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German police performing house searches of 0% VAT import customers

Of course if the saving is being passed on to me, that would be a different story!

The saving is passed to you because there are two distinct markets for light aircraft:

  • those which have always been owned by VAT registered entities (these are interesting to a VAT registered buyer)
  • those which have at some stage been owned by a non VAT registered entity (these are “VAT paid” and cost ~20% more, but a VAT regd entity can’t reclaim the VAT, so these are interesting mostly to non VAT regd buyers)

The same plane would be up for sale for 100k+VAT, or 120k VAT paid, respectively (assuming 20% VAT).

If it passed through the Danish VAT route it would (should ) be for sale at 106k VAT paid. The 6k was Mr Rungholm’s fee for owning the plane for 1 day

IMHO, IANAL, etc, the Danish 0 VAT route is safe if you bought it as a private owner. I say this because tax avoidance is completely standard in the private context. But not all people bought nice pricey planes in their own name.

As I said, I bet the OP has more to it than was posted, regarding the exact circumstances of the parties who were hit.

Administrator
Shoreham EGKA, United Kingdom

dublinpilot wrote:

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.

It works the same with passenger cars around here. If I buy a car on my VAT registered company, I can claim the VAT back (as long as it’s used solely for business purposes) and when I sell it, I have to charge VAT (which means the buyer can claim it back if he has that option). This isn’t a problem. Well, a buyer might be liable in case the seller failed to pay the VAT, so that’s a one thing one should watch for.

The difference is I don’t have to pay VAT when I import an “old” car from outside the EU. At least it used to be that way. Which means I don’t have to dig through history trying to prove the VAT was paid at some point and never claimed back.

The saving is passed to you because

That depends. If there are two aircraft of type X for sale.
Both are for sale from a private owner for €120K outside the scope of VAT.

If one got outside the scope of VAT because the owner suffered VAT at the full rate and wasn’t able to reclaim it, and the other got outside the scope of VAT because the owner brought it through Denmark and paid VAT at 0%, then I don’t think the saving was being passed on to me! I’d certainly be less inclined to buy the one from Denmark, all things being equal.

What I meant was that if the one that came through Denmark was for €100K I might think differently! But if they were both for €120 I’d be inclined to go for the other one. Less baggage.

It works the same with passenger cars around here. If I buy a car on my VAT registered company, I can claim the VAT back (as long as it’s used solely for business purposes) and when I sell it, I have to charge VAT (which means the buyer can claim it back if he has that option). This isn’t a problem. Well, a buyer might be liable in case the seller failed to pay the VAT, so that’s a one thing one should watch for.

As I said, that’s very country dependent. As someone explained earlier, that’s not the case in the UK. It’s also not the case in Ireland. Even companies can’t claim back VAT on new cars in Ireland (save for a small fraction of it in certain circumstances, or if they are dealers).

Martin wrote:

The difference is I don’t have to pay VAT when I import an “old” car from outside the EU.

How old are you talking about? Prior to the introduction of VAT would make sense to me. In Ireland (and I speak of that, because it’s the only system that I’m properly familiar with) you will pay VAT (and our vehicle registration tax) if you import it from outside the EU.

Like so much to do with tax, every country has their own versions of rules, and they don’t always follow logic!

EIWT Weston

dublinpilot wrote:

As I said, that’s very country dependent.

I know. And it’s not the whole story (I can claim VAT even when it’s not just for business, just not all of it). It used to be that the car had to be N1 (if I limit myself to vehicles under 3,5 tonnes) which meant that people had M1 cars (typically estates, wouldn’t work with a saloon or a sports car) modified to N1 by dealers so they could claim the VAT.

PS: For those not familiar with it, N1 is essentially a van (a vehicle for transport of goods), M1 is a passenger car.

dublinpilot wrote:

How old are you talking about?

6 months (since first registration) or 6 Mm on it, which is the definition of a new car in the EU law (AFAIK). If I get it within that period, I have to pay VAT here even if it was bought within EU (otherwise authorities would refuse to register it). That is IIRC, it’s been years since I was interested in this. For an aircraft, new is 3 months (since first entry into service) or 40 hours according to the same directive.

Last Edited by Martin at 08 Apr 20:17

Martin wrote:

Care to give some more examples?

Well, just a few different examples I can think of offhand:
- Danish T2L VAT cert available but only a photocopy, original missing;
- receipt for VAT paid on a value that looked rather extraordinarily small;
- private owner selling aircraft he bought upon import some 30 years ago, says he paid VAT then, but no documentary evidence at all available now.

Perhaps none of these are show-stoppers, but they would make you wonder whether a buyer could be taking on some exposure …….

Likewise where there has been a chain of private ownership, should one look for a complete chain of private ownership purchase/sale documents (they would not be “invoices”) back to whoever paid VAT at 0% or any other %? The theoretical answer is no, VAT is levied under EU law throughout the EU, private sales are not VAT-able, however I would be much more comfortable having some piece of paper to swat away the douaniers ….

Bluebeard
Ireland

Martin wrote:

The difference is I don’t have to pay VAT when I import an “old” car from outside the EU. At least it used to be that way. Which means I don’t have to dig through history trying to prove the VAT was paid at some point and never claimed back.

Are you sure? In Poland, part of the EU, when importing a car from outside the EU, it is ( ( price + tariff ) + excise tax ) + VAT (so VAT is paid on the base price + tariff + any additional taxes, e.g. excise tax). The VAT is deducted by eligible entities and the (price + tariff + tax) become the value of the car that gets amortized and so on. For planes this becomes a NOOP for companies (tariff at 0%, no excise tax), but for a car with an engine bigger than 2 liters the tariff + excise tax of around 20% make a significant difference in the “out of pocket” payment for any entity. Are the tax laws really that much different between the EU countries? I doubt it, if the “no VAT on used car import” held true, everyone and their uncle in Poland would be importing cars via that route, akin to the Dutch plane route.

If you meant “from inside the EU” then you’re right, but how is VAT due on a not-new plane bought within the EU? FWIW, to the best of my current knowledge, in Poland a light plane (under 1550kg MTOW – no idea who came up with that, how, nor why) that has more than 40 hrs TT or a CoA (or possibly, original “end user” invoice) that was issued more than 3 months ago is considered “used”.

tmo
EPKP - Kraków, Poland

The missing original VAT cert would to me suggest that the rest of the paperwork is, ahem, possibly likely to be conjecture

OTOH often people fall in love with a plane which is for sale, and buy it regardless, not worrying about details. And this is OK if you have enough money to cover the worst case.

The import 30 years ago, if it is in the UK, could have been covered by the 1980s amnesty (do a search for “amnesty” – I recall some posts on it).

Interesting that nobody has come up with any information on the original post in this thread. Has the German initiative totally died?

Administrator
Shoreham EGKA, United Kingdom

tmo wrote:

Are you sure?

I looked into it and I don’t see a way it could be done now. I know someone who said he has done it, years ago (he was hugely into American cars and bought his in Canada – closer to European specification AIUI). Perhaps some crappy implementation that got corrected. The calculation here should be ((price + shipping) + tariff) + VAT. I’m not aware of excise tax or any tax-like registration fees (there is something for cars meeting older emission standards to demotivate people from buying them, historical vehicles excluded IIRC, but I don’t think you can import anything older than 8 years anyway PS: again, historical vehicles excluded).

I guess the main reason I have cars in my mind as trouble free is because they’re less mobile and the market is huge.

tmo wrote:

in Poland a light plane (under 1550kg MTOW – no idea who came up with that, how, nor why) that has more than 40 hrs TT or a CoA (or possibly, original “end user” invoice) that was issued more than 3 months ago is considered “used”.

The relevant (well, I think it’s still in force) Council Directive defines means of transport in case of an aircraft as with MTOW above 1550 kg (except airliners that operate mostly internationally or some such – did I mention I hate tax regs? ). New is then up to 40 hours or 3 months since first entry into service. I guess they consider lighter planes sports equipment or something. The numbers are surprisingly low. The 0 % VAT route shouldn’t work with such new planes AIUI.

Complementing definitions are interesting. I have seen it before (complement of A or B being (not A) or (not B) when it should be (not A) and (not B)). However, if a definition of new uses “or”, definition of used has to use “and” (if you’re simply “flipping” the conditions). Right? OTOH who says law follows logic.

Last Edited by Martin at 09 Apr 08:22

Bluebeard wrote:

Well, just a few different examples I can think of offhand:

Thank you.

where there has been a chain of private ownership, should one look for a complete chain of private ownership purchase/sale documents

You might want to for a different reason – to do some poking around to verify all sales were legit. I’m not aware of a way to claim back VAT after it was paid by a legal person that is not VAT registered. You want to make sure that the country where VAT was due will always go after the owner at the time if there is any problem (if there is no proof or it looks shady). Assuming the plane was in service more than three months and did more than 40 hours before he sold it, no country after that should be able to levy VAT. As long as the plane wasn’t sold outside the EU and didn’t sit somewhere outside the EU for too long (generally too long would be more than 180 days/ 6 months). And it’s that country where you might want to inquire about some proof of VAT paid. OTOH with old planes, who knows what laws were in force at the time. I think I would prefer to pay the VAT again (on the price I paid) or accept lower resale value (to allow for VAT) to wasting time digging that out. It would have to be quite expensive to justify that.

I would be much more comfortable having some piece of paper to swat away the douaniers

AIUI, if you register the plane outside the EU, then they can get more aggressive. If it’s registered in the EU, they shouldn’t be able to touch it (unless it’s registered in France but then I assume they would poke in it at the time of registration). You might want to ask a lawyer about it, but this should be covered by EU law.

Last Edited by Martin at 09 Apr 09:50

I would be much more comfortable having some piece of paper to swat away the douaniers

I agree, because they are looking for a box ticking process.

The Q is not what is right. The Q is what they have in their briefing pack.

I obtained a Certificate of Free Circulation, for £200, via a guy who used to work for UK Customs and is now a VAT consultant. But that route is now closed; I got in just under the wire in 2005 when I went N-reg.

However I have since discovered that a Socata cannot need a CofFC anyway because it never left the EU and it’s VAT status is dealt with under some internal transfer scheme. THAT IS UNLESS it did leave the EU at some stage e.g. got sold to the USA, Switzerland or, wait for it… the Channel Islands! A “famous” GA personality got busted for VAT (he wrote about it in a forum) because his US-made G-reg plane was bought from one of the Channel Islands, and this happened I believe many years after he bought it. Reading between the lines, I think he had a tax inspection triggered by putting his plane into a company, etc… he did write that the UK tax inspector wanted to see his journey logs and checked them against airport logs.

So you need some form of proof that the plane has always been in the EU.

So the CofFC I obtained from UK Customs is in most cases a useless bit of paper really, but I am sure French Customs will love it I carry a lawyer-certified copy of it in the plane.

And that brings us to the journey log. Many threads here on this… I know you can trivially forge a journey log, but it’s the only defence you will have, short of digging out loads of service docs, airport invoices, etc, going back to when it initially entered the EU. And who is going to keep stuff like that? I keep some stuff for ever, but generally airport invoices etc (for a privately operated plane) I keep for 6 years which is the standard UK tax requirement (assuming no fraud took place). And fancy doing this to satisfy French Customs! It would take you months to get your plane back, plus huge legal fees because you will need a French lawyer who is familiar with this (€500/hr min?).

Administrator
Shoreham EGKA, United Kingdom
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