COMMERCIAL AND CORPORATE FLYING WITHIN THE EUROPEAN UNION
Short & Sweet no. 8
Do not fall into the operator trap when flying within the EU and UK
- What is the operator trap?
- Do not get things wrong from the get-go
- What are the pitfalls?
As we anticipate that most aircraft will eventually also fly to the UK or that every owner at least wants the opportunity to fly freely within Europe and not just the EU, we have added the UK to this description.
We frequently receive the following inquiry: “We have just brought a new aircraft into our operation and will be flying to Europe, please tell us how to do so properly”.
The statement above is frequently asked by professional managements or operating companies that have a new client, or private or corporate operators where the aircraft ownership structure makes it very difficult to operate the aircraft within Europe in accordance with the various customs regulations without huge consequences simply because the aircraft ownership, management, and operating structure do 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, management, and operating structure are very important aspects to consider if an operator is planning to fly 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 the Temporary Admission procedure or a 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.
Please, be aware that the setups described below can create an operator trap. If an owner or operator can recognize their setup in one or more of the listed points below, the alarm bell should go off, and the owner or operator should maybe consider re-structuring 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 which must continuously be followed.
- The owner/importing entity is a shell company
- The owner/importing entity is incorporated or domiciled in exotic places, or jurisdictions known as tax havens
- The owner/importing entity is not using the aircraft 100% in their pursuit of real economic activity *
- The aircraft is not commercially operated
- The owner entity is incorporated or domiciled within the EU or the UK, including the Isle of Man **
- Any potential lessee is incorporated or domiciled within the EU or the UK, including the Isle of Man
- Any potential UBO or main user has habitual residence within the EU or the UK, including the Isle of Man
- The physical operator is incorporated or domiciled within the EU or the UK, including the Isle of Man
- The aircraft registration has origin within the EU or the UK, including the Isle of Man ***
- 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 importation VAT during a full importation even though the aircraft is used 100% for real business activities within the mentioned areas
- The Isle of Man is inside the customs territory of the UK
- An Isle of Man (M) registration will not work. A San Marino (T7) registration will work fine
The only option left
If the aircraft will operate within the EU, the only option left could be to pay the EU VAT, ranging from 15 to 27% of the aircraft’s value. This could also be the tragic result if customs find something wrong during a ramp check.
How can we help?
If you have questions about the above, please do not hesitate to contact us.
List of all OPMAS
Short & Sweet mails:
No. 18 – Exporting an aircraft from the EU
Jun 2023 FI
No. 5 – What about private use
of corporate aircraft?
May 2021 TA FI
No. 4 – What does ‘VAT paid’ mean?
Mar 2021 FI
No. 2 – Flying commercially
within the EU
Feb 2021 TA FI
No. 1 – Flying with the
Nov 2020 TA FI