Martin wrote:
@Peter I would imagine the “commercial purpose” relates to companies as that is their reason for existence. If you set up a company that doesn’t produce any value, it just reduces your taxes, this could apply.
How many start up companies die before they even break even? A lot. Throw in aviation and its even more. Anyone ever hear of the expression, "How do you make a million $ in aviation? Answer Start with 2 million dollars.
VAT is still a topic with lots of variations in different countries of the EU.
if Achim’s company buy a car as company car, they pay VAT and get it reimbursed as a VAT rgistered company. If my company buys a company car, I pay a higher rate on an already higher base price and I can’t claim back VAT on vehicles.
Don’t start with Italy, they have a more complex VAT law structure.
Where does all this leave private transactions in used aircraft within the EU?
If I as an EU resident private individual buy a used aircraft from another EU resident private individual (neither of us being VAT registered), and that aircraft went through the Danish 0% process at some past time under the ownership of some previous owner, with the usual Danish certificate being on file, am I exposed to a VAT claim now following a ramp check say in Germany, Italy etc?
If this were even a theoretical possibility, it could seriously depreciate the value of all “0% VAT” aircraft.
Generally a sale within the EU between two non-VAT registered persons (private individuals) is not subject to VAT. So if there was a liability it would be with the person who imported it and paid 0% VAT.
However, some countries might have legislation to say that if a VAT liability is unpaid, that it can attach to the asset itself. It wouldn’t surprise me at all as “New means of transport” is a hot issue for VAT, with a lot of efforts over the years to find ways around it. So countries could well decide to implement such a system.
Also there is the danger that customs simply seize the aircraft (under various powers) while they investigate. In the end you get it back, but you could be a very long time without it while they investigate.
The trouble here is that each country will have their own anti avoidance laws, and it’s next to impossible to know those of each country that you might visit.
So if there was a liability it would be with the person who imported it and paid 0% VAT.
What about stolen goods? Do you ever get a good title? I don’t know, and I don’t know if this is relevant to unpaid VAT.
However, some countries might have legislation to say that if a VAT liability is unpaid, that it can attach to the asset itself
Some liabilities definitely do e.g. unpaid landing/handling/parking fees, and possibly fines for major stuff like busting the French prohibited zones which have been variously reported at c. €10k (never seen a reference for that). Some airliners have been famously impounded at major airports.
But there is always this grey area with any aircraft which you have not owned from new, in that you never know where somebody landed and didn’t pay the landing fees, etc.
And, as I have often written, it’s easy to get away with not paying, with so many airports having nobody there when you want to pay. You might fill in a form but it could be a year before they deal with it. I’ve been asked to pay 2x at a few places, so now keep receipts for at least a year.
I think in practice this sort of thing very rarely causes a problem. Probably, most airports will give up chasing a small amount e.g. below 100 quid, after some months. IME, having seen this a number of times via poor airport accounting procedures, they initially contact the owner address (the US trustee if N-reg) and hassle them. The trustees in particular really hate this work and can get quite stroppy about it.
But also people tend to not advertise on pilot forums that something like that happened.
Also there is the danger that customs simply seize the aircraft (under various powers) while they investigate. In the end you get it back, but you could be a very long time without it while they investigate.
Exactly.
No idea how one could safeguard against this. You could look in the journey log, for an idea of the general exposure. I’d look at foreign flights within the past year. Usually there will be very few of those. Also if the seller looks shifty that might be another clue 
I know the above is mixing VAT with Title, but the persons looking for you might be the same ones.
C210_Flyer wrote:
How many start up companies die before they even break even? A lot. Throw in aviation and its even more. Anyone ever hear of the expression, "How do you make a million $ in aviation? Answer Start with 2 million dollars.
What that has to do with it? It’s no coincidence that I didn’t use the word profit. I’m talking about companies that don’t render any services, don’t manufacture anything, don’t add anything, it was never intended, they exist just as funnels for money. Authorities don’t like this. Well, I imagine they don’t like any structure that lowers taxes but there is a limit to what they can successfully attack.
Bluebeard wrote:
Where does all this leave private transactions in used aircraft within the EU?
Generally speaking, sale between two EU resident, non-VAT registered legal persons should be VAT free. But tax laws are complex, can contain weird provisions and are country specific. So it’s hard to write something general (even if I was a lawyer specialized in this). It’s worth investigating who can get screwed and how much in a particular case (i.e. what’s your exposure).
PS: One example where it can get interesting is if you were to buy an aircraft from someone like C210_Flyer who moved into EU. When you change residence, you can bring your plane at 0 % VAT. But you can’t sell it within a certain period. Seller should be liable for that but you want to be sure.
Stolen goods are a different issue – nemo dat quod non habet – in general the seller can’t give better title than he has himself.
Martin wrote:
It’s worth investigating who can get screwed and how much in a particular case
I posted my VAT questions above because as a potential purchaser I’ve looked over a number of EU-resident pre-owned aircraft document files in the past year. In most cases the VAT paperwork has had some questionable aspect, been incomplete or even absent. I am well aware that intra-EU transactions among private individuals are not chargeable to VAT. Some sellers claim that their pride and joy could not have been registered in Germany (say) unless VAT had been paid; this may well be true, but no VAT history means it may not be possible to change the registration in future, and such indirect evidence will be of little use when ramp checked on some bleak windswept airfield. Tax inspectors expect to see paper documents – seize first and get explanations later may well be their best way to put pressure on the operator.
I don’t know how we can investigate who gets screwed – we can just assume the person holding the asset gets screwed. If Italy (say) decides the Danish VAT system was deficient or was exploited in bogus or sham transactions, it seems we have little practical protection waving a Danish certificate.
I deal with a lot of tax issues in my professional life, but this is a very specialised area requiring specialised advice.
Let me add that a search here for
VAT
digs out some other VAT related threads, which may be useful to someone wanting to learn more.
Bluebeard wrote:
I don’t know how we can investigate who gets screwed – we can just assume the person holding the asset gets screwed. If Italy (say) decides the Danish VAT system was deficient or was exploited in bogus or sham transactions, it seems we have little practical protection waving a Danish certificate.
Since we’re talking about some kind of anti tax avoidance provision, only the law and practice in the country where tax was possibly avoided should matter. And if the aircraft is EU-reg, I don’t think they can question VAT status unless it’s registered in that country. You probably know more about taxes than I do. Where do you see a problem?
Bluebeard wrote:
In most cases the VAT paperwork has had some questionable aspect, been incomplete or even absent.
Care to give some more examples? I’m still bugged that we have to pay taxes on old planes. Especially since no one (AFAIK) has to keep records indefinitely.
Martin wrote:
I’m still bugged that we have to pay taxes on old planes
Martin the age of the aircraft is irrelevant (with one exception). You mentioned cars, but cars are a unique situation in some countries. If you buy a truck, VAT will always be owed on its sale, until someone buys it who is not in a position to claim back the VAT. The principal of VAT is that the final “consumer” pays VAT and nobody else. So “Business 1” does something to make something. “Business 2” enhances it (the “Value Added” in “Value Added Tax”). Business 3 + enhances it further until it’s eventually sold to a consumer (non-business). Nobody up to the final consumer should pay any VAT. They may pay it over to the previous business, but they claim it back from the tax man.
Once the consumer pays the VAT, they can’t claim it back, and any transactions after that are irrelevant for VAT (some important exceptions, but not relevant to the discussion).
It doesn’t matter if it tax 5 seconds or 50 years for it to get from business 1 to the consumer. VAT keeps passing along until the final consumer pays. So if you’re buying an old aircraft and have to pay VAT on it, it’s because the previous owners were businesses who did not pay the VAT.
The only exception that I can think of off hand, where age is relevant, is if the asset was built prior to the introduction of VAT. Generally those items are outside the scope of VAT. So very old aircraft are probably outside the scope of VAT.
Care to give some more examples?
I presume he’s referring to missing invoice, or a receipt that doesn’t show any VAT on it, or an invoice that doesn’t identity the aircraft or missing a VAT number. Or of the 10 owners of the aircraft, details of the sale between 1 in the middle is missing.
Personally, I wouldn’t buy an aircraft that came through the 0% route without a lot of careful contemplation. It’s probably 100% correct, but do I need the hassle, if someone else got the saving 
Of course if the saving is being passed on to me, that would be a different story!
