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Do tax authorities assess taxes, duties, or other impositions in connection with any of the following events and, if so, at what rates and under what circumstances?
Sales Tax / VAT
The sale of an aircraft in Germany constitutes a supply (turnover transaction) pursuant to the Value Added Tax Act. Turnover transactions in aviation are in principle exempt from German VAT, in particular deliveries, modifications, repair, maintenance, chartering and renting out of aircraft designed for the use of entrepreneurs carrying out commercial air traffic in terms of predominant cross-border transportation, or transportation exclusively on distances abroad, and are not carrying out tax exempt transport of sick persons (rescue and emergency medical transport services), as well as certain supplementary supplies and services.
The Federal Ministry of Finance publishes every year a decree of airlines that fulfill these requirements.
If the abovementioned prerequisites for tax exempt supplies and services are not fulfilled, the sale/supplies and the respective other services are subject to the regular tax rate of 19 %. The export of aircraft in foreign countries (non EC) is regularly tax-exempt, but the seller must obtain proof of such export; however, the transaction may be subject to sales taxes or VAT in the jurisdiction in which the aircraft is situated at the point of sale.
Generally – No. However:
- German Air Travel Tax – The German Air Travel Tax (air travel duty) is levied in Germany since 1 January 2011. The tax is levied on the carriage, from a German airport, of certain civil passengers on most aircraft. The tax becomes due when the aircraft first takes off on the passengers flight and is payable by the operator of the aircraft. The amount due is dependent on the final destination of the passenger. German Air Travel Tax differentiates between three different categories, namely short-, medium-, and long haul (2012: EUR 7.50, 23.43, or 42.18).
- Carbon Emissions Scheme – With the beginning of the year 2012, the Aviation Emissions Directive is also applicable on air traffic. The Directive provides that, from 1 January 2012, the EU Emissions Trading Scheme shall apply to all aircraft flying to and from the EC. Under the scheme, only limited rights are assigned to aircraft operators to emit carbon, and they are required to purchase additional rights if their emissions exceed the amount of rights granted.
Finance (mortgage tax, promissory note tax, conditional sale tax, tax on loan payments, and tax on interest)
Mortgage tax – No.
Promissory note tax – No.
Conditional sale tax – No.
Taxes on loan payments and taxes on interest –
For corporate entities resident in Germany, corporation tax will be levied on the entire profit including the interest. The corporation tax rate for the current year is 15 percent. The repayment of a loan is not subject to tax.
Corporations resident outside Germany are subject to limited taxation only. If such corporation receives interest from loans granted to German debtors, the interest is regularly not subject to corporation tax, if no domestic permanent establishment is maintained.
Furthermore, the German trade tax has to be taken into account: Commercial trade tax has to be paid by any commercial enterprise, which is operated in Germany. Basis of taxation is likewise the profit as calculated for (corporation) income tax purposes, increased and decreased by certain amounts (including interest expense and rent/lease payments) as mentioned in the German Trade Tax Act.
Generally corporate lessors resident in Germany will be subject to German corporation tax on profits. Non-resident corporate lessors, who are operating their business in Germany through a permanent establishment, are subject to limited corporation taxation.
Capital withholding tax is not imposed on interest payments of a German debtor who is not a domestic bank or other finance institute. Interest payments to a German creditor are not subject to domestic withholding taxes. Withholding taxes are imposed on certain capital income and wages in Germany.
The import of civil aircraft is not burdened with customs; however, German importation VAT may be levied at the regular VAT rate (applied on the customs value) of 19 %.
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DISCLAIMER: The above information should not be relied upon by the reader for legal advice as it is intended merely to serve as preliminary guide to the laws and regulations governing the taxation of aviation and aircraft in Germany. The information intends to provide summary-level information about certain tax issues affecting general aviation and aircraft finance. Since these materials are general in nature, readers are encouraged to obtain legal and tax advice from their own professional legal and tax counsel based on specific facts and circumstances regarding their acquisition and/or use of aviation and aircraft.