By Vincent Wigmans
Importing an aircraft can be complex and there are many exemptions and circumstances that influence the import and VAT levied. The aircraft import and VAT payments depend on several factors like how you will operate the aircraft and the import location. It is known that all aircraft are eligible for EU VAT if the owner is a resident living in Europe, but also if the aircraft is operated on intra-European flights with EU residents on board. In this blog we explain the basic rules of EU VAT on aircraft. Equally we discuss how to reclaim aircraft VAT. Note that the rules mentioned are different for commercial operators.
Aircraft Import VAT into the EU
There are basically two ways to handle a full aircraft import, either by the real economic owner or by the operator. Do note that a trust can never be the importer. The import VAT will be handled during the import of the aircraft into a member country of the EU. If an aircraft is fully imported by the owner, by paying custom duties and VAT, it can fly freely inside the EU without any restrictions. These fees vary between the different countries but are generally between 17% and 27% of the aircraft value. Once imported, you will get all the EU documents that can be shown to customs during a possible ramp check.
If the aircraft is not fully imported when entering the EU and anticipated to fly within the EU, the aircraft will be considered as flying under a temporary admission. Best is to arrange this temporary admission formally before entering the EU, chances exist that you must pay VAT and custom duty directly when you are subject to a ramp check. A temporary admission can only be used if the aircraft is owned, registered, and operated outside the EU. It’s limited to a maximum of 180 days in a 12-month period.
Aircraft Sales VAT within the EU
In an aircraft sales advert, you regularly scan terms as VAT Paid and Excl. VAT. If the aircraft is free of VAT and the seller is a private person having paid VAT already, then the VAT does not have to be charged again. Nonetheless we do always recommend you update the authorities of your upcoming sale or acquisition.
If the advert shows Excl. VAT, then the VAT must be paid. The buyer must pay VAT in the country where the aircraft has been bought. Though if the buyer is a commercial entity, it must pay VAT in the country of the buyer. Transactions conducted by businesses registered for VAT in different EU member states can be based on a so-called intra-Community acquisition, implying that no payments of the local VAT will need to be made.
If you want to reclaim the VAT, you should be aware that you will have to prove the commercial intentions operating the aircraft in your business. Think about business travel, corporate flying with employees and board members trips for business purposes. Keep in mind that an “empty” holding with no real “business” activity does not qualify.
Be aware that VAT is not a one-timer. Any change of ownership will mean that the VAT must be accounted again.
As there are many exceptions to the general rule (Brexit, Switzerland, Guernsey etc.), we always recommend asking your local tax authorities for a binding tax ruling in advance, hence, to be sure that there will be no issues popping up during the import.