VAT and import are a single design problem, solved at acquisition, not patched afterwards. We set the place-of-supply treatment, the Article 148 and Article 56 positions and the import route as one coherent plan — so input VAT is recoverable, the exemption is defensible, and the aircraft enters the EU on terms you chose.
The two VATs — import and transaction — and the exemption that sits across them are solved together. Each deliverable is a document your tax counsel and financier can rely on.
Import VAT at entry and transaction VAT across sale, lease and charter, each exposure quantified and its trigger named.
Place-of-supply, Article 148 and 56 treatment and the import route, reasoned as one plan rather than three opinions.
How input VAT is recovered or deferred, and the records that have to exist from day one to support the position.
Almost every expensive VAT mistake on an aircraft comes from solving one half of the problem and ignoring the other. Import VAT — charged on the customs value when the aircraft enters free circulation — and transaction VAT on sale, lease and charter are governed by different rules, but they are bound together by one fact: whether input VAT can be recovered depends on the structure that owns and operates the aircraft at the moment each supply happens. Decide the import route without designing the recovery, and a recoverable charge becomes a sunk one.
The place-of-supply rules are the connective tissue. Under Directive 2006/112/EC, the hiring of a means of transport, the chartering of an aircraft and the services around it are each located somewhere for VAT, and that location decides who charges whom and whether an exemption applies. Article 148 exempts supplies to qualifying airlines; Article 56 governs where the hiring of the aircraft is treated as supplied. Read together, they shape the leasing chain; read separately, they produce contradictions that an audit resolves against the taxpayer.
Our work is to design the whole position at acquisition: how the aircraft is owned, how it is leased, where each supply lands, which exemption is claimed and on what evidence, and how and where the aircraft is imported so that input VAT is recovered or deferred by design. Done at the outset, this is ordinary structuring. Done after the aircraft is bought and flying, it is remediation — slower, narrower and more expensive.
Input-VAT recovery is the single largest number in most aircraft VAT files, and it is the one most often lost by accident. It depends on a VAT-registered structure with a genuine right to deduct, an import routed through that structure, and a commercial use case that supports deduction. Each of those has to be in place at the moment of import. We build them in advance, so recovery is a planned outcome rather than a claim made hopefully after the fact.
Each event in an aircraft’s life has its own VAT treatment. Designing them together is what keeps them from colliding.
| Event | VAT question | What decides it |
|---|---|---|
| Acquisition | VAT on purchase; recoverable? | Seller status, structure, right to deduct |
| Import into EU | Import VAT on customs value | Route, structure, deferral mechanism |
| Lease | Place of supply; rate; exemption | Dry vs wet; Articles 148 & 56 |
| Charter | Exempt or standard-rated supply | Genuine commercial, international use |
| Sale | VAT on disposal | Status of parties; where supplied |
A position that is right on one row and wrong on the next is the usual shape of an aircraft VAT dispute. We reconcile the whole column.
An auditor reading a VAT file works down the supply chain and asks whether each link is consistent with the next. Was the aircraft imported through the entity that then claimed the input VAT? Does the lease characterisation match how the aircraft is actually operated? Is the exemption claimed at charter consistent with the place-of-supply treatment of the lease above it? Does the commercial-use case support the deduction taken on acquisition and import? A single inconsistency — a recovery claimed by one entity on an import made by another, an exemption that assumes a commercial operation the records do not show — is enough to unpick the position.
The defence is coherence built in advance. When ownership, leasing, import and exemption are designed as one plan and documented from the first supply, the chain reconciles because it was built to. When they are assembled separately and stitched together afterwards, the seams show, and interest and penalties accrue on the gap. We build the chain to read cleanly top to bottom, and we set up the records that let it be demonstrated on request.
Underlying all of it are the anti-abuse rules — the principal-purpose test and economic substance — which ask whether the structure has a genuine commercial rationale. A VAT design that is efficient because the operation is real and the chain is honest clears that bar; one that is efficient only because of the arrangement does not.
Generalised, with no client detail — an illustration of the reasoning, not a promise of an outcome.
A buyer acquires a jet intended for a mix of charter and private use and, left to default, imports it through a holding company with no right to deduct, claims input VAT recovery that does not belong to that entity, and runs a lease whose label does not match the operation. Three inconsistencies, one audit, an eight-figure unwind.
The designed version routes the import through a VAT-registered structure with a genuine right to deduct, aligns the lease characterisation with the real operation, positions the Article 148 exemption on the charter leg consistently with the place-of-supply treatment above it, and sets up the records from day one. The input VAT is recovered because the structure was built to recover it — and the chain reconciles when it is read.
Most expensive VAT outcomes trace to the same handful of errors. The first is sequencing: deciding the import, or signing the purchase, before the recovery has been designed — so a charge that could have been recovered becomes sunk because the importing entity had no right to deduct. The second is reading the articles in isolation: positioning the Article 148 exemption at charter without checking that it is consistent with the Article 56 place-of-supply treatment of the lease above it, and ending up with two rows of the file that contradict each other.
The third is the lease label that does not match the operation — a dry lease on paper, a wet lease in practice, or the reverse — which breaks both the characterisation and the exemption that depends on it. The fourth is claiming recovery in the wrong hands: a holding entity deducting input VAT on an import it did not make. The fifth is building the chain and never keeping the evidence, so that a position which was correct by design cannot be demonstrated when an inspector works down the supply chain link by link.
Each of these is a sequencing or coherence failure, and each is avoidable by designing the whole VAT position at the outset rather than assembling it from separate opinions. When ownership, leasing, import, exemption and recovery are planned as one and documented from the first supply, the chain reconciles because it was built to. That is ordinary structuring done early; done late, the same work becomes remediation, and the gap between the rows accrues interest and penalties while it is being closed.
This is the whole VAT design — import and transaction VAT, place of supply, exemption and recovery — set at acquisition. Our import VAT service focuses specifically on the import event and its mechanics. For a new acquisition we usually start here, because the import decision only makes sense inside the wider VAT plan.
Where the structure carries a genuine right to deduct and the aircraft is acquired and imported through it, recovery is designed in. The key is that the right entity does the importing and the commercial use supports the deduction — both decided before the invoice and the entry, not afterwards.
Article 56 governs where the hiring of a means of transport, including an aircraft, is treated as supplied for VAT. It interacts with the Article 148 exemption and with the dry/wet lease characterisation to decide who charges VAT to whom. Reading the two articles together is what keeps the leasing chain consistent.
The cleanest window is before purchase and import, but much can still be done afterwards — a corrective structure, a proper recovery claim where one is available, a records regime that supports the ongoing position. We start with an exposure map and set out what is recoverable and what has to be fixed.
Yes. We own the VAT and import structuring and coordinate it with your tax counsel, the operator and the financier, so the design, the filings and the operation all tell the same story.
We will map the exposure and set out a coherent VAT and import plan — in writing, within two business days.
Four details to start. We reply within two business days — or reach us on WhatsApp for a faster first word.