Short & Sweet no. 5
What about private use of corporate aircraft?

Added May 2021
  • Can a corporate aircraft be used for private purposes without VAT consequences?

  • What does the term predominately used for business mean?

  • What are the definitions of private use and business use?

The case below describes a scenario where the aircraft is imported and admitted by a non-EU corporation that operates and uses the aircraft for its own business. We have often, in a VAT context, seen the use of the term predominately used for businesswhich should somehow indicate that a certain amount of private use of a corporate aircraft is acceptable without any VAT consequences but is this correct? Please, remember that many other scenarios are in play that also influences the situation.

Introduction
Any aircraft flying into the EU will fly under customs control using either the Temporary Admission (TA) procedure 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 customs territory of the Union, while the FI procedure can be used by anyone. Consequently, full importation is the only option for EU corporations.

It is often tricky for non-experts to see the differences between the two entry options, but the flexibility and long-term consequences are very different, and there are certain conditions that must be taken into consideration when opting for either the TA or FI procedure. Non-compliance with the TA or FI procedure will most likely activate a direct payment of the VAT (ranging 17-27%) and customs duty (2.7-7.7%).

Can a corporate aircraft be predominately used for business without VAT consequences?

FI: No, not unless proper VAT corrections are made.
TA: Yes, this is not a problem. Here, 100% private use is also acceptable.

What is the general definition of business use?
This is typically activities such as:
– Any business travel in furtherance of the corporation’s affairs
– Flying with the management and staff to support the economic activities of the corporation

What is the general definition of private use?
This is typically activities such as:
– Entertainment of clients
– Staff commuting
– Hobby activities of shareholders, principal, management, etc.
– Any personal, recreational, or amusement travel
– Any travel in furtherance of another business than the importing entity’s affairs


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