Importation and Value Added Tax (VAT) of aircraft is a complex area, which depends completely on the location of importation and your own use and operation of the aircraft. It is important to note that VAT liability may arise regardless of the state of registry of your aircraft. This information addresses the general rules for importation and VAT with regards to the European Union (EU).
If you are operating your aircraft inside the EU, you may have to import the aircraft and deal with VAT. Importation of aircraft and management of VAT exposure may be a necessity where you are operating your non-EU registered aircraft within the EU. The general rule is that all aircraft must be considered for EU VAT if they are owned by a European resident or when intended to carry EU residents on board point to point within Europe. An appropriate VAT solution is therefore essential because failure to do so could result in your aircraft being impounded and the flight crew and passengers on board detained, as well as fines on the aircraft owner.
Please find the following general rules with regards to the two methods of importation into the EU, and note that Guernsey is not part of the EU for VAT purposes.
An aircraft is fully imported into the EU when it is brought into a particular EU member country and the owner pays all applicable customs duties and VAT imposed in that country. VAT rates and customs duties vary between EU member countries, but are generally between 15 to 25 percent of the aircraft’s value. The result of permanent importation is that the aircraft is in free circulation within the EU, there are no restrictions for the period of stay in the EU, as well as no restrictions for carrying EU residents for flights within the EU.
This option is limited to aircraft owned outside the EU, that are not staying in the EU for more than 180 days in a 12 month period, and that are not available to EU residents for flights within the EU, except for special situations. This situation is aimed at the occasional entry of foreign registered aircraft into the EU only.
Depending on your circumstances, the VAT status of the aircraft and your intended usage of the aircraft, it may be possible to reduce the VAT liability or even mitigate it all together. As every owner and their aircraft’s circumstances are different it is always wise to check well in advance before you operate your aircraft within Europe and possibly incur a large tax liability. In addition, aircraft owners should recall that aircraft may also attract customs duty (Guernsey is within the customs territory of the EU), which may also be avoided upon seeking professional advice. There are several countries offering various importation regimes across Europe, irrespective of aircraft registration, and such regimes generally consist of either permanently importing an aircraft or temporarily importing an aircraft. There is no single structure which everyone must be compliant with, rather the most appropriate VAT solution for you depends on your own use and operation of the aircraft. Therefore, no matter where you aircraft is registered, there are VAT solutions to be achieved by an import route through various countries. For aircraft in between lease, the potential VAT and duty liabilities are the same as for any other aircraft – it all depends upon their status and intended operation.
To determine the most appropriate and cost effective procedure for use of your aircraft within the EU, we recommend that you contact an EU VAT specialist.