Browse by Question

Tax Regulations

Taxation plays a crucial role when it comes to aviation. It is no surprise that tax law is one of the most recurring topics aviation lawyers face on a day to day basis.

Unlike other areas of aviation, taxation can be very broad and is often very different between countries. In an ever growing globalized world, aviation lawyers require to provide sound advice to the different actors in this industry, most importantly, when money is at stake.

In recent years, a general consensus has seemed to appear that excessive taxes striking aviation have flourished, slowing down competitiveness and reducing the rate at which the industry grows. Certainly, complex taxation on the aviation industry has a negative impact on economic and social development.

Aside from ordinary taxes, many countries in Latin America impose taxes or fees on aviation-related services to finance local development, including Mexico, Nicaragua, Costa Rica, Peru, Ecuador, Guatemala, Colombia and El Salvador. Many international and local associations strongly oppose such taxes on the basis that the revenues generated are not reinvested in the aviation industry.

Moreover, since the aviation industry may be very sensitive to price changes, taxes often tend to reduce the number of aircraft transfers and sales as well as passenger demand, leading to a loss in economic activity due to decreased demand for aviation-related services, such as tourism.

The aforementioned phenomenon is more clearly seen in airport infrastructure projects. In Mexico, for instance, a new airport for Mexico City was announced by Mexico’s formal federal administration back in 2014. The vast majority of the financial resources for the development and construction of the airport would be obtained by increasing the airport use tariff of the actual Mexico City international airport, and although such measure was not very well welcomed by Mexican airlines, it would have had secured the project’s repayment; however, in 2018, with more than approximately 30% construction progress, the recently inaugurated federal government announced the cancellation of the project based on alleged corruption. Although the project was cancelled, the investors continue to be repaid with the actual Mexico City airport use tariff. This has caused the Mexico City airport use tariff to be one of the highest in the world at the expense of airlines abandoning their current operations in the airport, and passengers paying for and inexistent airport.

In some European countries new taxes have been introduced during the last decade as well under several names, such as “air passenger tax”, “air transportation tax”, “air travel tax”. These taxes vary between USD $4 and USD $26, depending on the destination. The International Air Transport Association (IATA) and the International Civil Aviation Organization (ICAO) have actively worked to reengineer how these taxes are charged in an effort to boost a more dynamic aviation network in Europe.

In spite of the fact that taxes will continue to be a sensitive matter for the industry, the truth is that they play an important role for securing the economic, social and political development and growth not only of the aviation industry itself, but of entire regions. This is why L2B aviation expert lawyers have committed to summarize the most relevant tax information on the aviation sector in each of the jurisdictions where L2B members are present, hoping the reader may find in this report relevant information to facilitate surfing the intricate fiscal regimes across the world.

This publication should not be construed as legal advice on any specific facts or circumstances.

The contents are intended for general information purposes only.


Juan Carlos Machorro

Santamarina Y Steta, Mexico

Share this article