Aerlex Law Group

Flying Your Aircraft to the European Union

Flying Your Aircraft to the European Union— Originally published in
BusinessAir Magazine, September 2012, Volume 22, No. 9.

In the past few years, it has become increasingly expensive and difficult to fly business jet aircraft into the European Union (EU). There are currently two issues that are evolving and making travel to the EU more challenging: the importation of the aircraft into the EU and the requirements of the European Union’s Emissions Trading System.

When you are operating an aircraft in the EU that is not registered there, you may have to import the Aircraft into the EU and comply with the EU VAT (Value Added Tax) in order to fly in the EU. An owner may elect full importation or temporary importation. If full importation is elected and completed by owner or operator, then upon completion, the aircraft can fly without restriction throughout the EU. Full importation does not automatically mean that the full VAT must be paid at the time of the import of the aircraft, as there are alternative approaches available.

Alternatively, an owner or operator can elect temporary importation of the aircraft. The aircraft is deemed to be temporarily imported into the EU every time it enters the EU without being fully imported. Temporary importation rules vary among EU countries and are very complex because they often use the same words, but defined and interpreted differently. In order to assess whether a flight is permissible under the temporary importation rules of a given country, many EU countries determine if the specific flight is “commercial” or “private.” Again, however, the definition of these terms varies from country to country. Another factor often considered is who is onboard the aircraft, in particular, whether an EU resident is onboard. Unfortunately, because each member state has different definitions and rules, temporary importation of an aircraft into the EU can be risky. The aircraft owner or operator must be certain the flight will meet the temporary importation definitions of the destination countries within the EU. Otherwise, it is possible that an EU country could deem the aircraft as fully imported and require immediate payment of the entire VAT tax. There have been instances where a country within the EU has grounded an aircraft until the VAT is paid in full.

Another factor complicating travel to the EU is the Emissions Trading System (EU-ETS). EU-ETS is a cap-and-trade scheme governing the permissible level of carbon emissions from jet aircraft engines that was initiated in the EU in 2005 and fully implemented in 2012. The aim of the EU-ETS scheme is to reduce emissions in a cost-effective manner, allowing companies to trade emission allowances and thereby determine when, how and where they reduce emissions.

The EU-ETS affects all aircraft operators flying to or from the EU, regardless of where they are based. All operators must register, and the registration process is complex with a requirement to disclose significant amounts of what operators will likely view as highly confidential information. Once an account is established with the EU-ETS office, operators are required to account for their emissions from the past year and to surrender the matching number of allowances. Depending on an owner’s actual emissions and its free allocation of allowances, operators have the flexibility to buy additional or sell surplus allowances.

To be sure, flying into the EU is more complex than it has been in the past. It can also be very expensive if the right planning hasn’t been done prior to making the decision to fly into the EU.

 

Amanda Applegate
Senior Transactional Counsel
Aerlex Law Group
Santa Monica, California
aapplegate@aerlex.com