As governments balance revenue generation with regulatory oversight and sustainability goals, operators face a complex global landscape. Around the world it seems that political convenience can trump economic logic. “As long as business aircraft are perceived as a luxury rather than an essential tool for commerce, innovation and regional connectivity, the industry will be unfairly burdened with excessive taxation and restrictive legislation,” says TSH aviation managing partner Thierry Huguenin.

The US has long been a favourable jurisdiction, with depreciation incentives, tax deductions for business use and a supportive regulatory framework, although there are calls for higher taxes and usage fees under the pretext of environmental concerns. But the US tax system embraces multiple layers of federal, state and local structures, and a simplification of these would not only support industry growth but also enhance compliance and operational efficiency.

“The overall direction of the new administration remains unclear,” notes MySky head of aviation tax Ryan DeMoor, “and this unpredictability makes it difficult for operators to plan ahead and navigate compliance effectively.”

“Accelerated depreciation is a job creator,” says Trident Aircraft president John Galdieri. “I sincerely hope the current administration reinstates the Section 179 Bonus Depreciation (currently being phased out) as it has wonderful long term positive effects on employment and the economy.” A significant number of aircraft under Trident’s management are there because the owners value the asset as a business tool, and tax treatment of the depreciation helps the business justification. Each new jet that comes under its management employs at least two full-time pilots, and the company frequently hires four full-time crew (three pilots and a technician). The trickle-down is that even the light jets are pushing well over $1million a year into the economy and help justify Trident’s 20-person ground and air staff.  

In contrast, Europe presents one of the most challenging and highly fragmented tax environments, with high rates of VAT, costly carbon emission schemes and increasingly restrictive airport access policies. Not only that, there are varying applications and interpretations of EU directives, leading to inconsistencies and complexity.

“Countries such as France and the UK are known for substantial VAT on aircraft purchases, landing fees and operating costs,” says SkyShare CEO Cory Bengtzen, “and they also tend to have more stringent regulations around emissions and noise restrictions.”

Regulatory pressures and taxation policies are increasingly being used to shape environmental policies. “The push for environmental responsibility has led to higher costs and, in some cases, outright operational restrictions,” says Skylark Aviation Expert managing director Benjamin Sinclair. The UK’s recent increase in Air Passenger Duty (APD) shows how taxation can be used as a tool to influence travel behaviours. Similarly, France has introduced a solidarity tax on air travel of up to €2,100 per departing passenger, which applies to all departing flights and is intended to fund global development and environmental initiatives. “However, these measures can sometimes have unintended consequences, potentially incentivising inefficient flight patterns and increasing carbon emissions,” says DeMoor.

In 2024, APD rates ranged from £14 for domestic to £78–£607 for international flights, depending on distance and class. While business jets are taxed at the lower reduced rate, the cumulative cost impacts operators’ competitiveness. VAT at 20 per cent on maintenance and charter services adds further strain. “Environmentally, the UK participates in CORSIA and enforces its own Emissions Trading Scheme (UK ETS), requiring carbon allowances,” notes Weekend Jets MD Christopher Oldfield, “and post-Brexit regulatory misalignment with the EU also complicates cross-border operations.”  

At the European level, the EU Emissions Trading Scheme already imposes significant costs on operators, and the introduction of the Carbon Border Adjustment Mechanism will add more. In addition, the ReFuelEU Aviation initiative requires all aircraft operators to use a minimum percentage of SAF, starting at two per cent in 2025 and increasing to 70 per cent by 2050.

While SAF is critical to reducing emissions, it currently costs at least twice as much as conventional jet fuel. And as fuel is one of the largest operating expenses, this significantly increases the cost of flying. “The bigger problem is that the policy creates a competitive imbalance,” says Sinclair. “European operators must comply, while their non-European competitors are not subject to the same rules, in particular tankering, which is not banned elsewhere and paradoxically increases fuel burn and eventually emissions. This weakens European business aviation by making operations more costly and less competitive, potentially leading companies to relocate outside Europe.”

The growing number of indirect aviation tax schemes and fuel and CO2 regulations serve a variety of purposes, including funding state budgets, financing security screenings and inspection services, supporting infrastructure and public transportation projects, noise abatement initiatives and subsidising SAF uptake. Additionally, they create financial incentives to discourage shorter flights, promote the use of quieter and more fuel-efficient aircraft, and encourage the development of all-electric aircraft. But the costs associated with these regulations vary widely. “Passenger taxes range from as little as €1 to as much as €2,100 per passenger,” says FCC Aviation chief executive Tobias Konik. “Compliance with emissions regulations involves purchasing carbon allowances or offsets, which can cost anywhere from a few euros to around €70 per tonne of CO2. Since your aircraft typically emits between five to 10 tonnes of CO2 per flight within Europe, this translates to a cost of €350 to €700 per flight. Additionally, you must pay regulatory fees and dedicate significant time to managing compliance or outsource to a third party.”

Regional aviation in the Caribbean is being systematically undermined by high taxation, uneven policy decisions and a preference for foreign carriers over homegrown airlines; operators are struggling and more than 150 have been forced to close their doors. Without decisive intervention, it risks losing even more, an outcome that would cripple its economies, isolate its people and further erode the connectivity that binds the region together. Montserrat Airways CEO Nigel Harris says: “Regional aviation is far more than just a means of transport; it is the lifeblood of Caribbean trade, tourism and economic integration. Yet, despite its critical role, it is being systematically undermined by high taxation, uneven policy decisions and a preference for foreign carriers over homegrown airlines.”

Simultaneously, billions have been poured into constructing large, debt-laden airports that have become economic liabilities and, to recover costs, governments have introduced a web of punitive taxes and fees. These have however caused ticket and charter prices to skyrocket, making travel unaffordable for locals and tourists alike. So passenger numbers have plummeted, tourism revenues have stagnated and economic growth has suffered.

This all sounds quite pessimistic, but SkyShare's Bengtzen finds joy in South America and the Middle East, where there is little to no sales taxes on aircraft purchases, but favourable taxation on fuel and relatively low registration taxes or ownership fees. The more attractive tax structures encourage investment in aviation. “The UAE has low corporate tax rates and incentives for foreign investors, and the region’s strategic location, modern infrastructure and government backing are significant advantages,” adds Flyinggroup director, business development Jeroen van Doorslaer.

To support the aviation sector’s recovery post-pandemic, the Brazilian government provisionally exempts local aviation companies from paying the PIS and COFINS taxes (effectively VAT) until the end of 2026, in order to reduce operational costs and stimulate growth within the sector. And in January 2022 it reduced the withholding income tax (IRRF) on aircraft leasing payments from 15 per cent to zero for 2022 and 2023, increasing annually by one per cent from 2024 up to three per cent in 2026. 

“And in Chile, amendments were made to the luxury goods tax, which now exempts local companies using helicopters, yachts and aircraft over 160kg valued above 122UTAs for regular business operations,” notes Aerocardal CEO Ricardo Real.

A contribution to economic efficiency

Operators agree that a balanced tax framework would recognise business aviation as a critical economic driver rather than a political scapegoat. Lower and less complex taxes would lead to greater market participation. “More aircraft in operation means more transactions, increased fuel sales and higher employment within the sector, ultimately resulting in increased tax revenues over time,” says MySky's DeMoor. A tax-friendly environment would also incentivise investment in new aircraft technologies and manufacturing processes that boost fuel-efficiency: “This would create massive new opportunities in our industry, as well as benefiting society and the environment,” adds Bengtzen. Indeed, from talks with the UK Chancellor of the Exchequer a few years ago, Martyn Fiddler tax director Adrian Parcell-Jones discovered that: “The most compelling argument is that tax reductions should not rely on the assumption that they will automatically encourage growth and increase the overall tax revenue. Instead, such requests should highlight the potential for increased growth and the consequential benefits to other industries and significant support for government policy in key areas.”

Nevertheless, operators want to see industry growth. They would like to see governments reduce taxes on aircraft purchase and operation, especially for new, more efficient and sustainable aircraft. Offering tax credits or incentives for fleet modernisation and green initiatives could help reduce emissions and encourage further investment. By simplifying regulatory requirements and reducing compliance costs, specifically when it comes to international operations, operators can focus solely on growth.

“Bringing back 100 per cent bonus depreciation is another move that always propels significant growth in our industry, as was evidenced during 2020-2022, the best years business aviation has had in decades,” says Bengtzen.

In the UK, Martyn Fiddler director Mark Byrne knows that extending the application of the VAT zero rate to operators and airlines servicing domestic routes could help. “This extension could eliminate the ‘VAT trap’ created by the HMRC’s 2017 policy change, which removed the right to VAT recovery on asset imports to the UK from all but the legal owners,” he says. Domestic airlines and operators can no longer reclaim import VAT on leased aircraft or engines, resulting in a 20 per cent premium on their operations.

“Punitive levies divert capital from innovation, delaying climate goals,” says Oldfield. He believes that policymakers in the UK should reduce APD for business jets to align with European rivals; expand VAT exemptions to include charter services and hybrid-electric aircraft investments; introduce SAF subsidies or tax rebates to accelerate decarbonisation; streamline post-Brexit regulations through mutual recognition of EU standards; and enhance R&D incentives for green aviation technologies.  

“Higher taxes means fewer passengers; lower taxes stimulate business and job creation,” Real concludes. Competitive operating costs, open skies agreements and lower taxes will increase connectivity, tourism, job creation and GDPs. And an extension of any lower taxes to end customers may also encourage market growth.