Further to Lawrie Walford’s fine article in last month’s issue of European Business Air News, ‘Does anyone really understand fuel taxes in Europe?’, we say ‘Well, a little, maybe.’

That VAT and MOT (Mineral Oil Tax) generate confusion for flight dispatchers of charter and corporate flight units in the USA is no surprise to us at VATAmerica. Begun in 1997, our aircraft division now assists over 400 US and other aircraft in obtaining refunds of EU VAT and MOT. Although there are Europe-wide VAT and MOT rules, each country manages to implement the rules slightly differently. That’s the main glitch.

As noted and lamented in Mr Walford’s article, VAT and MOT are generally not problematic for US or other commercial air passenger traffic as exemptions are provided courtesy of the EU sixth VAT directive and the EU customs code, and comparable Swiss provisions. However, application of the EU VAT and MOT rules to charter, corporate or non-business flights is not straightforward.

Let’s start with VAT. Most countries in Europe will not charge VAT on fuel uplifts to any type of US aircraft at a ‘friendly’ airport; that is, an airfield designated as a customs clearance facility. In the event of an incorrect VAT charge, relief from the fueller or from the tax authorities is normally available. However, Germany, France, Austria, Italy and Switzerland are exceptions. Fuel uplifts to all non-commercial aircraft in these five countries typically attract local VAT.

VAT incurred by charter operators and business aircraft is refundable in Austria, Italy and Switzerland in accordance with local rules governing refunds of VAT to foreign businesses, although Italy only refunds to companies established in other EU member states (and then only after years!). In Germany, VAT incurred by aircraft operators established outside the EU is normally ‘blocked’ and thus non-refundable (but good faith efforts for relief at the pump – especially by charterers – are often successful). We believe this position by Germany, favouring EU purchasers, contravenes the EU VAT directives and would be declared unlawful if challenged. French fuellers normally exempt uplifts to charter operators under simple exemption letters provided in advance of the uplift.

As to MOT, non-charter business and personal aircraft will not find any opportunity for relief,

other than simply arranging to purchase fuel elsewhere. However, for (wet) charter operators, the

MOT position is similar to the VAT rules outlined above. Most EU countries, including France, provide automatic MOT or local fuel excise tax exemptions for US and other charter aircraft. But of course, not Germany, Austria, Switzerland or Italy.

In Germany, charter operators may obtain an MOT exemption certificate from the national or state customs agency, thus becoming listed on an official exemption roster and receiving the customs certificate mentioned in Mr Walford’s article. Second, some fuellers will apply the exemption upon presentation of the aircraft’s air carrier certificate, and some fuellers will entertain requests for adjustments of previously paid MOT. Finally, there is a German MOT refund mechanism allowing refund for uplifts up to two years after the invoicing date.

Austria, Switzerland and Italy all have separate MOT refund procedures, and the most favorable process in Italy can be applied by non-EU as well as EU charterers.

The availability of VAT and MOT refunds is subject to certain procedures and time limits varying by country.

Just in case life wasn’t complicated enough for our US flight dispatcher, VAT is not solely an issue for fuel. All aircraft operations (including commercial) will incur VAT on EuroControl and crew hotel expenses, and

non-commercial operators will also incur local, often refundable, VAT on various ground handling and other operating expenses. VATAmerica has prepared charts of refundable VAT on aircraft operating and crew expenses by country. See www.vatamerica.com/aircraft.html

Natalie Braier, Senior VAT specialist, VATAmerica