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German police performing house searches of 0% VAT import customers

if I go buy something in Lithuania rather than the UK to save 5% VAT, it comes down to freedom issues

I am sure Achimha will be here in a minute, quoting a German regulation which prohibits import from Lithuania

Thus far, he has never disappointed

As regards the Danish route, my vague recollection of how it worked was that the aircraft was owned by the lawyer for a day, after which it was "secondhand" and thus zero-rated. But obviously there must be a threshold so if e.g. he (or some other 3rd party) owned it for say a month, and maybe flew it in Denmark, that would be unchallengeable.

The really interesting thing would be how exactly the "airport policemen" in France, Germany, and now Italy, determine how much VAT is due. It's obvious they cannot objectively determine the fair market value.

The other route to getting a Certificate of Free Circulation, which I know has been available here in the UK, for people who somehow ended up with an aircraft for which they had no VAT documents, was to declare a market value for it and pay the VAT on that value. Obviously, this gives you better control over the MV determination.

Administrator
Shoreham EGKA, United Kingdom

They would do MV at the time. Quite simple.

EGTK Oxford

They would do MV at the time. Quite simple.

Can you please elaborate?

Administrator
Shoreham EGKA, United Kingdom

I am sure Achimha will be here in a minute, quoting a German regulation which prohibits import from Lithuania

No, as I said the countries will most likely establish that it was an abusive construction designed to avoid taxes. Then the ECJ will take a very different point of view. This happens all the time, the national courts are weak on the European freedom rights.

However, I am not convinced the 0% VAT payers will prevail. Denmark's VAT rule might have been non compliant with EU regulations.

I think the number of people who followed the Danish route is HUGE. Not just GA but countless business jets, helicopters, etc.

I doubt there are a lot of privately owned helicopters and jets. One would typically establish a corporation owning these assets so VAT is irrelevant. A lot of the private owners might not want to fight over this for 3-5 years and just pay.

The really interesting thing would be how exactly the "airport policemen" in France, Germany, and now Italy, determine how much VAT is due. It's obvious they cannot objectively determine the fair market value.

That is very easy. They take new list price of the planes and it's up to you to come up with evidence that it should be less. That's how the tax authorities approach such issues. Also there were payments made for the airplanes for which there are paper trails (unless you paid cash in which case they get you with the new list price).

They take new list price of the planes and it's up to you to come up with evidence that it should be less.

But this supports my point. How are you going to "come up with evidence"? You can't.

About the best you can do is dig out some adverts, but in GA the prices shows will be 20-30% higher than what was actually paid.

For dealer sales this is because the dealers know that if they advertise the actual price, everybody will mark the whole market down 20-30%.

For private sales this is because few want to admit how much they lost, so most private owners don't want to tell even their friends how little they got for it.

In user groups, actual prices are not normally discussed because everybody else gets really upset.

And many adverts are purely wishful thinking. I see TB20GTs for sale at €220k. I might get €150k for it, maybe 160k with the TCAS in. I expect these adverts are up to please a wife hostile to the man's hobby, to please a bank which demanded the sale of the plane as a condition of rescheduling a loan, etc. I know one pilot whose bank told him to sell a plane and a heli as a condition of a bank loan. Often, the sale never actually takes place and at those prices it certainly won't.

Sure this process can be carried out, but not objectively in a day or two. You would collect evidence of actual values paid, and evidence of how damage history affects them (the more the better of course). You get statements from dealers on how much they would pay. Etc. You then present the wad of paper to the tax people and pay VAT on that.

Digging out a "new" price list will be a lot of fun for many types A 1960 Cessna might be $10k; I'd happily pay the VAT on that.

Maybe they are using some simplified method but I'd like to know what it is, and why people can't appeal against it if it is grossly over.

Administrator
Shoreham EGKA, United Kingdom

I don't think you need to come up with a market value of the plane, based on the price of similar planes. VAT is normally due over the actual sales price, and there's no need to disclose that price to anybody but the tax authorities. So just dig out the bank transfer details, bill of sale or whatever of the actual sales transaction, and that will determine the VAT. Since lawyers were involved in this deal, it should not be that hard to find the paperwork.

After all, if you go to a supermarket and buy a pint of milk, and somehow get a discount on that pint of milk from the supermarket owner, you pay VAT over the discounted price, not over the advertised price, right?

OK; that makes sense.

But can anybody actually confirm this is what the French / German / Italian Customs officers are actually doing?

Administrator
Shoreham EGKA, United Kingdom

I tend to agree that this will end up in the ECJ.

It will be worth pursuing for someone. The lawyer who oversaw the scheme if no one else.

Where a scheme involves importation through more than one EU country, it's a big hard for one authority to set it aside without agreement from the other authority.

For example, if I bought a new iPad while on holidays in the US, and returned to Europe, but instead of coming home first to Ireland, I went to Paris and went to meet a client. Then it's customs in France that would seek to collect the VAT and duties from me on it.

At that point, I'm free to travel home with it to Ireland without fear of further duties.

I think it would be hard for the Irish authorities to set this transaction aside even if I admitted that I simply left airside in Paris so that I could pay the duty to the French government.

There is a concept in EU VAT law about unjust enrichment, and paying VAT twice (you pay 0% VAT, as distinct from not paying VAT when something is exempt) may very well fall foul of that.

There are however special rules generally covering "new means of transport". Thinking about it I can't recall seeing any for "used means of transport" though.

It's a complicated area, involving multiple jurisdictions and an overarching EU policy and court. I'd be surprised if it didn't end up there if individual jurisdictions seek to set it aside.

EIWT Weston

But can anybody actually confirm this is what the French / German / Italian Customs officers are actually doing?

Peter if I read the original post correctly, this isn't about landing in another country and getting confronted by the customs officer. Instead this is about the tax authorities in the home country taking an interest in it. They will seek to negociate a settlement, and failing that will raise an assessment and seek to collect it. At that point the taxpayer can challenge it in the courts.

The value will can be agreed between the tax authorities, or set unilaterially by the tax authorities and challenged in court by the tax payer. Either way, there is no rush to come up with a figure in a day or two. It will be a long drawn out process.

I would equally think it unlikely that the aircraft will be impounded in the mean time, as removing the aircraft from the country is unlikely to remove the tax bill, and the aircraft owner is likely to have plenty of significant assets left in the country for the tax authorities to collect from.

EIWT Weston

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

Though I can't quantify this, there is evidence in Bremerhaven. I have spent many days at the airport working since 2007, and it was fairly common to see a non "D" aircraft passing through. I'd speak to the occasional pilot, who would tell me the that aircraft was being imported through Denmark.

Home runway, in central Ontario, Canada
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