1. VAT on aviation Austin Demajo - Grant Thornton

2. VAT on aviation  Acquisition/lease of aircraft and parts/fuelling  International transport - passengers  On board restaurant services  On board sale of goods  International transport – cargo  Closing remarks 2

3. Supply of aircraft/direct needs VAT on aviation

4. Supply of aircraft/direct needs MSs shall exempt:  Supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward chiefly on international routes;  Supply, modification, repair, maintenance, chartering and hiring of aircraft referred to [1 st bullet point] and supply, hiring, repair and maintenance of equipment incorporated or used therein; and  Other services to meet direct needs of aircraft referred to [1 st bullet point] or their cargoes. 4

5. Supply of aircraft/direct needs C-382/02 Cimber Air A/S:  Operates domestic flights in Denmark and international flights from Denmark to other countries and flights which depart and land outside Danish territory  Cimber Air requested a refund of VAT paid on goods and services supplied for commercial passenger flights 5

6. Supply of aircraft/direct needs C-382/02 Cimber Air A/S:  Q1: whether article 15(6), (7) and (9) is to be interpreted as meaning that goods and services referred to by those provisions, supplied to aircraft which, although carrying out domestic flights, are used by airlines operating for reward chiefly on international routes, are VAT exempt?  Court decided that such supplies are exempt when supplied to an airline operating chiefly for reward on international routes 6

7. Supply of aircraft/direct needs C-382/02 Cimber Air A/S:  Q2: Criteria to be used to determine whether an airline operates chiefly on international routes?  Court decided: It is for the national courts to assess the extent of the international business and the extent of the non- international business of such companies. In doing so, they may take account of all information which indicates the relative importance of the type of operations concerned, in particular turnover. 7

8. Supply of aircraft/direct needs C-33/11 A Oy 8 A Oy C Oy B Oy A = owner of aircraft acquired from French supplier (did not account for reverse charge VAT which it could not recover) B = international charter airline which leased aircraft from A Q1: whether wording “operating for reward on international routes” encompasses also international charter flights to meet requirements of companies and private persons? YES 25% 78%

9. Supply of aircraft/direct needs C-33/11 A Oy  Q2: does exemption also apply to supply of an aircraft to an operator which is not itself an airline operating for reward chiefly on international routes but which acquires that aircraft for the purposes of the exclusive use thereof by such an undertaking? YES 9

10. International transport of passengers VAT on aviation

11. International transport-passengers  Includes accompanying luggage and motor vehicles  Place of supply: where transport takes place proportionate to distance covered  Service exempt in all 27 Member States 11

12. On board restaurant and catering VAT on aviation

13. On board restaurant/catering  Regulations define this service as the supply of prepared or unprepared food or beverages for human consumption accompanied by sufficient support services allowing for immediate consumption thereof  Supply without adequate support services not considered restaurant and catering services [Joint cases C-497/04; 499/09; 501/09; 502/09] 13

14. On board restaurant/catering  Place of supply when supplied during the section of a passenger transport operation effected within Community: point of departure of passenger transport operation (art 37(1)  Place of supply when supplied outside section of a passenger transport operation effected within Community: where services physically carried out (art 55)  Return trip: separate transport operation 14

15. On board restaurant/catering  Section of passenger transport operation effected within Community: that effected, without stopover outside Community, between point of departure and arrival of passenger transport operation (determined by journey of aircraft and not by journey completed by each of the passengers)  Point of departure: 1 st scheduled point of passenger embarkation within Community, where applicable after stopover outside Community  Point of arrival: last scheduled point of disembarkation within Community of passengers who embarked in Community, where applicable before a stopover outside Community 15

16. Sale of goods on board VAT on aviation 16

17. Sale of goods on board  Where place of supply takes place during section of transport operation effected within Community, Directive allows MSs to exempt supply of goods for consumption on board (art 37(3)  Place of supply: same rules as for on board restaurant services (arts. 37(1) and 31) 17

18. Sale of goods on board Summary – place of supply rules Sale of goods on board  Art 37(1), (2) – Community section  Art 31 – Non Community section  Restaurant services:  Art 57(1), (2) – Community section  Art 55 – Non Community section 18

19. Sale of goods on board 19 MaltaDubai Malta London Cyprus

20. Transport of goods VAT on aviation

21. Transport of goods  Taxable supply  Place of supply – depends on various factors;  Status of customer (B or C)  Intra-Community transport or other  Intra-Community transport: transport of goods in respect of which place of departure and arrival are situated within the territories of 2 different MSs  Place of departure: place where transport of the goods actually begins, irrespective of distances covered in order to reach the place where the goods are located  Place of arrival: place where transport of the goods actually ends 21

22. Transport of goods Place of supply (arts 49-52):  B2B – determined by general rule  B2C (Intra-Community transport) – place of departure  B2C (other than intra-Community transport) – where transport takes place proportionate to distances covered 22

23. Transport of goods Exemptions:  Where they relate to importation of goods and value of services included in taxable amount of imported goods  Where directly connected with exports, or, imports placed under customs duty suspension regime  MSs need not apply VAT to that part of the intra-Community transport of goods to non-taxable persons taking place over waters which do not form part of territory of the Community (art 52) 23

24. Closing remarks VAT on aviation

25. Thank you Austin Demajo Tax Partner - Grant Thornton austin.demajo@mt.gt.com VAT on aviation