Tax

3. Will the relevant law require any sales, value added or other taxes to be payable on a sale/purchase or transfer of title/interest of an aircraft in that jurisdiction if the purchaser is a foreign entity and will export the aircraft to another country?

Austria

A taxable delivery in Austria is considered as tax-exempt export delivery in case that the aircraft is transported or shipped to a third country.

The aircraft can be transported or shipped (in terms of transporting by a third party) to the third country by the seller. In case that the purchaser is the one who transports or ships the aircraft, it is required that the purchaser is a “foreigner” (no seat or residence in Austria).

However, the seller must prove such export which usually requires Austrian customs export clearance and other evidence/documents supporting the export of the aircraft from Austrian VAT territory.

Brazil

If the seller is a Brazilian taxpayer, the sale may be subject to the ICMS and income taxes mentioned in section 1 above.  If neither the seller nor buyer is Brazilian then, since February 2004, Brazilian Law has provided that on the sale of assets “located in Brazil” Brazilian Capital Gains Tax (“BCGT“) is due.  To the best of our knowledge, however, the SRF (as defined in section 1) has not sought to impose BCGT on such sales of aircraft registered in Brazil since the inception of the law mentioned above.  We note, however, that there still exist uncertainties concerning whether the SRF intends to collect BCGT on the sales of aircraft between non-Brazilian parties and the methods the SRF would use to assess and collect BCGT on such sales.  We note further that if the SRF were to endeavour to impose BCGT on sale of the Aircraft each of the seller and purchaser would have valid legal arguments to challenge such applicability.  It is not possible to predict the outcome of such a challenge at this time.  

Colombia

In Colombia it is possible to conclude sale contracts with foreign parties providing that, as a rule, Colombian law shall apply. In this way, taxes and their treatment will be equivalent to those caused in the celebration of a sale when, both, the buyer and the seller, are Colombian persons.  

When the contract is concluded abroad but is related to a property that is located or registered (like aircraft) within the Colombian national territory, the Colombian law must be applied. It will be the Colombian law that regulates the entire legal relationship of a sale when the situation and location of the good commercialized is located within Colombia at the time of the sale. 

In this way, the sale of an aircraft, either through a contract concluded with a foreign party, or abroad will generate sales tax. It is not relevant to Colombian law, if the aircraft sold will enter the country through a long-term import, because this is not part of the grounds exempted from the tax. 

On the contrary, when one of the sales contract’s parties is foreign and the good that is the subject of the contract is not within Colombia, the time of sale of the movable property shall govern the contractual relationship with the rules of the other State. 

On the other hand, when a sale of an aircraft is held and then exported, it is necessary to consider that they are two different and independent chargeable events between them. That is, in the sale, taxes are generated by the mere action of the transfer of the domain, regardless of what will be done next with the good sold. Thus, whether export sales tax is generated or not, it does not affect the tax treatment of the purchase and sale of the aircraft at all. 

However, as will be mentioned below, the export of goods under the Colombian legal system is exempt from sales tax and customs levies. 

As always, each issue must be analyzed individually. 

Czech Republic

The sale or transfer of an aircraft is exempt from VAT in the Czech Republic provided that it is subject to export to third countries (non-EU) and the transport of the aircraft is organized by the seller, the buyer or a person empowered by either the seller or the buyer to transport the aircraft. Of course, the seller must prove, in cooperation with the buyer, that the aircraft has actually been exported, i.e. usually by customs export clearance and other evidence supporting the transport of the aircraft from the territory of the Czech Republic. Please note that the physical export of the aircraft must be realized within 60 days after the actual sale or transfer of the aircraft to the buyer. 

Germany

No, in such case, the transaction will be exempt from German VAT. Thus, a sale of an aircraft in Germany is rated 0% VAT if the aircraft is bought by a company from a non-EU member state and (after transfer to title) exported from Germany to a third country  (Section 4 No. 1a together with Section 6 of the VAT Act). However, it is important for the seller that the invoice shows that it is a 0% VAT supply pursuant to Section 6 of the VAT Act. In addition, the Seller must be able to prove such export by the appropriate documents stamped by an EU customs authority, respectively through the electronic export procedure. Therefore, the sales contract should include obligations of the purchaser to provide such evidence to the seller. 

Greece

According to article 24 par. 1 (b) of Greek Value Added Taxes Code (Law 2859/2000), export of goods to non EU countries, where the purchaser is a foreign entity not established in Greece and will export the aircraft to another country is exempt from Greek VAT.  

Israel

The sale of, or transfer of title/interest in and to, an aircraft by an Israeli resident to a foreign (i.e., non-Israeli) resident purchaser is subject to VAT unless exempted pursuant to applicable law. Moreover, the sale of an aircraft by an Israeli resident manufacturer/dealer may also be subject to income/corporate tax or capital gains tax (as applicable).

Italy

As mentioned, VAT does not apply if the aircraft is sold in Italy and thereafter exported by the foreign purchaser within ninety (90) days from the date of purchase. 

Kenya

Where the purchaser is a foreign entity which is not registered in Kenya and does not have a tax presence in Kenya, the following taxes will apply:

  • VAT

The exportation of taxable goods from Kenya is subject to VAT at the rate of zero percent (i.e. zero-rated supply). In this regard, the sale of aircraft to a person outside Kenya is an export of goods which is zero-rated for VAT purposes. Where an individual supplies zero-rated goods, the supplier is allowed to claim a VAT refund from the Kenya Revenue Authority in respect of the VAT portion incurred in making the zero-rated supplies.

  • Export levy

Export levy is charged on exportation of certain goods from Kenya. Sale of aircraft is however not chargeable to export levy. There are no other taxes applicable in Kenya on the sale of aircraft (exportation) to a person outside Kenya.

Mexico

In this case seller must treat the sale as exportation.  Seller is required to transfer VAT to the foreign purchaser at the rate of 0% (special invoice requirements have to be complied). 

Nigeria

The sale of aircraft is zero rated for the purposes of VAT by virtue of the Federal Inland Revenue Service Information Circular No. 9701

Norway

A sale of an aircraft in Norway for export is, as a starting point, Norwegian tax- and VAT-exempt (zero rated) if the purchaser is a foreign entity, cf. the Norwegian VAT Act Section 6-21.  

Panama

Answers to question 1 above apply, the nationality of the purchaser does not affect the general rules as Panamanian taxes are based on territoriality and not on the nationality of the parties. 

Peru

According to Article 1 of the General Sales Tax (VAT) Law, there is a tax on Purchases and Sales of movable property located in the national territory, which is carried out in any of the stages of the production and distribution cycle, whether new or used, regardless of the place where the contract is entered into or the place where the payment is made.  The rate of the VAT is 18% which includes the own rate of the VAT 16% plus a municipal promotion tax equivalent to 2%. 

Portugal

The transfer of an aircraft for export to a non-EU country shall not be subject to VAT in Portugal as long as the aircraft is made available to the purchaser outside Portugal. 

Puerto Rico

Except for the reciprocity requirement concerning the collection of sales and use taxes in Puerto Rico, the taxable items (as the aircrafts) sold for use or consumption outside Puerto Rico shall be exempt from the payment of the sale and use tax established in the PR Internal Revenue Code of 2011 (“the Code”), as amended, even when the sale takes place in Puerto Rico.  In order for the  taxable items thus sold to be exempt from the taxation, they must be exported within sixty (60) days as of the date of sale. 13 L.P.R.A. § 32053. 

Romania

In case the purchaser is a foreign entity who will export the aircraft to another country there is no sale tax and the operation is VAT exempt under the rule related to aircraft used by aviation companies who are mainly performing international transportation of persons and/or goods against payment; the proof of export is compulsory.  

South Africa

  • South Africa imposes an interest withholding tax on cross border finance provided by non-resident lenders to South African borrowers.  The obligation to withhold is subject to limited exceptions and applicable treaty relief.  Where there is an obligation to withhold the rate will be 15% subject to any applicable treaty relief. 
  • Where a gain is realized on the disposal of an asset of a capital nature, capital gains tax at an effective rate of 22.4% will be payable by an SA resident company. 
  • Non-residents are only subject to income tax in South Africa on income from a source or deemed source in South Africa. Further, if the non-resident is a resident of a country with which South Africa has a DTA, any such income will only be taxable in South Africa if it is attributable to a permanent establishment through which the non-resident operates in South Africa. 
  • VAT may be levied by the seller on the sale of an aircraft.  This is dependent on: 
    • Whether the aircraft is being sold as a going concern; 
    • Whether the aircraft is to be exported from SA after the sale; and 
      • If the seller (SA resident) is registered for VAT, the export of the aircraft will be subject to VAT at 0%. 
      • If the seller is not registered for VAT, provided that the seller obtains a VAT exemption ruling from SARS, there will be no VAT consequences on the exportation of the aircraft. 
    • The VAT status of the seller and the buyer. 

Spain

If a purchase or transfer of title is made by a foreign non-EU operator, this would be an exportation exempt from Spanish VAT as long the delivery of goods would be made outside the VAT territory. If the delivery takes place inside VAT territory, in order not to charge VAT to the buyer, the seller must obtain a proof of transportation of the good outside VAT territory.  

Switzerland

A sale of an aircraft in Switzerland for export is, as a rule, Swiss VAT-exempt, but the seller must prove such export which usually requires Swiss customs export clearance and other evidence supporting the removal of the aircraft from the Swiss customs and VAT territory. 

United States (Miami)

No, although a license may be required. Export control laws should be carefully reviewed to determine  whether a license will be required.