Jet A-1 Fuel Uplifts in Europe – Part 1: Basic Considerations for Minimizing Costs, Taxes and Duties
This business aviation blog post is part of a series on minimizing costs for fuel uplifts in Europe.
Pre-planning fuel uplifts in Europe can significantly impact overall operating costs by minimizing impact of fuel taxes and duties. Depending upon where you uplift and your type of flight, fuel costs at some locations may be three times what they’d be at other locations. Communicating with your 3rd-party provider and fuel suppliers, in advance of the day of operation, can help reduce overall fuel costs in Europe.
The following is an overview of what you need to know:
1. Base price of fuel is fairly constant across Europe
While base price of fuel across Europe is usually within a fairly tight spread and does not vary considerably from country to country, taxes, duties and fees have the potential to almost triple the base price of fuel. You may, for example, be able to uplift fuel without taxes or duties at one location for $2.15/gallon while at another location you may pay $6.40/gallon — primarily due to application of Mineral Oil Tax (MOT) and Value Added Tax (VAT). In addition, fuel costs at particular locations may also vary depending on how fuel is delivered to the airfield. One airport may have a direct pipeline while another trucks fuel in from a storage facility 50 miles away. Local transport costs can add 1 – 2% to base price of fuel.
2. Fuel volume and cost units
Fuel pricing in Europe is usually published in USD with volume indicated in U.S. gallons in line with global industry standards. There are locations and suppliers, however, that may price aviation fuel in Euros/liter or Euros per metric ton.
3. VAT and MOT
In most of Europe aviation fuel uplifts are subject to both MOT and VAT. MOT is a duty, rather than a tax, and is calculated on a volume basis while VAT charges are usually a percentage of the total invoice including MOT charges.
4. VAT rates vary
VAT rates in Europe range from 8% to 27% and are applied not just to the base price of fuel but also to MOT, airport charges, and handler fees. VAT is always charged at a percentage rate, and these rates tend to evolve upward over time. Examples of VAT rates on fuel uplifts in Europe are Switzerland 8%, Ireland 13.5% (reduced rate for fuel in Ireland, rather than the standard rate of 23%), Germany 19%, UK 20%, Italy 22%, Finland 24% and Hungary 27%.
5. MOT considerations
MOT is charged as a line item on your fuel invoice and subject to VAT at the applicable percentage rate. So, if you’re paying $3/gallon in MOT and 20% VAT you’re effectively paying $3.60/gallon in MOT related charges. This is more than base price of fuel at most locations in Europe. The good news is that existing MOT rates do not seem to be escalating, and no new MOT mandates have been put in place over recent years. Still, you’re paying the same per gallon MOT duties even when oil prices drop.
6. High and low cost examples
For operators subject to VAT and MOT on fuel uplifts some countries are more expensive than others. Germany and Switzerland are among the higher cost regions. Per gallon fuel costs are typically much lower in Shannon (EINN), the UK, Spain or Sweden depending on your type of flight and opportunities for exempting or reclaiming VAT and MOT.
7. VAT and MOT exemptions
To be exempt from VAT and MOT in a majority of European countries you must be operating for reward on primarily international routes. “Operating for reward,” however, is interpreted at different percentages in various countries.
8. Local charges and territorial restrictions
Local airport fees can add 2-4% to base price of fuel and are based on volume uplifted. In some cases overtime fees are charged by fuelers for after-hour uplifts, and this may be in the $50 – $200 range. Additionally, local fixed-base operators (FBOs) may have territorial restrictions in place on who may or may not fuel an aircraft on their ramp. It’s important to be aware of such restrictions, in advance, and you can do this by having a conversation with your ground handler and local fuel provider.
9. Documentation requirements
Documentation required to exempt fuel taxes and duties at point of sale depends on who you’re buying the fuel from, an oil company or a fuel reseller. You’ll usually need to provide applicable paperwork such as an AOC, at time of uplift, to your local fuel provider. However, additional documentation requirements are in place at certain airports and in certain countries.
10. Saving costs with planning fuel uplifts
Planning fuel uplifts in Europe can lead to dramatic savings in total fuel costs. We recommend comparing fuel costs, on a location to location basis, well prior to day of operation. However, the benefits must be viewed from the perspective of all costs. For example, when flying from Frankfurt (EDDF) to Teterboro (KTEB) you may cut fuel costs in half by tech stopping and uplifting fuel at EINN rather than EDDF, but these savings must be considered in the context of optimal routing and the cost of a tech stop at EINN.
It’s important to understand how fees, taxes, and documentation requirements can affect the price of fuel and overall costs for your operation. To reduce such costs, fuel planning is integral to all pre-trip planning, and additional time is needed to do so due to the differing charges by country. It’s recommended that you always speak to your fuel provider in order to determine the best options for your operation.
Stay tuned for Part 2, which covers more information on minimizing fuel costs in Europe.
If you have any questions about this article or would like more information on how to minimize fuel costs in Europe, contact Christine Vamvakas at firstname.lastname@example.org.