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German police performing house searches of 0% VAT import customers

Today, the German police performed several house searches with airplane owners that have used the Danish company OPMAS to import an airplane with 0% VAT into the European Union.

This follow similar police actions in Italy. The Danish 0% VAT model was very popular until its abolishment some two years ago. The state attorneys accuse airplane owners of setting up a fraudulent model to avoid paying VAT.

The main accused appears to be the company Röder and its officers. Röder is Cessna's main distributor for Germany.

What are they hoping to achieve?

The Danish route gave you a 100.000% legal Certificate of Free Circulation.

Is it a harrassment of high net worth individuals? The UK tax people do that all the time; it's become standard practice. Any businessman will give them £10k-30k to get them off his back, which makes it very cost effective.

Administrator
Shoreham EGKA, United Kingdom

Quoting the court order:

Es besteht daher der Verdacht, dass die Zwischenschaltung der dänischen Firma OPMAS nur zum Schein erfolgte und dazu diente, eine Umsatzbesteuerung der vorgenannten Lieferungen zu 19% Umsatzsteuer gemäß §§ 1, 3, 12 UStG im Inland zu vermeiden.

Rough translation:

Therefore there is reasonable suspicion that inserting the Danish company OPMAS [in the deal] happened only in pretense and served the purpose of avoiding VAT taxation of the before mentioned delivery at 19% in Germany according to §§ 1, 3, 12 VAT code.

In German tax law, constructions that have no business reason but are only done to avoid taxes can be deemed invalid. As importing a private airplane into Germany/EU is subject to VAT, going via this company in Denmark can be seen as an illegal construction.

This legal risk has always been known. Given that it's easy to identify the importers and that airplanes are not cheap, the tax office came to the conclusion that it's worth pursuing. I think we will eventually see a ruling of the European Court of Justice (ECJ) but until then EU citizens will be subject to prosecution and will have to pay a lot of money (tax office gets what it wants immediately, you can go to court to ask it back).

Interesting...

The UK Customs tried to challenge the Danish route and failed, though I don't know what they actually did.

In German tax law, constructions that have no business reason but are only done to avoid taxes can be deemed invalid

Same here. But this can be reduced to absurdity. For example, a man has £100k savings and his wife is not working, so he gives the £100k to her and she gets the interest tax free. Are the German tax authorities going to prevent inter-family gifts if made in the direction of a lower tax liability?

I never did the Danish route, though it was offered to me in 2002. I thought the lawyer's fee was outrageous

Administrator
Shoreham EGKA, United Kingdom

Are the German tax authorities going to prevent inter-family gifts if made in the direction of a lower tax liability?

No, the tax code clearly specifies the allowed gifts over a period of time, depending on the level of your relationship. If there's one thing that Germany excels in, it's the effectiveness of its taxation. You can rape children and get out in 3 years but if you avoid taxes, you'll be in the can for 10.

I never did the Danish route, though it was offered to me in 2002. I thought the lawyer's fee was outrageous

Yes, these models usually work by sharing the tax savings between yourself and the lawyer, that's why lawyers like these models. Don't have to produce billable hours.

I've just heard that Italian police have forced some pilots there, who did the Danish 0% VAT route, to pay the VAT.

Administrator
Shoreham EGKA, United Kingdom

Well under EU law you can either optimize where you imported it, or you can't. Of course people did it to avoid VAT. Anti-avoidance trumps everything in most jurisdictions however it will come down to whether is is avoidance or evasion.

EGTK Oxford

I think most jurisdictions nowadays have a broad paragraph against financial constructions that only serve to avoid tax without a general business purpose. They would use that against the 0% VAT pilots. While that is most likely going to get them convicted in the respective country, is is quite likely that the ECJ in Luxemburg will set the national courts straight -- a few years after.

Having said that, an airplane purchased by a consumer is a good just like everything else so there's no reason for 0% VAT. That has been addressed a few years back now the question is what to do about the people that used this route. Not a lot of cases but each single case is big enough to make it worthwhile.

I think the number of people who followed the Danish route is HUGE.

Not just GA but countless business jets, helicopters, etc.

I think the one lawyer was processing something of the order of one per day, for maybe 10 years? And he wasn't the only one offering that.

How was the market value calculated by the Germans? If they do it fairly (which they must) then the MV is open to argument, with factors like damage history coming into it. This is alleged tax avoidance, not tax evasion.

Administrator
Shoreham EGKA, United Kingdom

But if I go buy something in Lithuania rather than the UK to save 5% VAT, it comes down to freedom issues. I think it will end up in ECJ. It doesn't matter whether 0% was right. It was the law in Denmark at the time.

EGTK Oxford
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