VAT is an ever changing landscape and the rules and exemptions change frequently. VAT is around 20% throughout Europe, equalling a substantial amount of money when imposed on a multi-million dollar aircraft. As a result, it is worth at least talking to a tax advisor if not getting a full formal opinion. Speaking with someone who knows the details of VAT, keeps up to date with the changes, and is insured on their opinions is important. With aircraft transactions the devil is in the details, and this is even truer when it comes to VAT. Because of the changing rules and regulations, a buyer or seller cannot assume that a tax structure that worked in a past transaction will work in today’s transaction.
VAT’s applicability comes down to where the aircraft is located when the transaction closes and what the buyer’s declared usage will be. If your aircraft is in the European Union and you are selling to a non-EU buyer, there should be no VAT applicable on the sale provided the buyer exports the aircraft within 90 days of closing. However, if you are an EU buyer with your aircraft in an EU country and are selling to an EU buyer, this is where it gets complicated and a tax opinion can give clarity. Your tax advisor may recommend positioning the aircraft to a non-EU location or they may say your current country is ok. But because of the complexity of the issue, we recommend at the least speaking with a professional tax advisor.
There are also numerous differing opinions on what is called “Free Circulation”. Free Circulation is when an aircraft has already been imported into the EU, and some believe that it can then be bought and sold among EU member states at zero VAT. However this is not always the case and can get very complex.
Each transaction is different and every buyer or seller’s structure is different. Acquiring a tax opinion for your aircraft transaction comes down to what makes you most comfortable from a commercial risk stand point. If you do choose to get advice, your aircraft broker should be able to recommend a few different firms that specialize in aviation tax advice.
If you would like more information on this, contact us at enquiries@colibriaircraft.com.
