Short & Sweet no. 1
Flying with the CEO

• What are the consequences and the pitfalls?

• How to get the greatest flexibility?

The Flying with the CEO case describes a scenario where an aircraft is imported or admitted by a non-EU corporation that operates and uses the aircraft mainly for its own business, flying with the CEO or management. Please remember that other scenarios that influence the situation are in play.

The customs aspect of flying within the EU
Any aircraft flying into the EU will operate under customs control using either the Temporary Admission procedure (TA) or full importation (FI). There are no other options. 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 with 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 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 the 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 a problem if the usage is directly in pursuit of 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: Any flight where the purpose is commuting, entertainment, hobby, and personal recreational travel, or any travel in furtherance of another business than the importing entity’s affairs, cannot be considered business or corporate use. The mentioned usage can cause payment of the VAT imposed during the importation, but any non-business use can be justified if the CEO pays the correct compensation for the non-business flights.
TA: If no tickets are sold, the aircraft can be used for any purpose.

How can the CEO pay compensation if the aircraft is used 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 work as the payment is not effectively made to the importing entity.
TA: Use of imputed income, timeshare, or any other form of payment is accepted as long as it does not function as payment for a ticket.

Is the 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 the EU VAT handling during an audit by the EU VAT authorities.
TA: No. Only flights within the EU matter.

The Temporary Admission procedure has become a very well-defined customs procedure
Please note that TA can be used to fly privately, corporately, and commercially within the EU without any problems and with EU-resident persons onboard if applied correctly. Since 2014, the TA procedure has become a very well-defined customs procedure, especially for corporate and commercial aviation. This is thanks to the huge effort from, e.g., the EU Commission and NBAA.

Important things to know about Temporary Admission
Operators should be aware that different interpretations of the TA procedure exist between member states. Thus, it is important to have a competent customs agency outline the correct use and understanding based on the specific setup. The problem with local interpretations is often related to flights within France, Spain, Portugal, Italy, Greece, and less often other places. Click here to see a list of the known grey zone areas where different interpretations of the TA procedure exist and where an operator often needs guidance to use TA safely. None of the grey zone areas create problems for using TA if correctly handled and documented.

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.

Selected links covering this issue
Survey 1: About private use, is non-business use accepted?
Survey 3: About private use, does the flight pattern/geography and size/type of compensation matter?