Avoiding VAT on aircraft imported to EU
Thread Starter
Avoiding VAT on aircraft imported to EU
I have a friend who is importing a CJ1 from USA to EU to fly as a private business aircraft (ie flying for his company operation). He is convinced that he will be able to claim back the VAT as the aircraft is for commercial use.
I'm fairly certain this is not possible - but can anybody confirm?
I'm fairly certain this is not possible - but can anybody confirm?
Thread Starter
Then why does anybody pay VAT on their aircraft? I've flown several corporate business jets (ie flying for the purposes of the business, but not on an AOC) and all have had VAT paid, and usually it is first item checked on a ramp-check.
Just about every private jet in Europe is owned through a holding company, and most owners could easily claim that they are flying for "business" - so if it is so easy why does any private jet owner pay VAT?
Just to clarify, I am talking about a non-AOC aircraft, flying for business purpose. Obviously AOC operated aircraft are VAT exempt.
Just about every private jet in Europe is owned through a holding company, and most owners could easily claim that they are flying for "business" - so if it is so easy why does any private jet owner pay VAT?
Just to clarify, I am talking about a non-AOC aircraft, flying for business purpose. Obviously AOC operated aircraft are VAT exempt.
Join Date: Aug 2007
Location: Groland
Posts: 63
Likes: 0
Received 0 Likes
on
0 Posts
Aviation lawyers specialising in tax-efficient structures can advise you on how to reclaim Vat on a privately operated aircraft. PM me if you need the details of the company we used.
Join Date: Jan 2010
Location: Texas and UK
Age: 66
Posts: 2,886
Likes: 0
Received 0 Likes
on
0 Posts
Might be worth reading the "Ferry bad experience" thread and keep that in mind, the company featured in that are now advertising "import your aircraft VAT free" services.
Thats not to say that any other company would be unscrupulous, the aviation lawyer would seem a very good starting point to find out the latest information and loopholes.
Thats not to say that any other company would be unscrupulous, the aviation lawyer would seem a very good starting point to find out the latest information and loopholes.
Join Date: Apr 2002
Location: Location: Location:
Age: 53
Posts: 1,110
Likes: 0
Received 0 Likes
on
0 Posts
CJB - hope you're well....
Big changes as of 1st Jan this year, austerity measures throughout the EU means big ticket items are easy pickings. When operating legitimately into the EU for business purposes Im finding the IOM cert of commercial use about as much use as t!ts on a bull. The fueller then agrees Commercial and then the bill arrives festooned with local taxes and MOT.....
Our advice was that its unavoidable unless on an AOC and you might find your loophole closed which wont help you when you're getting your bumps felt by a Gendarme at LBG with the boss looking through the window at signature seeing his pride and joy towed away.
Dont forget th French & spanish get a percentage of the unpaid taxes they discover, consider the Spanish ATC situation and how the rules were changed on the fly. The countries most likely to cause you problems are the ones with the biggest national financial problems....
Our advice came at cost courtesy KPMG.
Big changes as of 1st Jan this year, austerity measures throughout the EU means big ticket items are easy pickings. When operating legitimately into the EU for business purposes Im finding the IOM cert of commercial use about as much use as t!ts on a bull. The fueller then agrees Commercial and then the bill arrives festooned with local taxes and MOT.....
Our advice was that its unavoidable unless on an AOC and you might find your loophole closed which wont help you when you're getting your bumps felt by a Gendarme at LBG with the boss looking through the window at signature seeing his pride and joy towed away.
Dont forget th French & spanish get a percentage of the unpaid taxes they discover, consider the Spanish ATC situation and how the rules were changed on the fly. The countries most likely to cause you problems are the ones with the biggest national financial problems....
Our advice came at cost courtesy KPMG.
Join Date: Jan 2008
Location: MAN
Posts: 769
Likes: 0
Received 0 Likes
on
0 Posts
G-spot, you getting your taxes mixed up. Even offshore owners of EU registered aircraft can claim their VAT back on aircraft purchases by assigning an EU based agent that is VAT registered to claim back the VAT, there are loads of possibilites.
Trim Stab, proof of VAT paid has no bearing on how the owner claims the VAT back and has no bearing on the importation, that is just an accounting issue.
To the OP, get yourself professional advise based on your circumstances. Loads of different ways to claim the VAT back.
Trim Stab, proof of VAT paid has no bearing on how the owner claims the VAT back and has no bearing on the importation, that is just an accounting issue.
To the OP, get yourself professional advise based on your circumstances. Loads of different ways to claim the VAT back.
Join Date: Apr 2002
Location: Location: Location:
Age: 53
Posts: 1,110
Likes: 0
Received 0 Likes
on
0 Posts
CLDRVR
Quite happy with my understanding of the tax system thanks.....
My point being clever schemes born in an attempt to defer, avoid, delay the payment of VAT by "professional advisers" might come back to bite you in the ass. Note the italics.
We sought our advice from the Aviation people at KPMG who had had a briefing by the HMRC saying reclaimed VAT for people to weekend in STP wasn't going to wash or words to that effect. Spain = Skint, Greece = Skint, France = arguably skint....sense the political tone
We acted in late 2010 based on good expensive advice to protect ourselves and Im glad we did.
Tootlepip.....
Quite happy with my understanding of the tax system thanks.....
My point being clever schemes born in an attempt to defer, avoid, delay the payment of VAT by "professional advisers" might come back to bite you in the ass. Note the italics.
We sought our advice from the Aviation people at KPMG who had had a briefing by the HMRC saying reclaimed VAT for people to weekend in STP wasn't going to wash or words to that effect. Spain = Skint, Greece = Skint, France = arguably skint....sense the political tone
We acted in late 2010 based on good expensive advice to protect ourselves and Im glad we did.
Tootlepip.....
Thread Starter
Are there any minium requirements to show that the aircraft is being used for genuine commercial purposes?
I can see how a large publicly listed company could buy a businessjet and reclaim VAT. However, I suppose it might be a lot harder for a "one-man company" to justify that the aircraft is being used commercially.
I can see how a large publicly listed company could buy a businessjet and reclaim VAT. However, I suppose it might be a lot harder for a "one-man company" to justify that the aircraft is being used commercially.
Join Date: Apr 2002
Location: Location: Location:
Age: 53
Posts: 1,110
Likes: 0
Received 0 Likes
on
0 Posts
TrimStab
HMRC had plans also to ensure that aircraft placed on AOC's did a "representative" amount of commercial work. Nothing tangible but in my eyes that always leaved things open for the revenue to move the goal posts at will.
It will all pan out over the next 24 months but it would be unlikely that the aircraft operating on an AOC for principally one client ( the owner) will wash.
Depends on whether the HMRC decide the aircraft is a "commercial vehicle"' a lot of the legislation in the early part of this year was lifted from maritime law and a lot of that contradicts heavily with the hire and reward rules, so god knows.
There was merit in investigating a leasing arrangement whereby the finance company reclaimed the initial VAT and that full or none or 50% VAT was paid on the monthly / quarterly / daily possibly lease repayments depending on the useage for the lease payment period depending on whether or not the boss was holidaying or working....
That was this time last year so more than likely out of date now
Persuading HMRC that Bombardier's finest is in the same usage category as a Transit van will probably prove troublesome though
HMRC had plans also to ensure that aircraft placed on AOC's did a "representative" amount of commercial work. Nothing tangible but in my eyes that always leaved things open for the revenue to move the goal posts at will.
It will all pan out over the next 24 months but it would be unlikely that the aircraft operating on an AOC for principally one client ( the owner) will wash.
Depends on whether the HMRC decide the aircraft is a "commercial vehicle"' a lot of the legislation in the early part of this year was lifted from maritime law and a lot of that contradicts heavily with the hire and reward rules, so god knows.
There was merit in investigating a leasing arrangement whereby the finance company reclaimed the initial VAT and that full or none or 50% VAT was paid on the monthly / quarterly / daily possibly lease repayments depending on the useage for the lease payment period depending on whether or not the boss was holidaying or working....
That was this time last year so more than likely out of date now
Persuading HMRC that Bombardier's finest is in the same usage category as a Transit van will probably prove troublesome though
Thread Starter
HMRC had plans also to ensure that aircraft placed on AOC's did a "representative" amount of commercial work. Nothing tangible but in my eyes that always leaved things open for the revenue to move the goal posts at will.
Join Date: Apr 2002
Location: Location: Location:
Age: 53
Posts: 1,110
Likes: 0
Received 0 Likes
on
0 Posts
Yep sorry not clear moved onto that
Depends on whether the HMRC decide the aircraft is a "commercial vehicle"' a lot of the legislation in the early part of this year was lifted from maritime law and a lot of that contradicts heavily with the hire and reward rules, so god knows.
There was merit in investigating a leasing arrangement whereby the finance company reclaimed the initial VAT and that full or none or 50% VAT was paid on the monthly / quarterly / daily possibly lease repayments depending on the useage for the lease payment period depending on whether or not the boss was holidaying or working....
That was this time last year so more than likely out of date now
There was merit in investigating a leasing arrangement whereby the finance company reclaimed the initial VAT and that full or none or 50% VAT was paid on the monthly / quarterly / daily possibly lease repayments depending on the useage for the lease payment period depending on whether or not the boss was holidaying or working....
That was this time last year so more than likely out of date now
Join Date: Aug 2003
Location: Scotland
Posts: 240
Likes: 0
Received 0 Likes
on
0 Posts
Skipping over the irrelevent side-track, which was probably about paying VAT on fuel...
CJBoy is right - if the entity which buys the aircraft is a VAT registered business, then it is no different to buying a photocopier. You pay the VAT when you buy it, and claim it back again on the next VAT return. If you buy the aircraft in your own country it really is like buying a photocopier - you get a VAT invoice, and pay it. Claim it back in the usual way.
If you are importing the aircraft yourself, it is only slightly more complicated - you fly it into a customs airfield, stroll over to the customs shed and declare it, just like you would if you bought an iPad in the USA. Here's where it gets a tiny bit complicated. First, you need to file a customs declaration form, which you generally need to do on the Internet. Secondly, you will need to pay the VAT due right there and then. They get very cross if you try to fly the aircraft away again without paying the VAT
. If you paid $2million for the aircraft, the VAT is $400k, and they don't accept cheques. You will need a bankers draft from the bank. Once you've done that, you get a VAT receipt from the nice customs man, and claim it back on the next VAT return as before.
The problem with the whole scenario is one of cash flow. You will be out of pocket for $400k for the period between the importation date and the VAT reclaim. There are schemes for doing out-of-sequence VAT claims, but another simple solution is to deliberately time the importation to the last day (or week) of your VAT quarter.
CJBoy is right - if the entity which buys the aircraft is a VAT registered business, then it is no different to buying a photocopier. You pay the VAT when you buy it, and claim it back again on the next VAT return. If you buy the aircraft in your own country it really is like buying a photocopier - you get a VAT invoice, and pay it. Claim it back in the usual way.
If you are importing the aircraft yourself, it is only slightly more complicated - you fly it into a customs airfield, stroll over to the customs shed and declare it, just like you would if you bought an iPad in the USA. Here's where it gets a tiny bit complicated. First, you need to file a customs declaration form, which you generally need to do on the Internet. Secondly, you will need to pay the VAT due right there and then. They get very cross if you try to fly the aircraft away again without paying the VAT
. If you paid $2million for the aircraft, the VAT is $400k, and they don't accept cheques. You will need a bankers draft from the bank. Once you've done that, you get a VAT receipt from the nice customs man, and claim it back on the next VAT return as before.The problem with the whole scenario is one of cash flow. You will be out of pocket for $400k for the period between the importation date and the VAT reclaim. There are schemes for doing out-of-sequence VAT claims, but another simple solution is to deliberately time the importation to the last day (or week) of your VAT quarter.
Join Date: Jul 2003
Location: Scotland
Posts: 37
Likes: 0
Received 0 Likes
on
0 Posts
In answer to the OP's question (as already pointed out): If a company buys the aereyplane, pays the VAT then it can claim the VAT back as per the norm. No problem.
However, the company will most probably get a visit not long after from a friendly VAT / HMRC officer. Said company will then need to prove the commercial use of the goods (aereyplane).
So if the aereyplane is taking the boss and family for weekend jaunts then expect some difficult questions.
As for import timing for VAT quarters you do get 21 days after arrival to pay up, but you can't use the goods in the meantime.
Also in the UK the Customs side of things is now centralised (NCH in Salford), so if you rock up to customs (UKBA) officer with your paperwork and a wad of notes at most airports they'll just refer you to the NCH.
Other things to trip you up: If your moving a smaller aircraft that may need fuel stops in the EU before arriving at the chosen point of import, it will need a T1 transit to defer VAT & Duty until you import. (a T1 can also help with being able to move your aircraft until the import is cleared as this can take a day or so in some cases)
Also you need to make an ICS declaration before arriving with your shiny new toy in the EU. (currently not being enforced too much yet but runs the risk of being met by some nice customs peeps asking pointed questions).
PM if you need any more info.
However, the company will most probably get a visit not long after from a friendly VAT / HMRC officer. Said company will then need to prove the commercial use of the goods (aereyplane).
So if the aereyplane is taking the boss and family for weekend jaunts then expect some difficult questions.
As for import timing for VAT quarters you do get 21 days after arrival to pay up, but you can't use the goods in the meantime.
Also in the UK the Customs side of things is now centralised (NCH in Salford), so if you rock up to customs (UKBA) officer with your paperwork and a wad of notes at most airports they'll just refer you to the NCH.
Other things to trip you up: If your moving a smaller aircraft that may need fuel stops in the EU before arriving at the chosen point of import, it will need a T1 transit to defer VAT & Duty until you import. (a T1 can also help with being able to move your aircraft until the import is cleared as this can take a day or so in some cases)
Also you need to make an ICS declaration before arriving with your shiny new toy in the EU. (currently not being enforced too much yet but runs the risk of being met by some nice customs peeps asking pointed questions).
PM if you need any more info.
Join Date: May 2006
Location: Humberside
Age: 58
Posts: 1,265
Likes: 0
Received 0 Likes
on
0 Posts
Danish Still Works
On a business aircraft with a significant value, the preffered option is still to import into the EU via Denmark. Those whizz kids at Opmas have managed to do away with actually having to fork out the VAT. Not like prior 2010 when you could import at Zero % however. The VAT is still payable but they have managed a way so that it offsets during the process so strictly speaking, your not really any better off as it is a paper exercise but the benefit is in not having to lay out a large lump of hard earned to reclaim it at a later date. Frank at OPMAS can give you the exact procedure.
Hope that helps.
Hope that helps.
Join Date: May 2006
Location: Humberside
Age: 58
Posts: 1,265
Likes: 0
Received 0 Likes
on
0 Posts
PS Ramp Checks
Also worth pointing out that there is a significant purge
on this very subject at many airports and I dont just mean in France.
Also unbelievably, the NCH at Salford are not on the APACS
faster payment system so a chaps transfer is the quickest way to pay them so
of course that takes a number of working days so if
you want your prized possesion to use rather than have it laid up
at the port of entry then the vat amount of the commercial invoice value
needs to be paid in advance. T1 form wont work as this is only a transit form
but could be used if the aircraft stopped first in another EU country prior to
the final destiantion EU country if that makes sense. In the absence of a T1, then strictly
speaking, the duty is payable at the first port of entry into the EU
but its not as simple as landing in a country say with a 15% vat levy and
saying who wants my money.
on this very subject at many airports and I dont just mean in France.
Also unbelievably, the NCH at Salford are not on the APACS
faster payment system so a chaps transfer is the quickest way to pay them so
of course that takes a number of working days so if
you want your prized possesion to use rather than have it laid up
at the port of entry then the vat amount of the commercial invoice value
needs to be paid in advance. T1 form wont work as this is only a transit form
but could be used if the aircraft stopped first in another EU country prior to
the final destiantion EU country if that makes sense. In the absence of a T1, then strictly
speaking, the duty is payable at the first port of entry into the EU
but its not as simple as landing in a country say with a 15% vat levy and
saying who wants my money.
Last edited by debiassi; 2nd Sep 2011 at 16:30. Reason: spelling
Join Date: Jul 2003
Location: Scotland
Posts: 37
Likes: 0
Received 0 Likes
on
0 Posts
The bigger issue with the NCH is how they process the payment and subsequent import entry. British bureaucracy sadly isn't always efficient (don't get me wrong, the guys and girls at the front end are very helpful but the systems and resources let them down).
If the CHAPS is timed right you can clear the same day, normally any delay is not related to the money arriving.
(bit of a thread drift, I apologise)The T1 is actually quite a useful tool, its often misunderstood and seen as pain in the ar$e piece of paper.
We have for a long while put all our imports through T1 as a matter of course, it can save a lot of hassles and waiting on full clearance. If you land in the UK at the wrong time you could wait up to 3 or 4 days for your import to be cleared, even if you've paid up well in advance.
It also means you can keep your aircraft moving, useful if you need to get a 'pre loved' machine through maintenance before setting it to work, it doesn't sit at the entry airport waiting to be cleared.
Also if your paying a ferry pilot or your own crew, it saves paying them to hang around.
debiassi is quite right with the purge on paperwork. Were seeing more clients falling into trouble because they haven't done everything correctly getting their aircraft into the EU. (Such as not getting a T1 or similar)
Some customs procedures cannot be done retrospectively and have a potentially huge financial impact later on.
We've seen the fallout from errors many months after import, costing people far more than getting things done correctly in the first place. Including having to bring aircraft back to the point of entry to get cleared.
If the CHAPS is timed right you can clear the same day, normally any delay is not related to the money arriving.
(bit of a thread drift, I apologise)The T1 is actually quite a useful tool, its often misunderstood and seen as pain in the ar$e piece of paper.
We have for a long while put all our imports through T1 as a matter of course, it can save a lot of hassles and waiting on full clearance. If you land in the UK at the wrong time you could wait up to 3 or 4 days for your import to be cleared, even if you've paid up well in advance.
It also means you can keep your aircraft moving, useful if you need to get a 'pre loved' machine through maintenance before setting it to work, it doesn't sit at the entry airport waiting to be cleared.
Also if your paying a ferry pilot or your own crew, it saves paying them to hang around.
debiassi is quite right with the purge on paperwork. Were seeing more clients falling into trouble because they haven't done everything correctly getting their aircraft into the EU. (Such as not getting a T1 or similar)
Some customs procedures cannot be done retrospectively and have a potentially huge financial impact later on.
We've seen the fallout from errors many months after import, costing people far more than getting things done correctly in the first place. Including having to bring aircraft back to the point of entry to get cleared.
Join Date: Jul 2009
Location: England
Age: 65
Posts: 12
Likes: 0
Received 0 Likes
on
0 Posts
Reclaiming VAT
In time honoured tradition, it seems that what people don't know about VAT, they make up. To be able to reclaim VAT, there has to be an "economic activity". This is a European term which, in UK law equates to a "business activity". So, if a person acquires an aircraft upon which VAT is payable, the simple test is whether or not that aircraft is to be used for the purposes of a business.
If it is, then, in principle, the VAT can be reclaimed. If not, then the answer is no. Exactly what constitutes a business activity will depend on many factors. Charter of the aircraft to third parties would constitute a business activity. However, this would not be legal unless the charter was under an AOC. Leasing the aircraft to an AOC holder for it to charter would also constitute a business activity. Use of the aircraft for the purposes of a business would also qualify (eg the corporate jet), but one would only get all of the VAT back if the aircraft was used solely for the business. Any non corporate use would not be business use and if there is mixed use (ie corporate and non corporate), an apportionment would be needed.
That is the technical legal answer. However, just as in many other fields of taxation, in the real world, application of the law can vary from country to country and the interpretation of what constitutes a business activity for VAT purposes often depends on the whim of a local inspector. It is a specialist area and, given the values involved, I am often astonished to find that no specialist advice is sought.
The rules that came in in January 2011 relate to whether an aircraft can qualify for zero rating (ie whether an aircraft can be acquired without paying VAT). This is something entirely different to whether vat paid on an aircraft (or on importation) can be reclaimed. To qualify for zero rating, the test is whether that aircraft is to be used by an airline operating for reward chiefly on international routes. Pilots need to familiarise themselves with these terms which are set out in PN 744c on HMRC's website. Again, however, there is no substitute for professional specialist advice.
If it is, then, in principle, the VAT can be reclaimed. If not, then the answer is no. Exactly what constitutes a business activity will depend on many factors. Charter of the aircraft to third parties would constitute a business activity. However, this would not be legal unless the charter was under an AOC. Leasing the aircraft to an AOC holder for it to charter would also constitute a business activity. Use of the aircraft for the purposes of a business would also qualify (eg the corporate jet), but one would only get all of the VAT back if the aircraft was used solely for the business. Any non corporate use would not be business use and if there is mixed use (ie corporate and non corporate), an apportionment would be needed.
That is the technical legal answer. However, just as in many other fields of taxation, in the real world, application of the law can vary from country to country and the interpretation of what constitutes a business activity for VAT purposes often depends on the whim of a local inspector. It is a specialist area and, given the values involved, I am often astonished to find that no specialist advice is sought.
The rules that came in in January 2011 relate to whether an aircraft can qualify for zero rating (ie whether an aircraft can be acquired without paying VAT). This is something entirely different to whether vat paid on an aircraft (or on importation) can be reclaimed. To qualify for zero rating, the test is whether that aircraft is to be used by an airline operating for reward chiefly on international routes. Pilots need to familiarise themselves with these terms which are set out in PN 744c on HMRC's website. Again, however, there is no substitute for professional specialist advice.