The Challenges of Claiming Mineral Oil Tax and How to Overcome Them

Imagine if your business could take one of it’s most significant costs (fuel) and turn it into a cash savings opportunity. If your air charter company operates non-scheduled commercial flights abroad, this is actually a reality. Because line items on your fuel bill such as Mineral Oil Tax and VAT are reclaimable. The thing is, most companies don’t claim it. 

In this article, we identify the challenges of Mineral Oil Tax and VAT reclaim for Air Charter Companies. In addition, we’ll provide guidelines on how to overcome these challenges. 

If tax reclaim is so lucrative then why isn’t everyone doing it?

There are two main reasons why Air Charter Companies don’t take advantage of the tax opportunities available to them: 

1. They don’t know that MOT and foreign VAT on fuel bills are claimable.
2. The process to receive a successful refund is too cumbersome and complex for in-house teams.

To illustrate this point further, VAT IT is the global leading authority on Mineral Oil Tax Reclaim yet we still only service over 300 air charter companies across the globe helping them to recover their VAT and Mineral Oil Tax. This means there are still thousands of more companies that might require assistance or don’t know about the opportunities available. 

The challenges finance teams face when trying to claim MOT in-house 

Many companies may try to navigate the complex realm of tax reclaims in-house. However, that reveals many hurdles too. Most companies are unable to recover these taxes themselves for the following reasons: 

A high level of knowledge in international tax compliance is required

There are over 30 international jurisdictions from which you can claim VAT refunds. They all have their own laws and regulations, documentation requirements and differing claim opportunities. Furthermore, there are over 7 jurisdictions from which you can claim Mineral Oil Tax. And for this recovery, they also have differing laws, regulations and requirements. 

Another hurdle is that refunds need to be requested from two different authorities - VAT from the local VAT authority of each country, MOT from each customs office at each Airport. Most in-house teams at Air Charter companies simply don’t have the know-how to orchestrate such a process. Especially when language barriers can deepen the challenge.

Documentation requirements are cumbersome and confusing 

The documentation list required to claim mineral oil tax is lengthy and often these documents are no longer available or impossible to find.  Documents like fuel delivery receipts, landing permission slips, and the fuel supplier invoices (For example, Total’s fuel bill to UVAir who then invoices your air charter company for fuel and ground handling costs) are extremely hard to find or request. This is often the point at which a company may choose to outsource the service to specialists who are capable of finding these documents and requesting them from your various fuelers. 

With these hurdles in mind, and with many air charter companies being run by small teams, this level of complexity and administration is a tall order leaving companies believing the juice is not worth the squeeze. Ultimately, real money in the form of tax savings is left to rot on those fuel invoices.

The Solution to Mineral Oil Tax and VAT Recovery: Have somebody else do it for you  

Using a third-party specialist such as VAT IT, to complete the entire Mineral Oil Tax refund process for your company has many benefits. Some of which include: 

• You free up your internal resources.
• They will locate all the necessary documents for you among your A/P and expense files. 
• They will coordinate with your fuelers and their fuelers to obtain the correct documentation.
• They will assist in having any missing documentation reissued so that refund yields are maximised
• VAT IT’s fees are contingent meaning we only take a percentage of the successful refund. That means if you don’t get paid neither do we. It also means your company doesn’t pay any fixed fees for the service so it’s completely risk-free. 
• Some specialists (VAT IT included) will complete a complementary VAT refund potential audit so you can determine how much savings your company will receive.
• VAT IT spent years developing on-the-ground relationships with each customs official office at each airport.

The Commercial Benefit to your bottom line 

When you combine the amounts of Mineral Oil Tax and VAT found on your fuel bills, the savings potential can add up to a staggering 51% of your total fuel bill. With a potential saving like this within an industry that has been so heavily impacted by the pandemic, it shouldn’t be a question of if you should be claiming these taxes, but when. And the answer to that questions is, now. 

Download our practical guide to help you find savings on your fuel bill: