieve the greatest flexibility for your flights?

• Does flying outside the EU affect EU importation or admission status?

This case scenario concerns an aircraft that is either fully imported or temporarily admitted into the EU by a non-EU corporation. The aircraft is primarily used for internal corporate travel—often flying the CEO or management team. Please note: other configurations may apply depending on ownership and use.

The customs aspect of flying within the EU

Any aircraft flying into the EU will fly under customs control using either Temporary Admission (TA) or full importation (FI). There are no other options. If the aircraft is not already fully imported, the aircraft will automatically be considered as flying under TA even though the owner or operator has not themselves taken any action to activate this procedure or realized that their aircraft is flying under TA. The TA procedure is thus always required for non-EU imported aircraft, even for flights with only one stop within the EU. Here, non-compliance with TA will most likely activate a direct payment of the VAT (ranging from 17-27%) and customs duty (ranging from 2.7-7.7%) for the owner or operator. The TA procedure can only be used by EU outsiders where the aircraft is owned (including any UBOs), operated, registered, and based outside the EU, leaving EU insiders only one option: full importation. EU outsiders can, of course, choose to use full importation instead of TA if they find it beneficial. However, both options can be used commercially, corporately, or privately if applied correctly.

It is often tricky for laypeople to see the differences between the two entry options, but the flexibility and long-term consequences are indeed very different, and certain preconditions must be considered when opting for TA or FI. Non-compliance with TA or FI procedures will likely activate a direct VAT payment (15-27%) and customs duty (2.7-7.7%). Please see the topics and comments below.

General business and corporate use
FI: In general, business use is not an issue if the usage directly supports the approved economic activity of the importing entity.
TA: If no tickets are sold, the aircraft can be used for any purpose.

What if the aircraft is used for commuting by the CEO?
FI: Flights for commuting, entertainment, hobbies, personal recreational travel, or any purpose that furthers a business other than that of the importing entity cannot be considered business or corporate use. These uses may trigger VAT payment from the original importation. However, non-business use can be justified if the CEO pays appropriate compensation for such flights.
TA: If no tickets are sold, the aircraft can be used for any purpose.

How can the CEO pay compensation for non-business use?
FI: The CEO must pay the importing entity directly for the flights at a market rate. The use of imputed income will not suffice, as the payment is not effectively made to the importing entity.
TA: Imputed income, timeshare, or any other form of payment is accepted as long as it does not constitute payment for a ticket.

Is EU importation or admission affected when the aircraft flies outside the EU?
FI: Yes. A non-business or non-corporate leg flown, e.g. in the US, will impact EU VAT handling during an audit by the EU VAT authorities. A fully EU-imported aircraft is considered “owned by the EU jurisdiction” in a VAT context. EU regulations must therefore be observed fully to pass an EU audit, even when operating outside the EU.
TA: No. Only flights within the EU are relevant.

Legal background for Temporary Admission
The Istanbul Convention from 1990, regulating the worldwide usage of TA, is not very precise, and the EU Commission has been and is continuously publishing various working papers and guidelines to clarify the correct understanding of TA and its usage in the EU. The 2014 working paper from the Union Customs Code Committee (available in English, French, and German) is especially important. Operators should always be aware that these documents are not legally binding for EU member states. Interpretations may vary between member states, which is why it is crucial to have a competent customs agency provide guidance based on the specific setup.

Important things to know about full importation
Operators should be aware that full importation includes a potential VAT and tax liability, requires continuous correct worldwide economic activity, and correct handling of any potential worldwide non-business use and/or non-commercial use. These requirements do not apply under TA. The statute of limitations is five years for full importation, and the aircraft’s use must stay fully compliant with current EU regulations worldwide throughout this period.

How can we help?
If you have questions about the above, please do not hesitate to contact us.