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Denmark 0% VAT route may be back

It has an interesting optional definition of what is ‘commercial’:

which is performed under a contract between an operator and a customer, where the latter has no control over the operator’.

Quote

It would be interesting to see whether under the FAR’s by careful application, someone flying a plane on the N register, who has a Commercial license, could operate without an AOC.

Rochester, UK, United Kingdom

It’s difficult for a customer to have no control over the operator if both are one and the same physical person. Strong schizophrenia case.

ESMK, Sweden

But what is the point, a company can claim back the VAT anyway? So this is only interesting if there is as chain of transactions which ends with a private person owning an aircraft in free circulation without paying VAT.

www.ing-golze.de
EDAZ

Arne wrote:

It’s difficult for a customer to have no control over the operator if both are one and the same physical person. Strong schizophrenia case

Got same question by one fireman running the late evening show at Le Havre, are you “The Captain”? or “The VIP pax”?
I did not get what he is after, so I just replied “both” (actually, he confused a C172 with a Challenger parked nearby !)

Last Edited by Ibra at 22 Oct 22:56
ESSEX, United Kingdom

Sebastian_G wrote:

But what is the point, a company can claim back the VAT anyway? So this is only interesting if there is as chain of transactions which ends with a private person owning an aircraft in free circulation without paying VAT.

Well, for anything short of an airliner (but up to and including bizjets), you never know who you will sell it to, maybe in 5 years, maybe in 20 years. If you are selling to a non-commercial (as per VAT definition) operator, having the plane in “VAT paid” status is a competitive advantage. You can undercut the competition and/or pocket the price difference yourself!

ELLX

If you are selling to a non-commercial (as per VAT definition) operator, having the plane in “VAT paid” status is a competitive advantage.

But is that really true? I can only speak for Germany and even here I am a tax amateur. Here an AOC company can buy things VAT free according to German VAT legislation UStG §8 https://dejure.org/gesetze/UStG/8.html My understanding is that really buys VAT free instead of first paying and than claiming back (which would amount to the same thing for national companies).

But this does not mean that when this AOC company sells on the aircraft to a private person this sale is VAT free. One might be able to stretch German legislation UStG §25a https://dejure.org/gesetze/UStG/25a.html but I am sure even though the words of the law don’t say so that §25a should not be applied to aircraft purchased under UStG §8…

Last Edited by Sebastian_G at 23 Oct 09:13
www.ing-golze.de
EDAZ

I think they meant it is an advantage if you didn’t pay VAT but achieve the VAT paid status. Then you pretty much win the VAT.

I am not sure some of the above is correct.

A company with an AOC can (generally, in Europe) get stuff (parts, fuel, etc) duty free. Aircraft parts are duty free anyway for aircraft below 8000kg.

To reclaim VAT you have to be a VAT registered individual or a corporate body. I would be really surprised if having an AOC enabled VAT reclaim. In reality this is not an issue since the cost of getting even an AOC for counting hedgehogs is so high that the income needed to support it will push you above the mandatory VAT reg threshold anyway.

There are two distinct markets for aircraft, according to their VAT status. See e.g. here. That’s an interesting thread in itself. Getting the VAT zeroed and getting a Certificate of Free Circulation for VAT without actually paying VAT on the market value, or the sales invoice value, which is currently the only way benefits one of these market sectors (the private user one, basically). It has no effect on the other one (VAT registered companies, basically).

Administrator
Shoreham EGKA, United Kingdom

Peter wrote:

To reclaim VAT you have to be a VAT registered individual or a corporate body. I would be really surprised if having an AOC enabled VAT reclaim

At least here in Germany there is a separate case. AOC holders or similar with some additional limitations (50% of flight must be international etc.) can buy things actually VAT free which is different from the VAT reclaim procedure. I did only find out about this once I got the first such customer claiming he did not need to pay VAT on my products and sending me the confirmation letter from German tax authorities about that.

Noe wrote:

think they meant it is an advantage if you didn’t pay VAT but achieve the VAT paid status. Then you pretty much win the VAT.

But getting a plane VAT paid status without paying the VAT in a company able to reclaim the VAT is trivial and not the “jackpot” as there are strings attached. The real win is to transfer this plane VAT free to a private person “releasing the strings”. This is what the old Danish route did achieve. But the crucial point was not that the Danish company could buy the plane VAT free but that it could sell it on VAT free to a private person.

www.ing-golze.de
EDAZ
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