Short & Sweet no. 8
Do not fall into the operator trap when flying within the EU and UK

• What is the operator trap?

• Get things right from the get-go

• What are the pitfalls?

• We recommend these aircraft registrations

• What is the only option?

We often receive an inquiry sounding something like this: “We just brought a new aircraft into our operation and will be flying to Europe. Please tell us how to do so properly”.

Behind this inquiry is often an operating company that have new clients as well as private and corporate operators where the aircraft ownership structure makes it difficult to operate the aircraft within Europe in accordance with the various customs regulations without vast consequences due to the aircraft ownership, operatorship, aircraft registration, and operating structure that does not fit into either of the two customs entry options, namely the Temporary Admission or full importation procedure.

We call the above situation the “operator trap” because reasonable solutions are sometimes simply not available. Our goal is to point out that the aircraft ownership, operatorship, aircraft registration, and operating structure are very important aspects to consider if an operator is planning to fly as a guest or eventually base an aircraft within the EU or the UK.

A quick background of the customs regulation
Any aircraft flying into the EU or the UK will fly under customs control using either Temporary Admission or full importation. There are no other options. The Temporary Admission procedure can only be used by EU or UK outsiders where the aircraft is owned (including any UBOs), operated, registered, and based outside the EU or the UK, leaving EU or UK insiders with only one option – full importation with a payment of all taxes. 

What are the pitfalls?
Please be aware that the setups described below can create an operator trap. If an owner or operator recognizes their setup in one or more of the points listed below, the alarm bell should ring, and the owner or operator might consider restructuring the setup before it is too late. Please remember that the list is not comprehensive and that the full importation and Temporary Admission procedures also have other preconditions and limitations that must be followed continuously.

No-gos for a full importation (Both EU + UK):

• The owner or importing entity is a shell company
• The owner or importing entity is incorporated or domiciled in exotic places or jurisdictions known as tax havens
• The owner or importing entity is not using the aircraft 100% in their pursuit of real economic activity *)
• The aircraft is not commercially operated

1. Some business activities, such as selected real estate activities, banking and finance, insurance, gaming, and holding companies, etc., are not subject to VAT, meaning that an importing entity with such activities cannot deduct the imposed import VAT during a full importation even though the aircraft is used 100% for real business activities within the mentioned areas

No-gos for Temporary Admission (EU): 

• The owner entity is incorporated or domiciled within the EU
• Any potential lessee is incorporated or domiciled within the EU
• Any potential UBO or main user has habitual residence within the EU
• The physical operator is incorporated or domiciled within the EU
• The aircraft registration has origin within the EU *) **)

1. A San Marino (T7) registration will work fine. San Marino is outside the EU (customs territory of the Union)
2. A Gibraltar (ZD or VP-G) registration will work fine. Gibraltar is outside the EU (customs territory of the Union)

No-gos for Temporary Admission (UK):

• The owner entity is incorporated or domiciled within the UK, including the Isle of Man *)
• Any potential lessee is incorporated or domiciled within the UK, including the Isle of Man
• Any potential UBO or main user has habitual residence within the UK, including the Isle of Man
• The physical operator is incorporated or domiciled within the UK, including the Isle of Man
• The aircraft registration has origin within the UK, including the Isle of Man **)

1. The Isle of Man is inside the customs territory of the UK
2. An Isle of Man registration will not work

Please see more about aircraft registrations here.

OPMAS has earlier made overview maps of the customs territory of the Union (EU) and the UK customs territory. And, just for the record, Jersey and Guernsey are not a part of the latter.

The only option left
If the aircraft will fly to the EU or the UK and not adapt the above recommendations, the only option left to fly legally would be to pay the local VAT, ranging from 17 to 27% within the EU and 20% in the UK. The amount is based on the current aircraft value.

Such a VAT payment could also be the tragic result if local customs find an aircraft non-compliant with Temporary Admission during ramp checks at both places. In addition, there is a risk that any eventual VAT payment would include customs duty and a fine.

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