When aircraft are being bought and sold across global jurisdictions, the topic of tax advice always comes up. A formal tax opinion is legal advice of how your sale will affect taxes either with the location of the aircraft and who charges VAT, the implication to income tax or gain on sale and a variety of other possible issues. We typically do not make a tax opinion a standard part of all transactions; tax or VAT is often not an issue due to the structuring of the transaction or the domicile of some of the parties. However, we often see transactions where formal tax advice is both well advised and beneficial. Furthermore, many buyers or sellers personally feel better about getting an outside tax opinion to give them comfort that they are not creating a large tax liability.
The upside to a formal Tax Opinion is that if VAT is applicable on your sale, you have an expert to speak about it with or try to minimize any VAT implication for you. The downside is that these opinions often come with a number of caveats that exonerate the tax firm from any liability on the opinion given. But the main benefit it can give people is the comfort of knowing they are following the guidelines of the tax law as best they can.
Some tax firms only give statements about what the tax law states without interpreting it for your personal circumstance. This is less useful, and your broker should be able to guide you towards tax advisors they have used in the past who have been practically helpful and beneficial for their clients.
It is also important to ensure the tax firm is knowledgeable about the country you are dealing with in your transaction. An English advisor may not be the best choice to assist you with a transaction involving German tax law if your aircraft is going into or coming out of Germany. Most of the big tax firms have offices worldwide and are very capable with the intricacies of other countries tax laws.
There is no hard and fast rule about tax opinions – so much of it is dependent upon the circumstances of each specific transaction as well as your personal preference. Fundamentally, private jets are made to make your life more convenient – how they are transacted should reflect this nature. If you are more comfortable getting a tax opinion, we always encourage you to do whatever helps you feel best about your transaction.
Articles 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 us at enquiries@colibriaircraft.com