VAT Compliance Program for Europe: Part 2 – VAT Compliance Programs
This business aviation blog post continues from our article last week, entitled: "VAT Compliance Program for Europe: Part 1 – VAT Considerations"
Various Value-Added Tax (VAT) compliance programs are available to general aviation operators. The benefit of these programs is to help manage VAT obligations and minimize VAT payments at the pump. Be aware, however, that not all VAT compliance programs are the same. Some for example only facilitate VAT exemption in certain European countries, while other programs cover more European countries.
The following is an overview of what you need to know:
1. Understanding VAT programs
Not all 3rd-party resellers of aviation fuel offer VAT-compliance programs, and they’re not all able to provide VAT exemptions at the pump when applicable. Additionally, some Jet A-1 fuel resellers do not always provide VAT-compliant invoices. This can be a problem as you’ll not be able to reclaim VAT paid at a later date. Registering for a VAT compliance program, with a fuel reseller that is VAT-registered in the countries you fly to, helps ensure that VAT is only charged when it should be and that VAT is exempted, or zero-rated, at point of uplift for qualifying operators. By signing up to a VAT compliance program, the operator may be able to exempt VAT obligations, as long as they meet all requirements of the particular country. To register with a VAT program, you’ll need to fill out appropriate declaration forms. This helps determine your qualification status for VAT and avoids potential delays at time of uplift.
2. Choose the best VAT-compliance program
When you buy Jet A-1 directly from a fuel company that’s registered for VAT within the particular country, you’ll usually be able to exempt VAT on qualifying fuel uplifts. However, when sourcing fuel via 3rd-party resellers – as many operators do under contract fuel programs – it’s important to ensure that the reseller is VAT-registered within the particular country. Otherwise, they may not be able to provide VAT exemptions on operator uplifts and appropriate invoicing.
3. Signing up for a VAT program
When choosing a 3rd-party provider for a VAT program, look for a company that provides you with the most benefits. Fuel resellers have different VAT program offerings, depending upon where they’re VAT-registered. You’ll want to ensure you’re using a company that’s compliant as each country has different tax and VAT processes. The worst-case scenario is to use a reseller who’s not able to provide VAT exemptions (at the pump or after the fact) on qualifying uplifts and who does not provide you with VAT-compliant invoices that can be used to reclaim VAT later.
4. VAT exemption requirements for charter operations
Each country in Europe has its own particular requirements that operators must meet in order to exempt VAT. The basic requirement for VAT exemption on charter flights is that the flight must be commercial in nature, and the "majority" of flights must be to international destinations. While this "majority" requirement, put in place by EU regulations (Articles 148 and 152), is normally assumed to mean over 50% of flights, this is not always the case. France and Belgium for example, mandate that 80% or more of an operator’s aggregate flights be international in order to zero-rate VAT. Bulgaria requires that 60% of flights be to non-Bulgarian destinations (but the destination may be within the EU), while Denmark and Poland require that 55% and 60% of flights, respectively, be to international non-EU destinations. If you meet these criteria and have registered with a VAT program, you’re usually able to obtain VAT exemptions at the pump. Otherwise, you’ll have the option of reclaiming VAT after the fact as long as you’ve received a VAT-compliant invoice.
Talk with your fuel reseller to see if they offer a VAT compliance/exemption program for Europe. Be sure to confirm which countries they’re able to offer zero-rated VAT on fuel uplifts and what the relevant requirements are. It’s worthwhile doing your due diligence to ensure you’re working with the best VAT compliance/exemption program for the particular nature of your charter or private non-revenue operations.
If you have any questions about this article or would like more information on VAT compliance programs, contact Christine Vamvakas at firstname.lastname@example.org.