1. Will the relevant law require any sales, value added or other taxes to be payable on a domestic sale/purchase or transfer of title/interest of an aircraft?

In general each delivery/supply of an aircraft is subject to German value added tax (hereinafter VAT) of 19 per cent, if the aircraft is located in Germany when the power of disposal is obtained (Section 1 (1) No.1, together with Section 3 (7) of the German VAT Act (in German: “Umsatzsteuergesetz” or abbreviated “UStG”). 

Delivery/supply (in German: “Lieferung”) is defined in Section 3 (1) VAT Act as services by an entrepreneur by means of which the entrepreneur or a third party on its behalf enables the customer or a third party on its behalf to dispose of an object in its own name (procurement of power of disposal  – in German: “Übertragung der Verfügungsmacht). The power of disposal is transferred not only in case of a transfer of ownership but as well in case of a purchase made by installment payments over a longer period of time or a leasing, provided the contract includes a clause that upon payment of the last rate, the purchaser/lessee shall become the owner of the aircraft. 

The tax burden rests with the seller (Section 13a (1) No.1 of the VAT Act).  

However, such a transaction will be exempt from German VAT if it can be proved that at the time of supply, the aircraft was determined for (final) delivery to an airline operating on a commercial basis mainly on international routes  (Sections 4 No.2 together with Section 8 (2) No.1 VAT Act). The German Ministry of Finance publishes each year a list of German airlines that operate on that basis and are, therefore, exempt from VAT. Thus, the delivery/supply of an aircraft to such an airline is exempt from VAT and the invoice should mention the purchase price and 0% VAT (pursuant to §§ 4 No. 2, 8 (2) No. 1 VAT Act). 

Moreover, pursuant to Section 4 No. 2 and Section 8 (2) VAT Act not only the supply of an aircraft is exempt from VAT but all of the following as well 

  1. the supply, conversion, repair, maintenance, chartering and hiring of aircraft intended for use by a company who, for reward, carries out mainly international carriage or carriage on routes exclusively situated abroad; 
  2. the supply, repair, maintenance and hire of items intended for equipping the aircraft referred to in paragraph 1;
  3. the supply of goods intended for the supply of the aircraft referred to in paragraph 1;
  4. supplies other than those referred to in paragraphs 1 and 2 which are intended for the direct requirements of the aircraft referred to in paragraph 1, including their equipment and their loads.

Further, not only the direct supply of an aircraft to such an airline would be VAT exempt but as well any prior supply, provided that, at the time of such prior supply, it is clear (and can be proved) that the acquirer purchases the aircraft for the sole purpose of further delivering it to a VAT exempt airline (see judgements of the European Court of 19 July 2012 (C-33/11) and of 4 May 2017 (C-33/16)). In the first mentioned judgement the European Court held:  

1. The wording ‘operating for reward on international routes’ within the meaning of (…) must be interpreted as encompassing also international charter flights to meet demand from undertakings and private persons. 

  1. (…) must be interpreted as meaning that the exemption for which it provides also applies to the supply of an aircraft to an operator who is not itself an ‘airline operating for reward chiefly on international routes’ within the meaning of that provision but which acquires that aircraft for the purposes of exclusive use thereof by such an undertaking. 
  1. The circumstances referred to by the national court, namely the fact that the purchaser of the aircraft passes on the charge corresponding to its use to an individual who is its shareholder and who uses that aircraft essentially for his own business and/or private purposes, with the airline also having the opportunity to use it for other flights, are not such as to affect the answer to the second question.

In the latter judgment (cited above), the European Court expressly stated that not only the supply of services which takes place at the end of the commercial chain may be VAT exempt but also supplies of services made at an earlier stage as irrespective of the stage of the commercial chain in which the supply at issue is made, such supplies of services will be exempt if they are part of that commercial chain and it is clear (at such earlier stage) that the end user of such supply is a VAT exempt company. 

The two above cited court decisions have been incorporated in Part 8.1 (1-3) and Part 8.2 of the guidelines of the German Ministry of Finance that relate to the VAT Act (in German: Umsatzsteueranwendungserlass”)  

If the VAT exemption will be invoked by a purchaser who is not itself an airline operating for reward predominantly on international routes,  it is beneficial to have a statement already in the sale and purchase agreement that the purchaser acquires the aircraft for the purpose of exclusive use thereof by such an airline. 

In addition, the exemptions mentioned in No. 2 and No. 3 below have to be considered. 

a. If so, by whom, at what rate and are there any exemptions available?


2. Will the relevant law require any sales, value added or other taxes to be payable on an intra EU sale/purchase or transfer of title/interest of an aircraft?

An intra EU sale/purchase or transfer of title/interest of an aircraft is considered to have taken place in that EU country in which the aircraft finally ends up. Thus, if the aircraft is delivered to a company from another EU member state (than Germany) who wants to use it for its enterprise and thereafter the aircraft is brought to such other EU member state, then the purchase of the aircraft is taxable in that other EU member state (but not in Germany), even if the aircraft was sold by a German company and at the time of actual transfer of title, the aircraft was located in Germany (Section 6a VAT Act).  

However, it is important that the invoice shows the VAT identification number of the purchaser (from another EU member state) and that the sale is rated 0% VAT due to being an intra-EU sale. Further, the German seller must be able to prove, e.g. by a representation of the purchaser in the sale agreement or a new registration certificate, that the aircraft will be/has been brought to another EU member state after transfer of title. 

If, on the other side, the actual delivery/supply of the aircraft took place in another EU member state, but ends, according to the terms of the respective contract, in Germany (i.e.the aircraft was bought by a German company and (after transfer of title) brought to Germany, then such delivery/supply will be subject to German VAT (Sections 1 (1) No. 5, 1a (1) and 3d VAT Act).  

In such case, the tax burden rests with the purchaser (Section 13a (1) No.2 of the VAT Act).  

However, if the purchaser is a German (commercial) airline that predominately operates on international routes, then the exemption mentioned in No. 1 above will apply. 

a. If so, by whom, at what rate and are there any exemptions available?


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?

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. 

a. If so, by whom, at what rate and are there any exemptions available?


4. Will the relevant law require any export tax and/or customs duties to be payable on the export of an aircraft in the relevant jurisdiction?

No tax or customs duty is payable in Germany on the export of an aircraft from Germany.

a. If so, by whom, at what rate and are there any exemptions available?


5. Will the relevant law require any import (value added) tax and/or customs duties to be payable on the import of an aircraft in the relevant jurisdiction?

No customs duty or import VAT is payable if an aircraft is brought to Germany from another EU member state. 

However, if an aircraft originating in a non-EU member state is imported into Germany, it is (in general) subject to import VAT (Section 1 (1) No.4 of the VAT Act). The tax burden rests on the person who legally owes duties for a customs debt incurred on importation, namely the applicant (sections 13a (2) and 21 (2) of the VAT Act in connection with the EU Customs Code – Regulation (EU) No. 952/2013). 

According to customs tariff number 8802 400100 are civil fixed wing aircraft that have an empty weight of more than 15,000 kilogram exempt from customs duty. For others, customs duties may (in general) be charged if they are imported from a non-EU member state. 

Aircraft not registered in any of the EU member states may not have to pay customs duties and import VAT if they fly the aircraft into Germany under a temporary admission. Aircraft registered in the EU (that includes M and 2/ZJ registration) are not eligible for a temporary admission and therefore not allowed to fly in the EU Customs Territory without payment of customs duty and VAT – not even a single entry into the EU is allowed. Thus, all aircraft using an aircraft registration within the EU Customs Territory (Isle of Man, Guernsey and Jersey belong to the EU Customs Territory) must be fully imported at the first port of call in the EU if not already imported. 

However, no customs duty and import VAT will be charged in Germany if the aircraft is imported (from a non-EU country) by a German airline who is (i) the owner or the lessee of the aircraft and (ii) exempt from VAT as it predominately operates (on a commercial basis) on international routes (Section 5 (1) No. 2 and Section  8 (2) No.1 of the VAT Act; see exemption mentioned under No. 1 above). 

a. If so, by whom, at what rate and are there any exemptions available?


6. Will the relevant law require any stamp duties or fees and/or documentary taxes to be payable upon the execution of any aircraft transaction documents in the relevant jurisdiction?

There are no stamp duties or fees and/or documentary taxes payable in Germany.

a. If so, by whom, at what rate and are there any exemptions available?


7. Will the relevant law require any taxes or duties on registering the aircraft?

There are no taxes payable on registering an aircraft in Germany. However, the German Civil Aviation Authority “(Luftfahrt-Bundesamt” or abbreviated “LBA”) charges fees for registration of an aircraft which depend on the MTOW of the aircraft. 

Further, the acquirer of a new aircraft which was purchased in another EU member state but shall be registered in Germany, has to complete a certain form pursuant to Section 18 (10) VAT Act and submit it to the LBA. In that form, it has to notify the LBA, inter alia, as to whether it intends to use the aircraft for private or commercial flights. The LBA in turn has to notify the tax authorities accordingly. If any German VAT has become due on such intra-EU purchase but has not been paid, the LBA is obligated, upon request of the tax authorities, to withdraw the operating permit/license (Section 18 (10) No. 3 b) VAT Act).  

If any aircraft is imported from a non-EU state prior to registration of the aircraft in Germany, the LBA needs to be notified about such importation (including payment of the import tax and customs duty, if payable). 

8. Are there any luxury taxes payable in your jurisdiction in relation to aircraft?

There are no luxury taxes payable in Germany in relation to aircraft.

9. Will the relevant law require any income, withholding or other taxes to be payable in respect of payments made by an aircraft lessee to a lessor?

German VAT does not apply to lease payments as leasing does not constitute a supply/delivery in a fiscal sense if the lessee does not obtain the power of disposal in relation to the aircraft (see definition of supply/delivery and exception mentioned under No. 1 above). 

However, depending on the jurisdiction of the lessor for tax purposesthe income a lessor earns from leasing an aircraft to a German entity, may be taxable in Germany. Section 49 German Income Tax Act (in German: Einkommensteuergesetz” or abbreviated “EStG”) defines which income is taxable in Germany. Pursuant to Section 49 (1) No.2 (f) (aa) and No. 6 EStG income resulting from leasing payments is subject to income tax if the leased immovable asset is situated or registered in Germany.  

Pursuant to a judgement of the highest German Fiscal Court (in German: Bundesfinanzhof or abbreviated “BFH”from 2 May 2000 – file no. IX R 71/96; BStBL. 2000 II page 467ff – aircraft are considered to be immovable assets in the fiscal sense pursuant to Section 21 (1) No. 1 EStG 

Thus, income from leasing of an aircraft registered in Germany as well as the income generated from third party charter of a German registered aircraft could be considered income taxable in Germany. In other words(in general) the income of a lessor from an aircraft lease is subject to German income taxation pursuant to German domestic tax law if the aircraft is registered in the German aircraft register.

However, in many cases, German taxation of the income of a foreign lessor from an aircraft registered in the German aircraft register is limited or excluded by a Double Taxation Treaty provided the Double Taxation Treaty expressly states that aircraft are regarded as movable (and not as immovable) assets. Thus, the answer to this question depends on the taxation jurisdiction of the lessor and whether that country has a Double Taxation Treaty with Germany and the content of such Treaty. 

a. If so, by whom, at what rate and are there any exemptions available?


10. What are the tax implications for operation and use of commercial aircraft?

See the answers mentioned already above, in particular the VAT exemption of airlines operating on a commercial basis mainly on international routes. 

11. What are the tax implications for operation and use of corporate and/or private aircraft?

There is no distinction in the tax treatment in relation to the use of corporate and/or private aircraft as long as the aircraft is operated by (and on the AOC of) an airline operating for reward mainly on international routes (see the EU court judgement C-33/11 cited above). If, however, the aircraft is not intended for commercial use by an airline that chiefly operates on international routes, the exemption for VAT on supplies and in relation to import VAT cannot be invoked. Moreover, please see our answer to No. 15 below. 

12. Will the relevant law require any taxes to be payable on aircraft loan repayments (income tax and interest)?

German VAT does not apply to loan repayments as they do not constitute a supply/delivery in a fiscal sense (see definition above). In relation to income taxes on loan repayments (in connection with leasing) see our answer under No. 9 above. 

However, if part of the loan is a sale and lease back transaction between the financing bank and the borrower it must be examined whether the power of disposal over the object is actually transferred both in the context of the transfer of ownership and in the context of the subsequent transfer of use or whether the transfer of civil-law ownership of the object prior to use has a mere security and financing function, so that as a whole, a loan is granted and neither the sale nor the lease back is considered a supply in the fiscal sense which is subject to VAT (see BFH judgment of 9 February 2006, V R 22/03, BStBl II p. 727). Moreover, Section 4 No.8 a) VAT Act expressly states that the granting of a loan is exempt from VAT.  

However, if the person providing the loan and acquiring in that context the object under a sale and lease back transaction, just participates in a certain balance sheet preparation for the other person, it is considered a “supply of other services” under VAT law, as the recipient of such services receives an economic advantage as a result. Thus, such a transaction would not be exempt from VAT (BFH judgement 06 April 2016 – V R 12/15). 

In order to determine that, the overall circumstances of the individual case, i.e. the content of the contractual agreements and their respective actual implementation have to be examined, taking into account the interests of the parties involved. A mere (VAT free) loan is to be assumed, if the agreements on the transfer of ownership and on the leasing relationship or on the lease-back are in a direct factual connection or hire-purchase agreement is concluded on the basis of which the civil-law ownership reverts to the user at the end of the contract term or obliges the transferor to transfer ownership back.  

a. If so, by whom, at what rate and are there any exemptions available?


13. Does the relevant law have any environmental or carbon emission taxes or schemes?

Germany as a member state of the EU and as such a part of the EUs emission trading system (ETS) that is based on the Directive 2003/87/EC.  

Thereunder, each year polluters have to surrender a number of permits equivalent to the amount of CO2 they emitted in the preceding year. Polluters acquire permits through an annual allocation system, and some are issued by the member states free of charge. If polluters do not have enough allowances to acquit their previous year’s emissions, they have to buy additional permits at an auction or from other companies having a surplus. The EU puts a maximum cap on the CO2 emissions that are allowed to be emitted by restricting the number of permits available on the market. Thus, the theoretical concept is as follows: as issued permits become scarcer due to progressive reductions in the cap, the permit price goes up, providing emitters with an incentive to reduce their emissions if that is cheaper than buying permits.

Aviation was incorporated in the EU ETS, effective as of 1 January 2012 (Directive 2008/101/EC), and required all airlines departing or arriving at an EU airport to surrender allowances covering the emissions of all EU flights they had operated in a given year. Following an international outcry orchestrated by US carriers against the inclusion of foreign carriers in the scheme, the European Commission limited the scheme’s application to airlines operating flights in and between EU airports only (“stop-the-clock”). This was billed as a temporary measure to give ICAO time to agree on a global measure. When minimal progress was made at ICAO’s 38th assembly in October 2013, the clock was stopped again. In October 2016, the ICAO adopted a global market-based measure and agreed on a resolution on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which should become operational in 2021. Thereafter, the Commission proposed to extend the exemption indefinitely pending a review of the effectiveness of CORSIA. 

CORSIA has been established in order to monitor, report and offset any annual CO2 emissions from international civil aviation that are above 2020 levels. It will only apply to international fights, not domestic ones.  

Participation will be voluntary during the pilot and first phase (2021-2026) and will become mandatory for all states in the second phase, as of 2027. Exemptions would apply to flights from and to small island developing states, least developed countries, landlocked developing countries, and countries with low levels of aviation activity. Contrary to the ETS, which is a ‘cap and trade’ scheme that sets an upper limit for the total amount of emissions, CORSIA is an ‘offsetting scheme’, implying that emissions can grow, but must be compensated by offsets. 

14. Will the relevant law require any cargo, airport (departure) or passenger taxes?

Germany currently levies a ticket tax on departing passengers: the German Air Transport Tax (in German:  Luftverkehrssteuer”). The tax rate is differentiated according to the distance of the biggest commercial  airport in the country of destination from Germany’s largest airport, Frankfurt am Main. There are 3 categories:  

  • Annex 1 countries include the EU and EFTA member states, domestic flights, EU candidate countries and Turkey, Russia, Morocco, Tunisia and Algeria, which are taxed at EUR 7.46 (2018), respectively EUR 7.38 (2019) per passenger. 
  • Annex 2 countries are those not listed in Annex 1 and with a distance of not more than 6,000 kilometers, which includes countries in North and Central Africa, Middle East and Central Asia, which are taxed at EUR 23.31 (2018), respectively EUR 23.05 (2019) per passenger. 
  • the rest of the countries not in Annex 1 or 2 are charged at EUR 41.97 (2018), respectively EUR 41.49 (2019) per passenger. 

Such tax is payable by the commercial airline that performs the flight departing from an airport in Germany.  

According to the German federal government’s package of climate policies that was adopted on 16 October 2019 by the cabinet, the German Air Transport Tax will be increased from April 2020 on as follows: 

  • Annex 1: EUR 13.03 
  • Annex 2: EUR 33.01 
  • Annex 3: EUR 59.43 

The implementation of the planned changes is still open and there might be changes in the legislative process. 

Airlines that operate in Germany – including foreign airlines who have at least a branch office in Germany – are required to register with the relevant authorities. Airlines without a branch office in Germany who offer flights from German airports are required to appoint a licensed tax representative and to prove that by documentation to the relevant authorities 

The airline and its licensed tax representative will be jointly and severally liable for the tax. If a foreign airline fails to nominate a tax representative, the owners and operators of the aircraft will be deemed liable for that  tax. If the tax authorities suspect that the taxes will not be paid, clearance ttakeoff or landing may be denied 

Airlines that do not provide scheduled air services (i.e. charter flights) have to notify the main customs office  responsible for it at least three days prior to the respective flight. Tax debtors have up to 10 days after the end of a calendar month (in which the tax originated) to provide a tax declaration to the tax authorities. The airline or its tax representative is obliged to maintain records of the amount of tax due and the basis of its calculation. On the 20th day of each month the tax for previous month becomes due. 

15. Will the relevant law require any aviation fuel taxes?

Article 14 (1) (b) of Council Directive 2003/96/EC directs the EU member states to exempt energy products for use as fuel for flights other than private pleasure-flying from taxation under conditions which ensure the correct and straightforward application of such exemptions and prevent any evasion, avoidance or abuse.  Member states may limit the scope of this exemption to supplies of jet fuel (CN code 2710 19 21).  

For the purposes of the above stated Directive ‘private pleasure-flying shall mean the use of an aircraft by its owner or the natural or legal person who enjoys its use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities. 

Germany has put that Directive into law through Section 27 (2) of the Energy Tax Act (in German:  Energiesteuergesetz”) which states that aviation fuel (CN code 2710 12 31) which has a research octane  number of 100 or more and jet engine fuel (CN code 2710 19 21) may be used in aircraft for flights without payment of taxes unless it is for private non-commercial aviation. Commercial activity in the sense of Section 27 (2) of the Energy Tax Act is deemed to exist if the activity is carried out with an aircraft for remuneration with the intention of making a profit and the entrepreneur acts at its own risk and responsibility (§ 60 (5) of  the Regulation on Energy Tax). It is not necessary that the entrepreneur who performs the respective flights has a (commercial) operating license and an air operator certificate. 

16. Are there any other taxes specific to aircraft (not already mentioned above) in the relevant jurisdiction?

For airlines operating out of Germany, it might be crucial under what circumstances a permanent establishment (in German “Betriebsstätte”) is created in Germany.  

A fixed place of business or installation serving the activity of business is only deemed to be a permanent establishment if the company has the power of disposal of these premises that is not only temporary. There is a huge “grey area” and the question whether a permanent establishment is created is generally a case-by-case decision. 

Evidently a permanent establishment is created if a permanent place of business in which all or part of the  company’s activities are carried out is established 

A permanent establishment is also created if a fixed business facility serves the activity of the enterprise. The  business facility must be intended to serve the enterprise with a certain stability, i.e. for more than 6 months.  Business facilities of only a supporting or preparatory nature are not regarded as permanent establishments because of their merely ancillary nature. 

In general, if an airline acts on the premises of a contractual partner, this in itself is not sufficient to deem the  airline having the power of disposal or creating such facility. There must be additional circumstances that  lead to the creation of permanent establishment. 

There is a leading decision of the Federal Fiscal Court from 2008 stating that sufficient power of disposal only  exists if the foreign entity has a legal position which cannot be readily withdrawn from it without its cooperation or which cannot be readily altered without its cooperation. Moreover, if only dressing and staff rooms are used, this will, in general, not suffice for the creation of a permanent establishment.  

However, iJanuary 2019 the Federal Fiscal Court passed a resolution which indicates that a locker with the employee’s name and the name of the foreign entity on it, may already create a permanent establishment. 

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