The world of VAT and tax recovery is intimidating, especially when it comes to foreign VAT recovery. The laws are complicated, the process is complex and burdensome, so it’s very easy for private air charter businesses to turn a blind eye to the fact that they might be losing thousands of dollars every year in tax savings – savings that are actually rightfully theirs.
There are so many ways to save your company money and contribute it to your bottom line. And you’re not expected to know them all. Speaking to an expert in the industry can really help you unlock those extra cash savings lying around your business. All you have to do is ask someone who knows how to find it.
Here are four ways to save cash through VAT/tax recovery:
1. Recover VAT on flight operating costs
European Law provides VAT exemption on fuel and certain operating expenses to holders of an AOC and ACC. This exemption applies to both airlines and other general business aviation operators. There are also VAT exemptions on services relating to real estate, such as aircraft parking and storage, and services considered to be “used and enjoyed” where supplied.
Companies are able to recover foreign VAT charged on fuelling services, stock fee, small load fee, airport/flowage fee, infrastructure fee, hook-up nozzle fee and navigation costs.
2. Recover VAT on travel-related employee expenses
When flight crews land and alight in foreign territories, they will inevitably incur expenses that include local VAT charges. These travel and entertainment costs are for business purposes and are therefore recoverable through the EU refund directives. A company can recover VAT charged on accommodation, food, transport and mobile phone use.
3. Recover your mineral oil tax
MOT can be a significant surcharge to the base fuel cost. It is reclaimable by commercial aviation operators in foreign countries, providing that an AOC for the flight existed, the flight was of a commercial nature, and the uplift of fuel was immediately prior to departure to a foreign destination.
Not all countries charge MOT to foreign aircraft – but reclaiming from those that do (France, Germany, Switzerland, Austria, Italy and Spain) means following complex rules and providing the specific documentation required.
4. Staying compliant around aviation tax
The amount of tax to be paid depends on the distance travelled from the point of departure to the final destination. Airlines are obliged to collect the tax, pay it over to the local tax office and file a return. Non-resident airlines may be required to appoint a fiscal representative. As can be imagined, aviation tax compliance can be complicated, unwieldy and a highly cumbersome process.