Why Your Business is Incurring Mineral Oil Tax and How to Claim it
Why is Mineral Oil Tax charged, what can your business do to avoid it or claim it back
Private air charter companies are no strangers to Mineral Oil Tax (often referred to as Excise duties on fuel bills) and although some companies may go to great lengths to avoid Mineral Oil Tax (MOT), that hefty line item may still end up on your fuel bill.
What is Mineral Oil Tax?
Mineral Oil Tax is a tax levied only on the jet fuel amount when a plane refuels, on a per litre (or gallons) basis. There is no standardized naming for the MOT. Depending on the country, MOT is referred to as TIPP, TIPCE, Excise Duties, Fuel Tax, Special Tax and Petroleum Tax.
Is Mineral Oil Tax recoverable?
Depending on the nature of an air charter company’s operations and the necessary documentation being available, MOT can be recovered from the various local customs offices in countries such as Germany, France, Canada and Spain. Mineral oil tax recoverable under the following circumstances:
Non-scheduled commercial flights: Air charter companies who operate flights for third party clients for compensation are entitled to claim back their MOT retrospectively.
Private Business Jet for business purposes: When a business uses it’s company jet for flights that are connected to business purposes, then that business is entitled to claim back the Mineral Oil Tax.
It’s important to note that privately-owned jets used for leisure purposes are not entitled to claim Mineral Oil Tax.
But I’m supposed to Exempt from Mineral Oil Tax! Why is it being charged?
You’d be correct in thinking that your air charter business should be exempt from Mineral Oil Tax on non-scheduled commercial flights. Ideally, these exemptions should be applied before the uplift of fuel takes place or at the time of fueling. However, Mineral oil tax may still be charged incorrectly for the following reasons:
Fueler mistakenly assumes the flight is of a private leisure nature.
The pilot does not present the AOC and correct documentation to prove the commerciality of the flight.
The pilot declares the flight incorrectly.
A lack of knowledge of these exemptions to start off with.
How to Avoid Paying Mineral Oil Tax
These are the steps your company can take to ensure it mitigates Mineral Oil Tax leakages:
Make your pilots aware of Mineral Oil Tax.
Ensure that your pilots have an AOC with them ready to present to the fueler on commercial flights.
Make sure you mark the nature of the flight correctly so that the fueler and customs know that the flight is of a commercial nature.
How to claim back your Mineral Oil Tax retrospectively
Some countries’ local customs officials allow for retrospective refunding of Mineral Oil Tax. That’s if you’re able to provide the correct documentation, in the right format and supply at the right time to meet the deadlines. Unsurprisingly, this is where many companies get stuck. Gathering the correct invoices, claim documentation, flight logs and fuel tickets is cumbersome and tedious work. In addition, there is no centralised customs office to submit a claim to.
Each claim for each airport must be submitted to that local customs office and tracking them down can be an administrative nightmare as well as language barriers being a major problem.
This is the reason most air charter companies choose to use a third-party specialist to assist them with their refunds. To illustrate, over 300 air charter companies use VAT IT’s aviation and MOT reclaim services to claim back their MOT and VAT on fuel invoices. We’ve helped air charter companies claim back millions in Euros that might have been lost if not for our experience, knowledge and end-to-end service.
Claiming lost taxes increases your margins
Mineral Oil Tax can be as high as 50% of the fuel bill making it a considerable sunken cost to air charter companies. Therefore, having the ability to claim it back can transform an air charter company and create a possibly much-needed cash boost to the bottom line. 3
Does your company need assistance in claiming back it's Mineral Oil Tax? Download our helpful guide of the various MOT expenses your business can claim: