Malibuflyer wrote:
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.
That’s a different situation, because it is a company importing for resale as part of their business. It is correct that they pay VAT when they import and the end customer never sees that, but they can also claim the VAT back when they resell it.
In our case, the customer is end user and imports the object him/herself. When I buy aircraft supplies in Switzerland from a local online shop, that shop has paid VAT when importing the goods (in many/most cases from the US). They then charge me Swiss VAT and reclaim the VAT they paid. When I buy the same supplies direct from Aircraft Spruce in the US, I am the importer and end user so I am required to pay Swiss VAT upon import and cannot reclaim it.
Basically, we agree as that is essentially what you are saying in your last post.
What many people do not know is that they can be asked for the proof of VAT for any object they carry through customs. In fact, it is highly recommended that anyone travelling with expensive equipment (e.g. camera gear, ski equipment, electronic bike, etc) keep the receipt for just that case. In principle, customs could ask to see the VAT receipts for all the high-priced laptops and even cars that travel everywhere but they seem to have just accepted that it is not worth their effort. Occasionally they do check cars, but the numbers of planes is much smaller and the unit value generally high enough that it is worth the effort to keep tabs and that is what happened in Italy.
UK HMRC can state you owe a tax and you have to prove you do not owe it.
Obviously that is an over-simplification but that is basically how the tax assessment system works. They can also do a “lifestyle assessment” where if they think (read: your ex wife told them; that is actually their #1 source of info) you have had £x income in previous tax year, they just assess you for the tax on that, and you have to prove you did not have that income.
Also Customs everywhere are pretty aggressive, and in the aviation sphere there is an awful lot of people who compensate for lack of intelligence with an excess of aggression 
There are very strong country variations here as to the burden of proof.
Peter wrote:
UK HMRC can state you owe a tax and you have to prove you do not owe it.
That is basically the same in Germany – the question is, however, what they accept as “proof”. If (as you indicate in earlier posts) an invoice stating that you have bought this car/watch/painting/whatever in the country and that contains the local VAT is generally not accepted because they can without any further evidence claim “an invoice is easy to forge”, then things in UK are actually quite difficult.
Peter wrote:
you have had £x income in previous tax year, they just assess you for the tax on that, and you have to prove you did not have that income.
If they can do that without any kind of evidence, you are really screwed in the UK. There is no way (not no practical way but no way at all) to prove that you did not receive a 1 million premium by a philippine company that way payed on an anonymous account on the Caymans. You simply can’t!
Fortunately the German system is much more constitutional with that respect: If the tax authorities want to collect tax on some income it is their job to provide evidence that this income actually exists. Yes, in some cases they can estimate the income – but they still need to produce evidence on how they estimated it and demonstrate proof that it actually existed.
chflyer wrote:
What many people do not know is that they can be asked for the proof of VAT for any object they carry through customs.
Oh yes – I still remember the report of that unlucky (or one can call it stupid) fellow who was stopped by customs on a ski slope between Switzerland and Austria wearing an expensive watch and when they told him he needs to prove that he not just bought it in Switzerland he answered “Oh no, I’ve bought it in the US just 4 weeks ago but when I went through customs at the airport nobody asked about it” ;-)
Malibuflyer wrote:
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.
Be very careful with such statements. You are again mixing up different concepts, that don’t go together.
IFRS, US-GAAP or other financial reporting frameworks can have major effects on the timing or amount of a Corporation or Income tax liability due. But they have no effect at all on the timing of a VAT liability. The timing of a VAT liability is determined by VAT regulation. (The same would be impossible in CT or IT because there are too many variables to cover them all by regulation).
Malibuflyer wrote:
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.
That is unfortunately not true. The tax authorities can seize goods which have not correctly passed through customs procedures. Subsequent sale to someone else doesn’t remove that power from the tax office. The subsequent purchaser has simply been subject to a fraud (they were told the aircraft was in free circulation, given an invoice as evidence, but it was not).
If the tax authorities would choose to exercise that power on an innocent subsequent purchaser is a different matter, and one that probably varies not just from country to country, but tax inspector to tax inspector, and probably even case to case.
Malibuflyer wrote:
That is basically the same in Germany – the question is, however, what they accept as “proof”. If (as you indicate in earlier posts) an invoice stating that you have bought this car/watch/painting/whatever in the country and that contains the local VAT is generally not accepted because they can without any further evidence claim “an invoice is easy to forge”, then things in UK are actually quite difficult.
That’s actually the same in the UK. The tax authorities are not the final arbiter of if tax is due or not. They can form the belief that it is due, and raise an assessment (bill) for it. The tax payer can choose to accept it, appeal it to the tax appeals system or appeal it to the courts.
In the appeals system or courts, it’s a civil matter in the UK, and falls on the balance of probabilities. You don’t have to prove to a judge that you don’t owe the tax, but rather that it’s more likely than not, that you don’t owe it. Though we do have some (controversial) exceptions to that in Ireland.
But once the inspector raises the assessment, the tax payer must decide if it’s worth their time and expense in appeal the assessment. This will relate to the amount involved, the cost of appeal and the strength of the case. If the assessment shows that you owe €500, and the tax inspector is clearly wrong, you might choose not to appeal and just pay it, because your professional fees in making the appeal will be more. If the tax involved is €100M and your case is weak, you might choose to appeal anyway as the potential upside is significant if you can convince the judge!
Malibuflyer wrote:
Oh yes – I still remember the report of that unlucky (or one can call it stupid) fellow who was stopped by customs on a ski slope between Switzerland and Austria wearing an expensive watch and when they told him he needs to prove that he not just bought it in Switzerland he answered “Oh no, I’ve bought it in the US just 4 weeks ago but when I went through customs at the airport nobody asked about it” ;-)
I think “stupid” is the more appropriate term in that case!
dublinpilot wrote:
The tax authorities can seize goods which have not correctly passed through customs procedures. Subsequent sale to someone else doesn’t remove that power from the tax office. The subsequent purchaser has simply been subject to a fraud (they were told the aircraft was in free circulation, given an invoice as evidence, but it was not).
This is simply not true – at least in Germany. There is plenty of existing court rulings on this as this is nothing special to aircraft but affects hundreds thousands of deals each day.
Up until 2004 when the regulation has been adjusted in Germany the end customer could only be held responsible, if it positively knew that the seller does not intend to pay it (so basically seller and buyer colluding to avoid the tax). Since 2004 the law also includes cases where the buyer “could have known if he had applied diligence one normally applies in business”. There is ample jurisdiction on what this actually mean in the last 15 years. And it is obviously depending on the value of the deal as the “normal diligence” is different for different deals. But there is a clear line in jurisdiction that if the seller is “reputable” from outside impression (so they are listed, have an adequate business presence (e.g. offices) communicate professionally, etc.) and if the price is in line with market pricing you could assume it is ok.
Or the other way around and coming back to your statement: If the purchaser has been subject to fraud, it is clearly not responsible for the VAT and the tax authorities can neither claim to get it from the purchaser nor can they seize the goods!
Coming back to airplanes: If a consumer buys the plane from a professional seller, receives an invoice stating the VAT and the seller actually behaves like a professional seller (e.g. has a webpage, the deal is not done on the parking lot of a highway, etc.) the consumer is fine and does not need to fear that he had to pay VAT if he was subject to fraud
Malibuflyer wrote:
This is simply not true – at least in Germany. There is plenty of existing court rulings on this as this is nothing special to aircraft but affects hundreds thousands of deals each day.
I’d be very surprised if there such such number of items being seized by the tax authorities!
I’ve no knowledge of German court rulings. But be careful that you’re not mixing up title issue with tax authorities powers to seize goods over which the holder has valid title.
But the thing about aircraft is that they are mobile. And if the aircraft isn’t properly imported into the EU, then you have to worry about the laws in any country that you visit.
If you landed in Ireland with an aircraft that hasn’t been properly imported into the EU, the authorities are perfectly entitled to seize it. The fact that you were resident in Germany and usually fly there, would be of no defence once you landed here. If you were based here, they probably would try alternative means of collecting the tax first. But if you were not, and therefore likely to move the assets outside the jurisdiction, then I’d suspect you run a high risk of the property being seized.
Have a look at the inspector’s manual here.
Inspector’s Manual
These are the rules that the tax inspectors are expected to follow by their bosses. In particular section 7.1 deals with seizing goods. Part of it says
Other goods, which may be detained or seized by Revenue officers, include the
following:
- Goods imported or exported without clearing Customs formalities or
without payment of import charges
Note there is no exemption for a subsequent purchaser. If it hasn’t been imported correctly, then it can be seized irrespective of how many sales have taken place afterward.
Yes that has always been the exact problem with unpaid aircraft EU import VAT.
Any EU country can grab the plane. Some are just much more likely than others…
However, they do need to satisfy themselves that the plane is not a temporary import case, like say a US based pilot who just flies into Europe. We did this some pages back, with some articles written by OPMAS (the guy who used to run the Danish zero-VAT route).
I wonder what the procedure is for doing that verification. Obviously they would start with FR24 and they will have the top level business subscription Then, google pretty well tells you where a plane has been (and where it probably has not been, unless it’s been flying between farm strips and probably at night ). They need to do this fairly quickly. Take the case of the infamous airport police training school in France (Biarritz?). When they walk up to a plane there (as they have done many times, with many more not reported on any forum) they can ask to see the various papers, but any further action must require a parallel search of the above sources to make sure the plane is not just a temp import.
Or the pilot may have a temp import certificate; I believe there is such a thing, used by ferry pilots who “hang around” the EU for maybe some weeks.
dublinpilot wrote:
If you landed in Ireland with an aircraft that hasn’t been properly imported into the EU, the authorities are perfectly entitled to seize it.
Good to know that in Ireland this seems to be completely different than in Germany. In Germany when you buy a Toyota Car manufactured in Japan or a Kia from South Korea, and you get an VAT invoice from a German dealer, you are perfectly fine. No need to worry about having to pay any import duties or import VAT if it turns out the importer did not pay the applicable import VAT/duty.
“Luckily” Ireland is a quite remote Island (from German perspective) because what you basically saying is that Irish authorities are perfectly entitled to seize any imported car bought in Germany because there is no way at all (at least if you did not import it yourself) that a customer of a German Kia, Toyota, Hyundai, etc. dealer can prove that import duties have been paid properly – 99% of buyers actually do not know if their car has been produced in the EU or imported and they do not have to care according to German regulations.
So you practically could only drive a German car in Ireland if you positively know it has been manufactured in the EU.
dublinpilot wrote:
I’d be very surprised if there such such number of items being seized by the tax authorities!
To the opposite: Despite hundreds of thousands of deals every day where a consumer buys some goods from a dealer that have been imported before and do not receive a certificate of free circulation or a receipt on the import VAT originally paid, actual seizure of goods is extremely rare exactly because the German tax authorities can not seize if the customer bought the good bona fide and received a VAT invoice even though original import VAT has not been paid!
Malibuflyer wrote:
Good to know that in Ireland this seems to be completely different than in Germany. In Germany when you buy a Toyota Car manufactured in Japan or a Kia from South Korea, and you get an VAT invoice from a German dealer, you are perfectly fine. No need to worry about having to pay any import duties or import VAT if it turns out the importer did not pay the applicable import VAT/duty.
I’m not sure why the sudden turn to cars when we were talking about aircraft.
But there are many more reasons why a car can be seized than an aeroplane! In my experience, seizure of cars is far more common than the seizure of aircraft.
Again see section 7.1 of the Inspector’s manual for seizure of goods (as applies in Ireland)
Inspectors Manual
But in your basic example, were a car is imported from it’s manufacturer in Japan and registered in the home country, the opportunity for evasion of import taxes is almost non-existent. The car is imported by the distributor in mass quantities. The distributor deals with the VAT at the point of entry (handled no doubt by a shipping agent).Customs won’t let it leave the port until that is organised. And then the vehicle’s documents have to be presented to the authorities for registration.
No tax inspector is going to waste their time looking into that, as the chances that they find something wrong is remote.
But try driving around Germany with an Australian registered car, and you might find it attracts more attention.
Malibuflyer wrote:
“Luckily” Ireland is a quite remote Island (from German perspective) because what you basically saying is that Irish authorities are perfectly entitled to seize any imported car bought in Germany
If you choose not to visit Ireland for fear of your vehicle being seized, then I’m afraid that is your loss. I have no fear of visiting Germany (as I’ve very happily done many times) because my vehicle might be seized.
But let me suggest that perhaps it’s more likely for my aircraft to be seized in Germany than yours in Ireland! I’ve not heard of an aircraft ever being seized here because of import irregularities. I’m not saying it never happened, just that it’s rare enough that I’ve never heard of it. But wasn’t there recent case of just such a thing happening in Germany to a Swizz pilot who had the rental aircraft they were flying into Germany on a day trip, seized on a technicality?
Sometimes, it’s easier to find flaws in someone else’s country than your own.
