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Aircraft VAT / import VAT / getting busted upon landing in the EU (merged thread)

One problem in Spain is the incredible time they take to make a judgement.
The other aircraft that I mentioned was first tied up for a three year period while court judgments were made, all in the owners favor I might add, BUT STILL the Malaga customs defied the rulings and my friend had to give in and pay the Tax….
It then took a further 5 years to get a ruling against the customs office in Malaga who were ordered to re-pay the Tax with interest….I still don’t know if the refund was made I’ll have to ask because that happened in 2009.
Yes an incredible story!!

What about engine damage, by non-running for so long? Was it at least hangared? There is likely to be so much wrong with an aircraft, after being abandoned for so long.

A horrible story.

I have a Certificate of Free Circulation which I got from the UK Customs shortly before they permanently closed the office issuing them. This man (ex UK Customs) does a lot of work in that area and I would turn to him if this happened to me.

I would have tried to sue them, I think.

But how? In business, if you are owed money from another country, less than about 100k is not worth suing over, because the local lawyers you have to use will take you to the cleaners. Then the UK lawyers who instruct them will take you to the cleaners. 10k is what it costs to instruct a tax barrister for 1 day (been there myself).

Also the way things work in Spain (and France) is that if somebody in an official position is out to get you, they will get you. If you win in the courts, they will stab you in the back later. You can do a lot of things and up to a point they are free and easy, but when you p1ss off somebody big they will go after you. That is how the 3rd World runs too and a lot of people like it that way (compared to e.g. the high level of official transparency you have in the UK), but these people need to carefully maintain their “connections” and keep the officials “lubricated”.

Administrator
Shoreham EGKA, United Kingdom

They impounded my aircraft inside my own hangar. I was able to inhibit the engine keep silica gel plugs in the upper spark plug holes so for me no damage in the 9 months grounded. I was in contact with your man above, but there was nothing he could do for me at the time.

I still do not know if the Spanish release will work anywhere else in Europe, I had thought of getting the denuncia and the ACTA-Desprecinto, all translated into English and certified by a notary, whereby the reason for impounding would be clear and the ACTA-Desprecinto meaning that it was proven to be VAT paid. Plus of course the Sales agreement that states VAT paid in Germany by the seller and then of course the overhaul of the engine and propeller in the year 2007 that were VAT paid of course.
That could be good questions for your man above.

Is a “total solution” to this to obtain a Cert of Free Circulation?

When I got mine, one could get one for (essentially) nothing, by supplying documents showing VAT was paid.

Last I heard (maybe 2 years ago) the only way to get this is by paying the VAT on some “plausible” market value, which is obviously a huge waste of money, but if the plane is worth say only 50k then you can “buy” this document for ~10k (20% VAT rate).

This is another prebuy check item for any aircraft, not just N-reg. If you buy say a G-reg, its VAT status cannot be questioned in France or Spain but it can be questioned in the UK. And if it was imported without import VAT having been paid (very easily done) you have a big problem. Unfortunately most people buying a plane never check this.

Administrator
Shoreham EGKA, United Kingdom

So if buying a G-reg where VAT has not already been paid (e.g. imported N-reg, owned by a VAT registered entity in the UK and transferred to G-reg), would I be correct in thinking that simply paying the VAT and keeping a copy of the invoice showing the itemised VAT payment is all that is necessary? Or is there some additional official certificate required?

EGTT, The London FIR

imported N-reg, owned by a VAT registered entity in the UK and transferred to G-reg

That example would actually be a side issue.

If a VAT registered company buys a plane “£X+VAT” it pays the VAT. There is no VAT avoidance. It just immediately claims it back (subject to the repayment being approved by HMRC which can require the company to show a business plan, etc, but that’s a separate issue – I had to do that once) but the point is that it has paid the VAT. If it transfers it to another reg that doesn’t change anything whatsoever.

It that company later sells the plane, it must sell it “£Y+VAT”. If it fails to add the VAT when selling it, the buyer is safe. It is the company which (in the UK, anyway) is deemed to have charged VAT on the sale, and they must pay it to HMRC. (Yes this opens routes to various frauds which a buyer can do on the seller e.g. with a bogus VAT number, etc).

would I be correct in thinking that simply paying the VAT

Yes that should do the job, but

and keeping a copy of the invoice showing the itemised VAT payment is all that is necessary?

is open to question. Just because you have the purchase invoice showing the VAT doesn’t mean the VAT has been paid! The seller is not required to keep his accounts for ever (6 years in the UK) and you can photoshop a sales invoice easily.

When I got my Cert of Free Circ in 2005, HMRC wanted just my purchase invoice in order to issue it. However, I suspect two things were also relevant:

  • HMRC did some checking themselves (the dealer – Air Touring – had not yet gone bust at that point)
  • a French-made TB20 which was never physically exported out of the EU could never possibly have a “unpaid VAT” issue

The last point above makes the whole thing a complete farce, but try explaining this to a French VAT inspector (the major fear in 2005 on an N-reg) who can just impound your plane and laugh while you tear your hair out. In France, or Spain, he is the judge, jury and executioner. A UK VAT inspector would never try on anything that crude.

Or is there some additional official certificate required?

This point has been much debated. I have some notes here on what I found last time I was digging into it. It really does sound like the only definitive document is one of these

  • cert of free circulation
  • C88
  • IM4

Obviously many people will hope I am wrong.

Those on Euro-regs are “relatively” safe because under the EU VAT treaty an EU country’s inspector can challenge the VAT status of only

  • a non EU reg plane (e.g. N-reg), or
  • its own reg (e.g. F-reg can be challenged in France)

whereas an N-reg can be challenged anywhere in the EU. But if a plane was imported and somehow the import VAT didn’t get paid (historically true for thousands of planes around Europe, which simply got ferried and that was it) then the current owner obviously remains vulnerable.

There was an amnesty in the UK (G-regs) which involves specific dates and continuous residence in the UK after that.

Note that those (many) who imported via the Denmark zero-VAT route do have a legal cert of free circulation. (Actually Germany has been challenging this for German taxpayers, according to reports, but that is a separate issue, and could in theory happen in any country whose tax system seeks to set aside transactions without a “genuine purpose”).

The bottom line… I don’t know if there is a solution other than the above.

I do know that one aviation VAT specialist was approached about this c. 2 years ago and advised that declaring a market value and paying the VAT on it (a huge waste of money) is the only way to get a cert of free circulation.

If I was buying a plane which was or could have been imported, I would walk away unless it came with one of the three above documents, or in the case of a Euro-reg the dealer who originally imported it and sold it can supply proof that he paid the import VAT.

If I could not get those documents, I would want the price dropped by the VAT rate (20% in the UK). Controversial? You bet!

One problem is that of the people who did find solutions, very few will post them in a forum.

A longer reply than you wanted but often the world is like that

Administrator
Shoreham EGKA, United Kingdom

It is also okay if you have an original invoice for the imported plane. If the plane was imported by a dealer in (Germany) and sold to an individual, then the original invoice contains the VAT. If you have that you are safe. When the plane is sold to you as a private person there will be no VAT on top.

Certificates of Free Circulation are not issued aymore, I investogated that.

Last Edited by Flyer59 at 17 May 17:41

It is also okay if you have an original invoice for the imported plane

I am willing to believe that there is a ruling in Germany supporting this, but not many people will have such an invoice because it reveals how much the dealer has paid for it

That is also the exact reason not many have the C88…

Also today’s post suggests that the German VAT payment was ineffective in Spain, which takes up back to the start i.e. explain to a Spanish VAT inspector something about German law.

Certificates of Free Circulation are not issued aymore

Not anymore in the UK, for sure. Stopped c. 2006.

Administrator
Shoreham EGKA, United Kingdom
Those on Euro-regs are “relatively” safe because under the EU VAT treaty an EU country’s inspector can challenge the VAT status of only
•a non EU reg plane (e.g. N-reg), or
•its own reg (e.g. F-reg can be challenged in France)

Any idea where that is? I’m not arguing that it doesn’t exist…..just would like to have a read of it for myself and know where to find it. I might need it some day ;)

EIWT Weston, Ireland

I came over this Seneca at the Bergerac airport (LFBE) in the beginning of May. It had been impounded by the French Gendarmerie for failure to have paid VAT and “engines that were over TBO”, according to the person I spoke to.

Does anybody know anything about it?

LFPT, LFPN
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