Peter wrote:
Worth pointing out that Lufthansa could not care less, because they are a VAT registered company so they just claim any VAT back right away
Talking about Lufhansa themselves (not its regional/national subsidiaries), their aircraft are also exempt of VAT because they are “used by airlines operating for reward chiefly on international routes” – VAT directive title IX chapter 7, article 148.(f). So no VAT to reclaim, none is ever charged, not even fictionally on the VAT return.
Peter wrote:
The UK has a weird exception that you can’t claim back the VAT on a company car and it is possible some other country has the same for aircraft.
Yeah, France has that as a general rule on all vehicles used for transport of persons or mixed persons/other (CGI Annexe 2 article 206.IV.2.6°) including aircraft; however VAT can be reclaimed on cars used exclusively to teaching driving (Article 273 septies A), for ski resorts (Article 273 septies C), resold new, company buses for personnel transport (driver + at least 9 other seats), rental cars (for the lessor, not the lessee), used (only) in public transport, and “utility vehicles”; roughly if it has only two seats in front and a large trunk in the back (not convertible to seats for persons), it is a utility car, even if it is the “utility version” of the Renault Clio or Twingo. Actual usage is irrelevant, the “use it was designed for” is the criterion. So the “utility version” of the Renault Clio or Twingo qualifies for VAT deduction even if used only for transport of persons. See https://bofip.impots.gouv.fr/bofip/1192-PGP.html/identifiant=BOI-TVA-DED-30-30-20-20170201 for all the details.
VAT on (20% of) company vehicles petroleum or ethanol-based fuel, (100%) lubricants and (100%) Jet fuel also can’t be deducted (CGI article 298) when VAT is not deductible on the vehicle itself, but VAT on electricity for charging electrical cars (not aircraft or boats) is (CGI Article 273 septies B). Gasoline will become 100% deductible in 2022, but (barring a regulatory change) gasoil fuel will stay 20% non-deductible.
Peter wrote:
Scenario 1 must be common (even though non VAT registered buyers obviously avoid aircraft sold “plus VAT” because they cost ~20% more)
Well, I’d be looking for it to be 20% cheaper than the equivalent VAT-already-paid aircraft.
Peter wrote:
Worth pointing out that Lufthansa could not care less, because they are a VAT registered company so they just claim any VAT back right away
Commercial air transport of passengers is generally an exempt activity. Companies carrying on an exempt activity can’t claim back VAT on their purchases.
However, luckily for Lufthansa, generally the VAT rate applicable to aircraft chiefly operating for reward on international routes is 0%. So they won’t lose out 
This rate may vary in different countries, but I doubt it would for any country with or harbouring the hopes of developing, a based airline.
Peter wrote:
Scenario 1:If that aircraft is later sold to a non VAT registered owner, it must be sold “plus VAT” and the new owner should now have a proof of VAT paid, which will be valid, but it will be just an invoice; it won’t ever be anything fancy like a C88.
Indeed an invoice is the most you can realistically hope for. The Irish tax authority’s guidance to their inspectors tells them to look for evidence of VAT paid such as an invoice. Of course an invoice is open to challenge, just like any evidence. Is it a forgery? Was VAT reclaimed by the purchaser? etc. But it’s prima facia evidence of the the VAT being correctly accounted for.
Peter wrote:
Scenario 2:If that VAT registered owner de-registers from the VAT scheme (there is a defined procedure for that, which involves paying to Customs the VAT reclaimed over past X [time]) while still owning the aircraft, it must be sold “without VAT” and the new owner will not have a proof of VAT paid, and can’t get one because the original owner has probably chucked away the paperwork The only easy way to get one will be to declare the aircraft (obviously, at the lowest possible value you can get away with, and if possible with some damage ) to Customs and pay the VAT; I know someone who did exactly that; it cost him about 5k GBP.
Be careful. You’re mixing up issues here. The procedure for refunding excess VAT reclaimed generally applies to people who were not required to register for VAT, but who voluntarily elected to do so.
But often (perhaps in all states? Can’t be sure without checking them all!) there is a requirement to self account for the VAT on assets held at the time of deregistration. So if you own an aircraft on which you claimed back VAT on the purchase of, you may have account for a transaction as if the company soled the aircraft to itself and account for the VAT on that sale.
Here is the UK guidance on it. Look at section 7 for how this works
HMRC Guidance
Your difficulty here might be producing paperwork that anyone understands! If I was dealing with such a scenario, I’d contact the VAT authorities, explain what I was doing and provide the workings for the VAT return and ask them to issue a letter confirming that the VAT had been paid on the aircraft self supply, and not reclaimed. They should have little issue doing that, if they have visibility of the transaction and payment at the time that it takes place.
Peter wrote:
In view of Scenario 1 above, I reckon just an invoice must be sufficient (well, perhaps not in Italy ).
It is not “just an invoice” – it is an invoice including VAT. This is the normal case and it is obviously 100% proof that VAT has been paid by the current owner.
This is not an “aircraft thing”. It happens hundred thousands of times each day that a consumer in the EU buys goods from a business which imported it (and therefore had to pay import VAT). And in non of such cases the consumer gets any information on the VAT and duty paid by the importer but “just” a domestic invoice including VAT.
Just imagine what would happen if tax authorities in all of those cases would say "but you need to present the original import VAT receipt or a Cert of Free circulation.
So your Scenario 1 is simple: Keep the invoice and you are fine.
Malibuflyer wrote:
And in non of such cases the consumer gets any information on the VAT and duty paid by the importer but “just” a domestic invoice including VAT.
That may be true in the EU, but in Switzerland all invoices show what portion is VAT, even a cashier receipt at LIDL or ALDI.
Agree with the rest. That certaily applies to purchases within the country asking to see proof of VAT. Not so obvious if an article is brought across a border between EU countries.
chflyer wrote:
That may be true in the EU, but in Switzerland all invoices show what portion is VAT, even a cashier receipt at LIDL or ALDI.
Perhaps my wording was to complex: Obviously also in Germany (and all other countries I know, the portion of VAT the consumer paid is visible on the receipt.
I was talking about the Import-VAT the importer paid when bringing this good into the EU – that is not visible to the consumer when you buy a Chinese made something at Aldi. And you do not need to care about.
Exactly the same with airplanes: When a consumer buys an airplane from a business he will get an invoice that will proof that the consumer has paid VAT to the business – and therefore there is no need to worry at all if the business has paid all VAT/duties on import.
Well, there is the old debate regarding whether a vat invoice is a proof that vat was paid.
Clearly it isn’t a proof of anything, especially after a few years when the issuer is not able to confirm its validity.
The invoice may have never been paid at all
Peter wrote:
The invoice may have never been paid at all
Which does not matter at all – at least not under German regulation and also not internationally at least if the seller accounts under IFRS ur US-GAAP (and I guess also in most national accounting regulations) !
When the delivery has occurred and an invoice is issued (which is typically a sufficient proof that arrangement exists, amount is fixed and determinable and collection is reasonable), the revenue is recognized and hence the tax liability accrues. This is independent of whether the buyer actually paid the invoice.
Important to mention that the VAT is owed by the seller, not by the buyer – so if the buyer does not pay the bill for whatever reason the seller still has to pay the tax.
This is independent of whether the buyer actually paid the invoice.
Yes; same here, for accounting purposes, profit etc is made when the invoice is generated, and remains thus unless the customer has provably gone bust (then you are allowed to write it off) but that is nothing to do with evidence of import VAT paid to Customs.
Also an invoice is even more trivial to forge than a vaccination certificate And practically all companies will never co-operate on confirming an invoice of theirs is legitimate (that’s just how most companies run nowadays) plus few keep any records after a few years. In the UK you are supposed to keep that stuff for 6 years after the end of the accounting period, but for the aircraft VAT context you are likely to need much longer.
Peter wrote:
that is nothing to do with evidence of import VAT paid to Customs.
Might be different in the UK, but in Germany (and in the rest of EU) it has.
When I buy, let’s say, a DJI drone (which I know is manufactured in and then imported from China) as a consumer at a local toy shop, all I need to take care of is that I get an invoice that states the VAT. My duty is done (literally).
I do not need to worry if import VAT has been paid by the importer, I will never see an import VAT receipt (and no certificate of free circulation) and if the importer has not paid the import VAT I can not be held responsible – not for the import VAT and certainly not for any interest on the not paid import VAT.
Also if I sell that drone to my friend, I can sell it to him “VAT paid” and he doesn’t need to worry what the original importer did.
Peter wrote:
Also an invoice is even more trivial to forge than a vaccination certificate
Sure – but that is a different thing! Typically tax authorities need give evidence if they believe the invoice you present is false?
What is the point? You should never buy an airplane (or anything which is worth more than a few bucks because any kind of documentation you could get with it might be forged?
