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The short story about full importation

The essence of full importation

Updated November 2023
Contents
Use the colored buttons for a specific overview of the different importation options.

Who can use full importation?
All private individuals and corporations, regardless of nationality and residence, can use full importation (hereafter importation) and act as the importing entity. Options 1-3 described below are available in all 27 EU member states, but the practical handling and preconditions are often different. Importation is mandatory for EU insiders, which means that the aircraft is either owned, registered, operated, or based and mainly used within the EU (just one criterion must be fulfilled). On the other hand, importation is optional for EU outsiders, where the aircraft is both owned, registered, operated, and based outside the EU (all criteria must be fulfilled). The only alternative for EU outsiders is the Temporary Admission (TA) procedure.

Advantages
An importation will bring the aircraft into free circulation, which means that the aircraft can fly freely within the EU. A fixed EU base without restrictions is also permitted, as all the needed EU documentation will be onboard the aircraft, ensuring trouble-free flying no matter where the aircraft is registered, travels, or whom it carries.

Disadvantages
There are many preconditions, potential liabilities, and consequences related to using full importation, and numerous elements to check and secure before choosing so. The most important matter is whether you will be able and willing to comply and, after that, set up a system to document and ensure compliance with the preconditions while also continuously detecting any changes that may happen.

There are 3 options of importation
Option 1: Non-business aircraft owners and users – fully paying the import VAT.
Option 2
: Business aircraft owners, such as Part 91 – deducting the import VAT.
Option 3
: International charter operators and airlines, such as a Part 135 holder or an AOC holder – the import VAT is exempted (0%).

Use the colored buttons to get a specific view on the different options of importation.

ALL

How handling of the VAT works
12 The local VAT is imposed during the importation. Local rates are between 15-27% depending on the EU member state.
3 The VAT is exempted (0%) if the preconditions for the airline and the specific aircraft are continuously met.

How the handling of the customs works
123 The customs duty is equal to zero (0%) if the aircraft has a civil registration, meaning nobody should pay the customs duty.

When to import?
123 EU insiders must import the aircraft at the first port of entry within the EU unless some kind of approved customs transit or customs warehousing is activated.
123 EU insiders will, for instance, not need to import an aircraft as long as the aircraft is solely operated outside the EU.
123 EU outsiders do not necessarily have to import the aircraft as long as they are not violating the TA procedure when flying within the EU.

Preconditions for the VAT handling
1 None as long as the VAT is fully paid (a refund is not possible).
2 According to guidelines published in working paper 762 from the European Commission VAT Committee, the real economic owner must be the importing entity on record. Some EU member states still allow a lessee to be the importing entity and to deduct any VAT imposed during the importation.
2 The importing entity must use the aircraft for business purposes or as a business.
2 The importing entity must solely use the aircraft for their commercial operation, but the precise definition of “commercial operation” can vary from one EU member state to another.
3 The importing entity must be an international charter operator approved as being VAT-exempt.
3 The importing entity must solely use the aircraft for their commercial operation, but the precise definition of “commercial operation” can vary from one EU member state to another.
123 If the importing entity does not meet the preconditions for option 2+3, option 1 must be used.

The definition of correct use
2 The aircraft must be used solely for correct business use, often called ‘economic activities’. These activities represent general business use, but different exceptions occur.
2 The following activities are not considered correct economic activities: selected real estate activities, banking/finance, insurance, gaming and holding companies, etc. The list is not complete, and approved activity can often change as it depends on judgments and interpretations from the European Court of Justice (ECJ).
2 Commercial charter activity by an international charter operator is not correct business use as international charter is, in principle, VAT-exempt.
2 Any non-business use is not correct business use.
3 The aircraft must be owned or leased. A managed aircraft is considered used by the owner, not the international charter. Operators can, therefore, not be granted a VAT exemption.
3 According to guidelines published in working paper 758 from the European Commission VAT Committee, the aircraft must solely be used for commercial purposes.

The definition of non-business use
2 All non-business use must be handled correctly, and the importing entity must be compensated directly by receiving a direct payment based on market rates.
2 Imputed income as compensation is not acceptable as the option is not a direct payment to the importing entity.
2 The US SIFL compensation rates will often not solve the compensation problem as these values are often too low to be considered market rate.
2 The following activities are considered non-business use: entertainment, hobby, personal/recreational travel, commuting, and travel in furtherance of another business than the importing entity.
2 Most EU member states will include all worldwide non-business use of the aircraft during an audit. This means that any non-business legs flown locally in the US by an American Part 91 operator will impact the EU VAT assessment.
2 The term ‘predominately used for business’ is often used by tax havens but is not officially recognized by any VAT and tax authorities, nor by the EU Commission.
2 The importing entity is not allowed to deduct 100% of the import VAT up-front if the importing entity is anticipating non-business use or has a history of non-business use. This will rule out the use of the Capital Goods Scheme for most importing entities.
2 If the importing entity anticipates 15% non-business use without proper compensation, the importing entity should only deduct 85% of the import VAT. The importing entity has an obligation to adjust and report any increased non-business use.
3 According to guidelines published in working paper 758 from the European Commission VAT Committee, any owner flights worldwide must be invoiced at a market rate.

Demand for documentation of the correct aircraft usage
1 There is no demand for any documentation.
23 The importing entity must be able to document that all worldwide trips are used for the correct activity for the first five years after the importation.
2 The importing entity must be able to document the correct business use of the aircraft per flight and provide specific use data for all passengers onboard, such as a) list of passengers on the aircraft, b) purpose of flight per passenger, c) documentation for any stops enroute, such as the purpose of a meeting, including a list of all participants (also external participants) and emails to document the actual purpose of the meeting.
3 The importing entity must be able to document the correct commercial use of the aircraft by presenting flight logs and trip invoices for charters.

Validity of the full importation
12 The importation is generally valid as long the aircraft is owned by the importing entity. A sale to an EU-based buyer will require a sale handled correctly within the EU to retain the free circulation status.
3 The importation is generally valid as long as the aircraft is operated the same way by an international airline. A change will require a new importation or a reassessment of the VAT to retain the free circulation status.
23 If the preconditions for the importation are no longer fulfilled, the importing entity must immediately export the aircraft or ask for a reassessment, which involves a full payment of the correct VAT.
123 The importation will be considered void if the aircraft is leaving the customs territory of the Union for a continuous period exceeding three years.

Statute of limitations
123 Please be aware that importation includes a potential VAT and tax liability and requires onwards continuous correct handling of any worldwide non-business use, typically five years of correct economic activity as well as seven years of record-keeping, but only as long as the aircraft is owned by the same entity.

Traffic rights (charter permits)
3 Non-EU-based charter operators may need to obtain traffic rights on some internal EU legs, but this is independent of the TA or full importation status. Any fully EU-imported aircraft must also obtain the same traffic rights. A fully EU-imported aircraft instead of a TA aircraft will not improve the situation. Full importation does not grant an aircraft better traffic rights than aircraft flying under TA or EU-registered aircraft.

How handling of the VAT works
1 The local VAT is imposed during the importation. Local rates are between 15-27% depending on the EU member state.

How the handling of the customs works
1 The customs duty is equal to zero (0%) if the aircraft has a civil registration, meaning nobody should pay the customs duty.

When to import?
1 EU insiders must import the aircraft at the first port of entry within the EU unless some kind of approved customs transit or customs warehousing is activated.
1 EU insiders will, for instance, not need to import an aircraft as long as the aircraft is solely operated outside the EU.
1 EU outsiders do not necessarily have to import the aircraft as long as they are not violating the TA procedure when flying within the EU.

Preconditions for the VAT handling
1 None as long as the VAT is fully paid (a refund is not possible).
1 If the importing entity does not meet the preconditions for option 2+3, option 1 must be used.

Demand for documentation of the correct aircraft usage
1 There is no demand for any documentation.

Validity of the full importation
1 The importation is generally valid as long the aircraft is owned by the importing entity. A sale to an EU-based buyer will require a sale handled correctly within the EU to retain the free circulation status.
1 The importation will be considered void if the aircraft is leaving the customs territory of the Union for a continuous period exceeding three years.

Statute of limitations
1 Please be aware that importation includes a potential VAT and tax liability and requires onwards continuous correct handling of any worldwide non-business use, typically five years of correct economic activity as well as seven years of record-keeping, but only as long as the aircraft is owned by the same entity.

How handling of the VAT works
2 The local VAT is imposed during the importation. Local rates are between 15-27% depending on the EU member state.

How the handling of the customs works
2 The customs duty is equal to zero (0%) if the aircraft has a civil registration, meaning nobody should pay the customs duty.

When to import?
2 EU insiders must import the aircraft at the first port of entry within the EU unless some kind of approved customs transit or customs warehousing is activated.
2 EU insiders will, for instance, not need to import an aircraft as long as the aircraft is solely operated outside the EU.
2 EU outsiders do not necessarily have to import the aircraft as long as they are not violating the TA procedure when flying within the EU.

Preconditions for the VAT handling
2 According to guidelines published in working paper 762 from the European Commission VAT Committee, the real economic owner must be the importing entity on record. Some EU member states still allow a lessee to be the importing entity and to deduct any VAT imposed during the importation.
2 The importing entity must use the aircraft for business purposes or as a business.
2 The importing entity is only allowed to deduct the VAT 100% if the aircraft is used 100% for correct business use on a continuous basis.
2 If the importing entity does not meet the preconditions for option 2+3, option 1 must be used.

The definition of correct use
2 The aircraft must be used solely for correct business use, often called ‘economic activities’. These activities represent general business use, but different exceptions occur.
2 The following activities are not considered correct economic activities: selected real estate activities, banking/finance, insurance, gaming and holding companies, etc. The list is not complete, and approved activity can often change as it depends on judgments and interpretations from the European Court of Justice (ECJ).
2 Commercial charter activity by an international charter operator is not correct business use as international charter is, in principle, VAT-exempt.
2 Any non-business use is not correct business use.

The definition of non-business use
2 All non-business use must be handled correctly, and the importing entity must be compensated directly by receiving a direct payment based on market rates.
2 Imputed income as compensation is not acceptable as the option is not a direct payment to the importing entity.
2 The US SIFL compensation rates will often not solve the compensation problem as these values are often too low to be considered market rate.
2 The following activities are considered non-business use: entertainment, hobby, personal/recreational travel, commuting, and travel in furtherance of another business than the importing entity.
2 Most EU member states will include all worldwide non-business use of the aircraft during an audit. This means that any non-business legs flown locally in the US by an American Part 91 operator will impact the EU VAT assessment.
2 The term ‘predominately used for business’ is often used by tax havens but is not officially recognized by any VAT and tax authorities, nor by the EU Commission.
2 The importing entity is not allowed to deduct 100% of the import VAT up-front if the importing entity is anticipating non-business use or has a history of non-business use. This will rule out the use of the Capital Goods Scheme for most importing entities.
2 If the importing entity anticipates 15% non-business use without proper compensation, the importing entity should only deduct 85% of the import VAT. The importing entity has an obligation to adjust and report any increased non-business use.

Demand for documentation of the correct aircraft usage
2 The importing entity must be able to document that all worldwide trips are used for the correct activity for the first five years after the importation.
2 The importing entity must be able to document the correct business use of the aircraft per flight and provide specific use data for all passengers onboard, such as a) list of passengers on the aircraft, b) purpose of flight per passenger, c) documentation for any stops enroute, such as the purpose of a meeting, including a list of all participants (also external participants) and emails to document the actual purpose of the meeting.

Validity of the full importation
2 The importation is generally valid as long the aircraft is owned by the importing entity. A sale to an EU-based buyer will require a sale handled correctly within the EU to retain the free circulation status.
2 If the preconditions for the importation are no longer fulfilled, the importing entity must immediately export the aircraft or ask for a reassessment, which involves a full payment of the correct VAT.
2 The importation will be considered void if the aircraft is leaving the customs territory of the Union for a continuous period exceeding three years.

Statute of limitations
2 Please be aware that importation includes a potential VAT and tax liability and requires onwards continuous correct handling of any worldwide non-business use, typically five years of correct economic activity as well as seven years of record-keeping, but only as long as the aircraft is owned by the same entity.

How handling of the VAT works
3 The VAT is exempted (0%) if the preconditions for the airline and the specific aircraft are continuously met.

How the handling of the customs works
3 The customs duty is equal to zero (0%) if the aircraft has a civil registration, meaning nobody should pay the customs duty.

When to import?
3 EU insiders must import the aircraft at the first port of entry within the EU unless some kind of approved customs transit or customs warehousing is activated.
3 EU insiders will, for instance, not need to import an aircraft as long as the aircraft is solely operated outside the EU.
3 EU outsiders do not necessarily have to import the aircraft as long as they are not violating the TA procedure when flying within the EU.

Preconditions for the VAT handling
3 The importing entity must be an international charter operator approved as being VAT-exempt.
3 The importing entity must solely use the aircraft for their commercial operation, but the precise definition of “commercial operation” can vary from one EU member state to another.
3 If the importing entity does not meet the preconditions for option 2+3, option 1 must be used.

The definition of correct use 
3 The aircraft must be owned or leased. A managed aircraft is considered used by the owner, not the international charter. Operators can, therefore, not be granted a VAT exemption.
3 According to guidelines published in working paper 758 from the European Commission VAT Committee, the aircraft must solely be used for commercial purposes.

The definition of non-business use
3 According to guidelines published in working paper 758 from the European Commission VAT Committee, any owner flights worldwide must be invoiced at a market rate.

Demand for documentation of the correct aircraft usage
3 The importing entity must be able to document that all worldwide trips are used for the correct activity for the first five years after the importation.
3 The importing entity must be able to document the correct commercial use of the aircraft by presenting flight logs and trip invoices for charters.

Validity of the full importation
3 The importation is generally valid as long as the aircraft is operated the same way by an international airline. A change will require a new importation or a reassessment of the VAT to retain the free circulation status.
3 If the preconditions for the importation are no longer fulfilled, the importing entity must immediately export the aircraft or ask for a reassessment, which involves a full payment of the correct VAT.
3 The importation will be considered void if the aircraft is leaving the customs territory of the Union for a continuous period exceeding three years.

Statute of limitations
3 Please be aware that importation includes a potential VAT and tax liability and requires onwards continuous correct handling of any worldwide non-business use, typically five years of correct economic activity as well as seven years of record-keeping, but only as long as the aircraft is owned by the same entity.

Traffic rights (charter permits)
3 Non-EU-based charter operators may need to obtain traffic rights on some internal EU legs, but this is independent of the TA or full importation status. Any fully EU-imported aircraft must also obtain the same traffic rights. A fully EU-imported aircraft instead of a TA aircraft will not improve the situation. Full importation does not grant an aircraft better traffic rights than aircraft flying under TA or EU-registered aircraft.

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.

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