Four cash-saving Tax hacks for Air Charter Companies

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.

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 fueling 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.

Does your company need assistance in claiming back it's Mineral Oil Tax? Download our helpful claiming guide below: