Tax
10. What are the tax implications for operation and use of commercial aircraft?
Austria
See Sections 1, 5 and 8 above.
Brazil
Airlines are subject to complex tax obligations on ticket sales. Due to the number of variable factors such as the domicile of the airline and the availability of tax incentives, it is not possible to accurately summarize all applicable tax implications applicable to commercial aircraft operations.
Colombia
See answer to Question 11.
Czech Republic
In general, transactions with (and operation of) commercial aircraft usually have more beneficial tax treatment than aircraft operated and used for private (corporate) purposes only. For example, the sale and lease of aircraft to airlines operating for reward chiefly on international routes as well as necessary services provided in connection with such aircraft are exempt from VAT. Moreover, fuel used for the operation of commercial aircraft is exempt from VAT and excise duties.
Germany
See the answers mentioned already above, in particular the VAT exemption of airlines operating on a commercial basis mainly on international routes.
Greece
A company that operates commercial aircraft is subject to corporate income tax, pursuant to the Greek Income Tax Code (Law 4172/2013), as would be the case with any other company; there is no special taxation on the aviation business. As regards VAT, according to article 27 par. 1 (i) of the VAT Code, international air transport of persons, as well as the provision of related ancillary services, are exempt from VAT.
Israel
According to the prevailing Israeli tax law and ITA guidelines, an airline will generally be entitled to an exemption from income/corporate tax imposed in Israel in respect of profits generated by it on account of “international aviation operations”. According to the position taken by the ITA in this regard, the exemption encompasses and extends to income generated from ancillary services, which may be discerned as relating to the operation of international carriage and thus would not be deemed separate from the airline’s ongoing activity in the ordinary course. The exemption would therefore cover, for example, income generated by the airline from the sale and issue of flight tickets and payments received by it for: (i) overweight baggage; (ii) changes made to, and the upgrading of, tickets; (iii) the carriage of cargo and animals; (iv) the provision of personal services (food and beverages, etc.); and (v) accompanying children, the elderly and the like.
With regard to VAT, the sale of international flight tickets (regardless if concerning flights departing from or travelling to Israel) is generally exempted from VAT (zero-rated VAT).
Italy
The use of commercial aircraft is subject to the following charges (among the others):
– tax on aerotaxi passengers (see answer 8 above);
– passenger boarding duties – they are levied on the carriage of passengers from any Italian airport in accordance with Law No. 324/76. These duties are payable by the aircraft operator, but the aircraft owner is jointly liable with the operator if the latter is in default.
– landing and take-off duties – they are applied by Italian airports in connection with each landing and take-off of aircraft in accordance with Law No. 324/76. The amount due is dependent on the final destination and maximum take-off weight of the aircraft. These duties are payable by the aircraft operator, but the aircraft owner is jointly liable with the operator if the latter is in default.
Kenya
- Income tax
Kenya applies a source-based taxation system and therefore only income that is accrued in or derived from Kenya is subject to tax in Kenya. However, where a business is carried on or exercised partly within and partly outside Kenya by a resident person, the whole of the income from that business is taxable in Kenya on a worldwide basis. In this regard, the taxable income of resident commercial aircraft owners, charterers and operators derived from Kenya and outside Kenya is subject to tax in Kenya at the resident corporate rate of 30%. On the other hand, the taxable income that is accrued in or derived from Kenya by non-resident commercial aircraft, owners, charterers and operators is subject to tax in Kenya at the non-resident corporate rate of 37.5%.
Exemption from income tax on a reciprocal arrangement
Income derived from Kenya by a non-resident person who carries on the business of aircraft owner, charterer or air transport operator is exempt from tax in Kenya if the country where the non-resident person is resident extends a similar exemption to Kenyan resident aircraft owners, charterers or air transport operators.
- VAT
As discussed in question 1 above, the lease payments made in respect of hiring, chartering or leasing of aircraft (excluding helicopters), are exempt from VAT.
Mexico
Depends on the specific circumstances of the Mexican taxpayer, but normally costs associated to the operation and use of a commercial aircraft may be tax deductible.
Nigeria
Where the aircraft operated by a company resident in Nigeria, companies income tax is payable at the rate of 30% in any year of assessment on any profits accruing in derived from, brought into or received in Nigeria from the operation and use of the aircraft.
In the case of a non-resident company engaged in commercial air transport, companies income tax is payable at a minimum rate of 2% of the full sum of profits received from the carriage of passengers and goods into Nigeria. Section 14(1) of CITA provides that where a non-resident company carries on the business of air transport, its profit or loss to be deemed to be derived from Nigeria shall be the full profits or loss arising from the carriage of passengers and goods into an aircraft in Nigeria.
Also, a 5% tickets sales charge is payable to the NCAA. The charge is based on the total cost of travel paid by the passenger, inclusive of fuel surcharge or any other charge added to the total cost of travel.
There are also numerous fees and charges payable to the Federal Airport Authority of Nigeria. These include landing fees, fuel charge, port charge, check-in counter charge, concession fees, electricity fees, VIP lounges fees and so on.
Norway
See items 1, 5 and 8 above.
The VAT Act Section 6-10 states that supply and hiring out of aircrafts for commercial aviation activities shall be VAT exempt (zero-rated). The same exemption applies for supply of services that are directly connected to the building, alteration, repair or maintenance of aircraft used for commercial aviation. Furthermore, the supply of specific goods and services for use by aircraft in commercial aviation activities shall be exempt (zero-rated). The exemption only applies for aircrafts engaged solely in international aviation.
Panama
Commercial aircraft operators are subject to payment of income tax on the earnings for the commercial operation of the aircraft. They must charge and retain service tax (ITBMS) on all invoices for their services and remit this to the Tax Authorities.
Peru
In the event that the operating company is domiciled in Peru, all income obtained from its commercial activities is taxed with the Income Tax of the third category. The rate amounts to 29.50% of their net income.
If the operating company, a branch or permanent establishment of a foreign company, will only be taxed with income tax, those incomes from Peruvian source, applying according to the activity, a presumption that air transport activities between Peru and abroad, obtain net income from Peruvian source, equal to 29.5% of 1% of gross income.
It should be noted that according to Article 79 of Aviation Law No. 27261, National Commercial Aviation is reserved to Peruvians and/or Peruvians companies, excluding non-domiciled legal entities.
Portugal
A VAT exemption is available as long as the operator is an airline operating for reward chiefly on international routes. Fuel tax is also exempt.
Puerto Rico
FAA rules apply. There is no current State regulation.
Section 1113 of the Federal Aviation Act of 1958, as amended (49 U.S.C. App. 1513), establishes that no State (as such term is defined under subsection (d)(2)(E)) or political subdivision shall levy or collect any tax on or with respect to any flight of a commercial aircraft or any activity or service on board such aircraft unless such aircraft takes off or lands in such State or political subdivision as part of such flight.
Romania
The operation of aviation companies are subject to profit tax (16%), but it is allowed tax deductible accruals created for expenses with the maintenance and repairing of the aircraft and related components in accordance with the programs for maintaining the aircraft approved accordingly by the Romanian Civil Aeronautical Authority. Therefore, there is no special tax for aviation but the income obtained from aircraft sale/lease is taken into consideration when assessing the overall profit subject to 16% tax on profit.
In accordance with our domestic law, are VAT exempt the following:
(i) International transport of persons [art. 294 para 1 letter g],
(ii) rendering of services, including the transport and the services related to transport, directly connected with the export of goods [art. 294 para 1 letter c],
(iii) deliveries of goods that are dispatched or transported outside the European Union by a purchaser that is not established in Romania or by another person on his behalf, with the exception of goods transported by the purchaser that are used for the equipping or provisioning of recreational boats and private aircraft or any private means of transport. The delivery of goods transported in the personal luggage of travelers coming from outside the Community shall be exempt from tax, if some conditions are met [art. 294 para 1 letter b]
(iv) In the case of aircraft used by airlines mainly engaged in international passenger and/or goods transport, are VAT exempt the following operations:
a) delivery, modification, repair, maintenance, leasing and rental of aircrafts, as well as the delivery, l easing, rental, repair and maintenance of the equipment included or used on an aircraft.
b) delivery of fuel and supplies that are intended for use on aircraft.
c) supplies of services, other than those provided at point 1 above, performed for the direct needs of aircrafts and/or for its cargo [art. 294 para 1 letter i]
South Africa
- For VAT purposes, only persons who are carrying on an enterprise (as defined), and in terms of which taxable supplies exceeding R1 000 000 per annum are made, are obliged to register as VAT vendors in South Africa and levy VAT at 15% on supplies.
- Non-residents are only subject to income tax in SA on income from a source or deemed source in SA. Whether or not income is from a source or deemed source in SA will depend on the facts of each case, therefore if the operator or user of the aircraft is earning an income on the operation and use of the aircraft from a source in SA they may be liable for income tax.
Spain
The sole operation and use of a commercial aircraft would not levy, in principle, any taxation at source. However, a substantial physical presence of the operator in Spain might eventually constitute a permanent establishment, which would trigger full tax consequences.
Switzerland
See sections 1, 5 and 8 above.
United States (Miami)
Some states impose a use tax on the use, storage or consumption of aircraft in the state. In Florida, for example, when an aircraft is purchased in another state and then brought into Florida for use in Florida, then Florida use tax is due, unless a specific exemption applies. Generally, Florida’s six percent (6%) use tax, plus any applicable discretionary sales surtax, is due on an aircraft used or stored in Florida when: (i) the aircraft is purchased in another state, territory of the United States, or District of Columbia and is brought into Florida within six (6) months of the purchase date; or (ii) the aircraft is purchased in a foreign country and is brought into Florida at any time.