Minimizing Jet Fuel Costs: 5 Tips for EU VAT and MOT Exemptions
This aviation blog post is part of a series on aircraft fueling for business aviation and continues from our last post: 5 Best Practices When Making Aircraft Fueling Arrangements.
Jet fuel taxes vary by location and can more than double the base fuel price on international trips. There’s a lot to consider in terms of minimizing jet fuel costs, particularly in Europe. Taking advantage of fuel tax exemptions can represent significant – and, in some cases, dramatic – savings. Charter (non-scheduled commercial) operators generally have more leeway in exempting fuel taxes at the pump, but qualifying private non-revenue operators also have opportunities to exempt Value Added Taxes (VAT). For that reason, this is well worth looking into. While fuel taxes and tax exemptions can be somewhat confusing, your 3rd-party provider can help you navigate the process to achieve maximum savings.
1. Jet fuel tax exemptions may be available at the pump
Working in advance with a 3rd-party provider can help identify opportunities to exempt taxes at the pump or to reclaim taxes later. Tax exemptions offer significant savings within Europe, but rules and procedures vary from country to country and depend on the type of operation. Private “leisure” flights have virtually no tax exemption options, but private business, “non-leisure” flights may be exempt from VAT and/or excise duties. In many cases, charter (non-scheduled commercial) operators have the option of avoiding both VAT and excise duties. We recommend working with a fuel program that can assist you with these exemptions. Ensure the fuel program you select is compliant, advises on tax exemption options, is able to provide VAT-exempt fuel in many European countries and provide you with invoices with the correct application of VAT charges – not all fuel programs meet these standards. This is to ensure that not only are you taking advantage of all exemption opportunities available, but also you are compliant with all VAT regulations to avoid possible penalties and fines further down the road.
2. VAT and exemptions are available for private non-revenue operators
Procedures to exempt fuel tax in Europe vary and can be complex. Within the U.K., for example, you’ll always pay tax if you’re flying private non-revenue domestic or flying anywhere on a private/leisure basis. Private business, “non-leisure” flights are exempt from VAT when the next destination is outside the U.K. Specify on your fuel ticket that the flight is non-leisure to a non-U.K. destination, or you’ll be charged VAT. Private non-revenue operators can also avoid VAT at the pump in Sweden, Spain and Italy. Sweden does not charge VAT to anyone, Spain will exempt VAT if you are declared a private non-revenue business operator, and Italy exempts VAT if you’re a private non-revenue business operator (not Italian-registered) flying to a non-European Union destination.
3. VAT and Mineral Oil Tax exemptions are available for charter (non-scheduled commercial) operators
If you’re an Air Operator Certificate (AOC) holder flying charter (non-scheduled commercial), you may be exempt from both VAT and Mineral Oil Taxes (MOT) in Europe if you’re considered an “airline.” As some AOC holders are not flying for “reward,” the EU uses the rule that a majority of flights must be carrying passengers/goods for reward on “mainly” international routes. France and Belgium require that 80% of your flights be international and for reward to be exempt from VAT and excise duties. However, most EU countries use a 50% threshold. In Germany, some charter operators may have to pay excise duties unless they go to the customs office to get an exemption certificate. Switzerland requires that each flight be commercial in order to obtain MOT exemption. Additionally, Switzerland requires that charter legs be non-domestic to avoid MOT.
4. Not complying with the requirements may lead to additional costs and/or penalties
Charter (non-scheduled commercial) operators should, at minimum, show their AOC to the fueler in Europe to be exempt from excise duties and VAT. Some locations will require additional information. You may have to pay taxes if it’s determined you do not fit the EU “airline” category. In Switzerland, for example, they may check their internal systems and your flight-plan history to determine if your charter (non-scheduled commercial) flight should be tax-exempt. Private non-revenue, non-leisure operators must declare themselves correctly to be exempt from VAT (for applicable countries). Showing a company tax ID number may help prove that your flight is business-related. Be careful how you complete and sign your fuel ticket, as you may lose the right to exempt taxes or to reclaim later.
5. Jet fuel taxes can be reclaimed later
Qualifying operators who do not qualify for exempt fuel taxes at the pump (point of sale) may be able to reclaim taxes later, but this process can take several months. It’s preferable to exempt fuel taxes at the point of sale, but read through the declaration on the fuel ticket and be sure correct boxes are marked. If you feel you’ve been charged VAT or MOT incorrectly, you’ll need to dispute the charge quickly, usually within 30 days, or it may be impossible to obtain credit. Your 3rd-party provider should be able to help.
Consider options for exempting fuel taxes at point of sale and be aware of correct procedures – and documentation – for fuel tax exemption. An experienced 3rd-party provider can assist you navigate through the complex fuel tax environment. Also, registering for a compliant fuel program to help you exempt VAT and MOT at the pump is a worthwhile option that will save you time and money—and help avoid potential penalties down the road.
If you have any questions about this article, contact Christine Vamvakas at email@example.com.