A final point of every transaction is the Delivery Day. This is the day when the aircraft title and funds change hands and the deal finally completes. Where the aircraft is physically located during the closing call is an extremely important part of a transaction. This determines under whose tax rules the sale is occurring and determines whether or not VAT or sales tax is charged on the sale.
Getting this right is a multi-million dollar consideration and should merit extra attention.
First and foremost regarding the delivery location, hire a tax advisor. There are some extremely capable advisors that provide solid, insured advice for reasonable fees, and they give you the knowledge and comfort that your closing is occurring in a place that will have as little an impact upon you as possible. Every country has different rules, and understanding which country to have the actual closing in will substantially alter your final tax bill. In addition, the aircraft’s current status and actual use of the aircraft by the new buyer after closing will have an effect upon the implications of the aircraft’s location at closing. This gets very complicated and varies on a case by case basis, so consult with your aircraft broker to work out a strategy with your tax advisors and operator that fits with your plans.
While we won’t go into the specifics on structures and legalities here, we do recommend that you start thinking about delivery location as early as possible in the transaction process. Two days before closing is not the time to start working on this. Due to the complexities of international tax laws, getting the right opinions will take time, so leave yourself plenty of time to work through this. Keep in mind that where you currently have companies or business domiciled can also affect tax implications on your transaction. These are a few of the items to discuss with your broker and tax lawyer.
Many times, clients focus so much on the aircraft that they overlook the important decision point of the delivery location. We strongly urge our clients to focus on this as early as possible so an open and frank discussion can be had to find a solution that works for all parties. Getting the delivery location correct has a potential liability that is far greater than any technical item that would be found during a pre-purchase inspection, and it is worth paying attention to these details.
Blogs are written from real world experience by Colibri Aircraft’s individuals. If you have any questions or comments about the topic of this blog, please feel free to contact our team at enquiries@colibriaircraft.com