The short story about full importation

The VAT handling
1 Local VAT is imposed during the importation. The local rates are between 17-27% depending on the EU member state
 KNOW MORE: OPMAS Review: A brief introduction to VAT in the European Union

The customs duty handling
1 The customs duty is equal to zero (0%) if the aircraft has a civil registration which basically means that nobody should pay the customs duty unless the aircraft is ‘smuggled in’. An aircraft is ‘smuggled in’ if an EU insider simply does not declare the importation at the first port of entry
1 Until the year of 2018 only EU insiders were allowed the 0% customs duty
 KNOW MORE: See the quick overview: Customs duty and end-use exemption
 KNOW MORE: Significant change for EU aircraft importations and the EU customs duty

Know when to import?
1 EU insiders must import the aircraft at the first port of entry within the EU (first port of call) 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 they are not violating the Temporary Admission regulation when flying within the EU

Preconditions: for the VAT handling
1 None as long as the VAT is fully paid (no refunds are possible)
1 If the importer does not meet the preconditions for option 2+3, then option 1 is left and must be used
 KNOW MORE: OPMAS Review: The “airline” VAT exemption in the European Union
 KNOW MORE: ALERT: interesting and positive news about the EU airline exemption with 0% VAT

What is the demand for documentation of the aircraft usage on a continuous basis?
1 There is no demand for any documentation

Validity
1 The importation is in general valid as long the aircraft is owned by the importer. A sale to an EU based buyer will require a sale handled correctly within the EU in order to retain the free circulation status
1 The importation will no longer be valid if an aircraft has been outside the EU continuously for more than 3 years
1 The importation will no longer be valid if an imported aircraft is sold/delivered outside the EU

Statute of limitations
1 The limitation period is normally 5 years in most EU member states including 7 years of record-keeping of correct activity. In cases of serious abuse, the limitation period is prolonged to 10 years

Are there other pit falls?
1 Avoid using any disposal agreements with any EU insiders during or after the importation as this will be seen as a separate economic transaction and will attract local VAT both when giving and taking back the right of disposal

How to be ready to use full importation?
The importer will initially need to have a thorough dialogue with an importation expert in order to clarify the case details fully and look at the options. Everyone must know the exact preconditions and consequences of reclaiming the VAT or using the airline VAT exemption before a choice is made.

How can an operator secure all positions?
OPMAS can help operators to check how an aircraft can be imported. Send us an email with a short case description in order to start the dialogue.

The VAT handling
2 Local VAT is imposed during the importation. The local rates are between 17-27% depending on the EU member state
 KNOW MORE: OPMAS Review: A brief introduction to VAT in the European Union

The customs duty handling
2 The customs duty is equal to zero (0%) if the aircraft has a civil registration which basically means that nobody should pay the customs duty unless the aircraft is ‘smuggled in’. An aircraft is ‘smuggled in’ if an EU insider simply does not declare the importation at the first port of entry
2 Until the year of 2018 only EU insiders were allowed the 0% customs duty
 KNOW MORE: See the quick overview: Customs duty and end-use exemption
 KNOW MORE: Significant change for EU aircraft importations and the EU customs duty

Know when to import?
2 EU insiders must import the aircraft at the first port of entry within the EU (first port of call) 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 they are not violating the Temporary Admission regulation when flying within the EU

Preconditions: for the VAT handling
!2 The actual economic owner must be the importer on-record according to guidelines published in working paper 762 from the European Commission VAT Committee. A lessee will therefore not be allowed to reclaim/defer any VAT
2 The importer must use the aircraft for business purposes or as a business
!2 The importer is only allowed to reclaim/defer the VAT 100% if the aircraft is used 100% for correct business use on a continuous basis
2 If the importer does not meet the preconditions for option 2+3, then option 1 is left and must be used
 KNOW MORE: OPMAS Review: The “airline” VAT exemption in the European Union
 KNOW MORE: ALERT: interesting and positive news about the EU airline exemption with 0% VAT

Preconditions: what is meant by correct use?
2 The aircraft must be used solely for correct business use which is often referred to as ‘VAT taxable economic activities’. These activities represent general business use, but different exceptions occur
2 The following activities are NOT considered correct VAT taxable 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 judgements and interpretations from the European Court of Justice (ECJ)
2 Commercial charter activity by an AOC holder is not correct business use as this activity is VAT exempted
2 Any non-business use is NOT correct business use

Preconditions: what about non-business use?
2 All non-business use must be handled the correct way and the importer must be compensated directly by receiving a direct payment based on market rate
2 Imputed income as a compensation is not acceptable as the option is not a direct payment to the importer
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 importer
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 USA by an American Part 91 operator will actually have an impact on the EU VAT assessment
!2 The term ‘predominately used for business’ is often used in EU tax havens by their service providers but is not officially recognized by any VAT, tax authorities or by the EU Commission
!2 The importer is not allowed to reclaim/defer 100% of the import VAT up-front if the importer is anticipating non-business use or have a history of non-business use. This will rule out the use of the Capital Goods Scheme for most importers
2 If the importer is anticipating a 15% non-business use without proper compensation, the importer should only reclaim/defer 85% of the import VAT. The importer has an obligation to adjust and report any increase in the non-business use
 KNOW MORE: SURVEY 1: Is the term “predominately used for business” accepted by various EU VAT authorities?
 KNOW MORE: SURVEY 3: Does the flight pattern/geography and size/type of compensation matter?

What is the demand for documentation of the aircraft usage on a continuous basis?
2 The importer must be able to document that all worldwide trips are used for the correct activity for the first 5 years after the importation
2 The importer must be able to document the correct business use of the aircraft per flight and provide specific use-data for all passengers on-board such as 1. list of passengers on the aircraft, 2. purpose of flight per passenger, 3. documentation for any stops en-route 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
2 The importation is in general valid as long the aircraft is owned by the importer. A sale to an EU based buyer will require a sale handled correctly within the EU in order to retain the free circulation status
2 If the preconditions for the importation is no longer fulfilled the importer must immediately export the aircraft or ask for a reassessment which involves a full payment of the correct VAT
2 The importation will no longer be valid if an aircraft has been outside the EU continuously for more than 3 years
2 The importation will no longer be valid if an imported aircraft is sold/delivered outside the EU

Statute of limitations
2 The limitation period is normally 5 years in most EU member states including 7 years of record-keeping of correct activity. In cases of serious abuse, the limitation period is prolonged to 10 years

Are there other pit falls?
2 Avoid using any disposal agreements with any EU insiders during or after the importation as this will be seen as a separate economic transaction and will attract local VAT both when giving and taking back the right of disposal

How to be ready to use full importation?
The importer will initially need to have a thorough dialogue with an importation expert in order to clarify the case details fully and look at the options. Everyone must know the exact preconditions and consequences of reclaiming the VAT or using the airline VAT exemption before a choice is made.

How can an operator secure all positions?
OPMAS can help operators to check how an aircraft can be imported. Send us an email with a short case description in order to start the dialogue.

Points marked with !
We see it as pure gambling to perform an importation without a binding advance tax ruling especially where the importation is performed in EU member states with lower standards than described in the guidelines published by the European Commission VAT Committee or where other EU standards are not followed. We have marked selected points with ! to indicate where EU tax havens are known to have a lower standard or do not follow the guidelines.

The VAT handling
3 The VAT is exempted (0%) if the preconditions for both the airline and the specific aircraft are met on a continuous basis
 KNOW MORE: OPMAS Review: A brief introduction to VAT in the European Union

The customs duty handling
3 The customs duty is equal to zero (0%) if the aircraft has a civil registration which basically means that nobody should pay the customs duty unless the aircraft is ‘smuggled in’. An aircraft is ‘smuggled in’ if an EU insider simply does not declare the importation at the first port of entry
3 Until the year of 2018 only EU insiders were allowed the 0% customs duty
 KNOW MORE: See the quick overview: Customs duty and end-use exemption
 KNOW MORE: Significant change for EU aircraft importations and the EU customs duty

Know when to import?
3 EU insiders must import the aircraft at the first port of entry within the EU (first port of call) 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 they are not violating the Temporary Admission regulation when flying within the EU

Preconditions: for the VAT handling
3 The importer must be an international airline approved as VAT exempt
!3 The importer must solely use the aircraft for their commercial operation
3 If the importer does not meet the preconditions for option 2+3, then option 1 is left and must be used
 KNOW MORE: OPMAS Review: The “airline” VAT exemption in the European Union
 KNOW MORE: ALERT: interesting and positive news about the EU airline exemption with 0% VAT

Preconditions: what is meant by correct use? 
3 The aircraft must be owned or leased. A managed aircraft is considered used by the owner and not the international airline and the aircraft can therefore not be granted a VAT exemption. A management agreement is typically structured in such a way that the international airline do not have not full control over the aircraft, which is a must
!3 The aircraft must solely be used for commercial purposes according to guidelines published in working paper 758 from the European Commission VAT Committee
 KNOW MORE: See the quick overview: option 3: the import VAT is exempt

Preconditions: what about non-business use?
!3 Any owner flights worldwide must be invoiced at a market rate according to guidelines published in working paper 758 from the European Commission VAT Committee
 KNOW MORE: SURVEY 1: Is the term “predominately used for business” accepted by various EU VAT authorities?
 KNOW MORE: SURVEY 3: Does the flight pattern/geography and size/type of compensation matter?

What is the demand for documentation of the aircraft usage on a continuous basis?
3 The importer must be able to document that all worldwide trips are used for the correct activity for the first 5 years after the importation
3 The importer must be able to document correct commercial use of the aircraft by presenting flight logs and trip invoices for charters

Validity
3 The importation is in general valid as long the aircraft is operated the same way by an international airline. A change will require a new importation in order to retain the free circulation status
3 If the preconditions for the importation is no longer fulfilled the importer must immediately export the aircraft or ask for a reassessment which involves a full payment of the correct VAT
3 The importation will no longer be valid if an aircraft has been outside the EU continuously for more than 3 years
3 The importation will no longer be valid if an imported aircraft is sold/delivered outside the EU

Statute of limitations
3 The limitation period is normally 5 years in most EU member states including 7 years of record-keeping of correct activity. In cases of serious abuse, the limitation period is prolonged to 10 years

Traffic rights
3 Commercial non-EU operators will still need traffic rights where they are normally required. A customs handling, like an importation/admission, will not influence any of the demands for traffic rights anywhere in the aviation regulation

Are there other pit falls?
3 Avoid using any disposal agreements with any EU insiders during or after the importation as this will be seen as a separate economic transaction and will attract local VAT both when giving and taking back the right of disposal

How to be ready to use full importation?
The importer will initially need to have a thorough dialogue with an importation expert in order to clarify the case details fully and look at the options. Everyone must know the exact preconditions and consequences of reclaiming the VAT or using the airline VAT exemption before a choice is made.

How can an operator secure all positions?
OPMAS can help operators to check how an aircraft can be imported. Send us an email with a short case description in order to start the dialogue.

Points marked with !
We see it as pure gambling to perform an importation without a binding advance tax ruling especially where the importation is performed in EU member states with lower standards than described in the guidelines published by the European Commission VAT Committee or where other EU standards are not followed. We have marked selected points with ! to indicate where EU tax havens are known to have a lower standard or do not follow the guidelines.