COMMERCIAL AND CORPORATE FLYING WITHIN THE EUROPEAN UNION
Short & Sweet no. 3
Is a full importation needed in both the UK and the EU27?
Should an aircraft be imported in both the UK and the EU?
Is dual importation a trap or a flexible approach?
What are the gains and the risks?
This Dual Importation Issue describes scenarios where an aircraft is brought into EU27/UK by an operator who uses the aircraft for corporate and business purposes (such as part 91).
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”.
When is a single or a dual importation needed?
There is no logic behind fully importing an aircraft into every new economic zone or country that the aircraft will fly to. A full importation should only be performed within the EU27 or the UK if you absolutely have to as you commit to only use the aircraft for correct economic activity for the next many years while operating the aircraft.
A full importation into the UK will only be needed if the aircraft is owned, operated, or registered by a UK entity, will be based, registered, or spends the majority of its time within the UK. The same set of rules goes for the EU27. The gain of a single or a dual full importation is, of course, that the aircraft can move more freely within the customs zone(s) where it has been imported. But what would a dual importation entail?
The risk areas
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 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 UK rules are aligned as they have the same EU28 origin but will eventually differ over the years.
The Paradise Papers have also showcased that it has a huge consequence with a risk of repayment of the imposed importation VAT if the VAT is deducted and deferred 100% even though the aircraft is only used predominately for business purposes.
A dual importation = dual VAT liability
EU27 and UK authorities will include all worldwide flights during an eventual audit of an imported aircraft. This means that any non-business legs flown locally in the US by a US Part 91 operator will actually have an impact on the VAT assessment in both the EU27 and the UK if these flights are not handled correctly according to the current VAT rules in both the EU27 and the UK. The consequence could be that you fail once but have to pay the VAT twice with repayments to both the EU27 and the UK for the same event even though the aircraft did not fly into the EU27 or the UK. The average EU27 and UK VAT rate is around 20% of the aircraft’s value, so we are talking about jeopardizing up to 40% of the aircraft’s value.
It is also a common misunderstanding that a full importation is a one-off transaction. Any wrong use and handling of the VAT can have a huge economic impact with a future VAT and tax liability for up to five to seven years after the importation date and with a potential repayment of the imposed VAT whenever importation VAT is deducted and deferred wrongly. A full importation must continuously be monitored and maintained by competent, internal staff on a trip-by-trip basis in order to be compliant with the current and any future regulations in all the involved jurisdictions. So, please forget about a full importation being a one-off thing.
A shortcut to a dual importation; use the Returned Goods Relief
The Returned Goods Relief rules (RGR) might be a way to obtain a dual importation by grandfathering and porting an existing aircraft importation into the opposite zone. The end result of such a reimportation process will generate a new import document for the opposite zone without payment of the customs duty and the Value Added Tax (VAT), and the use of the RGR does not create a dual VAT liability. Please, ask us to verify your case’s eligibility to use RGR.
What to do?
We suggest that you always use the Temporary Admission procedure if possible. However, an operator must always be sure that the preconditions for a Temporary Admission are met and that the limitations are equally understood.
How can we help?
If you have questions about the above, please do not hesitate to contact us. We offer a cost-free introduction and analysis of the owner, user, and operator scenario to find the best option for you when flying within the EU. Please, feel free to contact us at any time.
Selected links covering this issue
A quick overview of aircraft importation and admission issues
List of all OPMAS
Short & Sweet mails:
No. 16 – Which customs procedures can be used for parking an aircraft within the EU?
Jan 2023 TA FI
No. 15 – Liability and risk elements associated with EU importation and admission
Oct 2022 TA FI
No. 14 – Temporary Admission is easy and flexible if you know how to use it
Aug 2022 TA
No. 13 – Importation impacts when traveling the world in corporate aircraft
Jun 2022 FI
No. 12 – How to get the 0% airline VAT exemption meant for commercial operators
May 2022 FI
No. 11 – Part 2: what to do when arriving in the EU using the Temporary Admission procedure?
Mar 2022 TA
No. 10 – How to handle aircraft maintenance correct in a customs context
Feb 2022 TA FI
No. 9 – Part 1: what to do when arriving in the EU using the Temporary Admission procedure?
Dec 2021 TA
No. 8 – Do not fall into the operator trap when flying within the EU and UK
Oct 2021 TA FI
No. 7 – Which offshore aircraft registrations can be used with Temporary Admissions when flying within the EU and UK?
Sep 2021 TA
No. 6 – Flying with EU-resident persons onboard when using Temporary Admission
Aug 2021 TA
No. 5 – What about private use
of corporate aircraft?
May 2021 TA FI
No. 4 – What does ‘VAT paid’ mean?
Mar 2021 FI
No. 3 – Is a full importation needed
in both the UK and the EU27?
Mar 2021 FI
No. 2 – Flying commercially
within the EU
Feb 2021 TA FI
No. 1 – Flying with the
CEO within the EU
Nov 2020 TA FI