How does EU free circulation work?
Once an aircraft is in free circulation in the EU many people assume that "that's it, the aircraft may come and go in EU territory as it pleases". For anyone who is not familiar with "free circulation" this is a term referring to an aircraft's status within EU territory. It means that the aircraft was either manufactured in the EU, or was imported fully into the EU, i.e. any import Customs duties due were paid in full, including import VAT.
The truth, as ever, is not quite so simple. Normally when goods leave the EU this is treated as an export for Customs and VAT purposes. Ordinarily goods are removed by freight transport or similar, but as aircraft are able to leave from and return to the EU under their own power - and do so frequently - it would be much harder to keep track of all these exports and re-imports. Consequently when a free circulation aircraft leaves the EU this is simply treated as a "deemed export", i.e. it is acknowledged to be technically an export but export paperwork is not required each time the aircraft moves. As this tends to be a seamless process many readers will not normally aware that an "export" has even occurred.
When the aircraft returns this would normally require a re-import but obviously this is not practicable, and nor should it be necessary when all the normal customs procedures have already been followed once. There is therefore a Customs relief procedure in place known as Returned Goods Relief, or RGR, that allows for a seamless return to the EU with the retention of the aircraft's existing free circulation status. However RGR only applies under certain conditions.
There are ways that an aircraft may unintentionally lose its free circulation status while it is outside EU territory. For example if the aircraft is physically kept outside the EU for three years or more there is no longer a right to return under RGR, and effectively its free circulation status has been lost. The same may also happen if the aircraft is sold or the operator replaced while the aircraft is located outside the EU.
It is important to be fully aware of the aircraft's EU status when you are looking to buy or make changes to the operation of an aircraft, particularly if the aircraft spends time outside of EU territory. This is something we can check for you on each aircraft and advise the best way forward.