Brexit: A deep dive into TA and the Netherlands Navigator
There are just 36 working days left until the end of the transition period between the UK and the EU. No-one knows if the EU and the UK will make a deal. Nevertheless, business aviation must plan for the worst and hope for the best.
Martyn Fiddler Aviation believe there will only be two suitable/optimal options business aircraft owners should take into consideration to continue access to the EU and/or the UK after 31 December 2020 unless an agreement is reached between the UK and the EU. These two options are:
- Temporary Admission; and
- An import into the EU, for example via the Netherlands (the "Netherlands Navigator")
Let's look at what each of these solutions means in theory (and in practice), as well as the advantages and disadvantages of each solution.
Temporary Admission (TA) is a great tool for private, pleasure aircraft users and occasional visitors to a customs territory (i.e. those making ad-hoc flights). As the name suggests, TA allows temporary customs relief from import VAT and duty (if applicable) so business aircraft can be admitted into a customs territory.
TA is a suitable solution for private users, private families, and private business users providing the following three main requirements are met:
- The aircraft is registered outside the territory being visited;
- the aircraft is owned outside of the territory being visited; and
- the user of the aircraft needs to be resident or established outside of the territory being visited.
N/B. there are also other conditions that must be met, but these are the primary requirements.
Advantages of Temporary Admission
- TA is an alternative to a full import for aircraft. Under TA all normal import taxes (VAT & Duty) are suspended.
- TA is what is known as a simplified procedure – i.e. designed to be quick and easy for aircraft owners with little paperwork required. Martyn Fiddler Aviation advise that if an aircraft will travel between areas in a territory, for example between France and Spain in the EU then TA should be formalised with the requisite paperwork which can be done on arrival
- TA applies as soon as an aircraft crosses the border into the customs territory and until it is discharged or closed.
- After 31 December 2020 TA may provide opportunities for aircraft which could not previously use it i.e. aircraft owners might be able to use TA in the UK or the EU - and vice versa.
Disadvantages of Temporary Admission
- Aircraft owners must meet the three main requirements for TA (outlined above)
- The user of the aircraft must be from outside the customs territory. This could be a company established outside the customs territory or an individual who is resident outside. However, there is no specific customs definition for the term 'residence' which means the interpretation of "residence" may vary between the EU27 member states. Things that might be taken into account are the users passport, tax residency, family or business links, frequency of visits etc. Again, the user will need to consider that if they stay in the customs territory for too long, the application for TA may be rejected.
- TA is limited to a maximum of 6 months duration.
- There are various other conditions for example the aircraft cannot be used commercially, for charter, sale and there is a restriction on what works may be done to the aircraft etc.
If the TA requirements are breached, the tax authority are able to retrospectively impose an import status on the aircraft. This means the tax authorities can retrospectively impose import VAT on the value of the aircraft.
How long does TA take to get it and how long does it last?
Providing the aircraft owner or user meets the requirements, TA is applied immediately on arrival into the customs territory. The TA period is limited to a maximum of 6 months. The EU generally differs from the global approach where TA only applies for six months out of every twelve.
Will TA be applicable in both the UK and EU27?
Yes, the same set of rules and regulations is expected to continue to apply in both territories.
How can an aircraft owner determine if they satisfy the requirements for TA?
The first step is to determine if the three core requirements (outlined above) as well as the other supplementary conditions can be satisfied. The second step is to consider the wider reason for the trip and seek formal advice to clarify that there may be no other issue impacting the TA claim.
Fact, Fiction or Fantasy – Busting Temporary Admission Myths
Are there different types of temporary admission depending on how much I pay for it?
Essentially no. In this case we are looking at the specific TA regulations for a means of transport (aircraft). Other TA Regimes are available but these are prohibitively expensive in regard to aircraft and provide less benefits that a full importation.
Can the pilot of an aircraft be classified as the primary user of the aircraft and hold the TA authorisation?
The EU regulation states:
"Where means of transport are declared for TA orally... the authorisation...shall be granted to the person who has physical control...unless that person acts on behalf of another person. If so the authorisation shall be granted to the latter person."
Clearly the pilot is the person in physical control of the aircraft when flying. However, in Martyn Fiddler Aviation's experience, this clause is interpreted by EU member states to mean that the pilot is only a default user for the purposes of TA. The person who holds the authorisation ("the user") is the passenger who directs the pilot on where they want to fly and when. However, there are occasions where the authorisation can default to the pilot, for example, where the user is also the pilot or if the only person on the aircraft is the pilot and crew.
Once an aircraft owner has TA authorisation, can the aircraft make repeat visits into/out of EU?
This is where the EU generally differs from the global approach where TA only applies for six months out of every twelve. Yes, practically this can be done, but TA is only intended to be for temporary rather than continuous use. If an EU member state considers that this relief has been abused they would be within their rights to take what they consider appropriate action, ultimately including a possible imposition of a retrospective import.
The Netherlands Navigator
What is the Netherlands Navigator?
The Netherlands Navigator offers a one off importation route through the Netherlands. This has been in place since 2014 and is used worldwide to import aircraft to the EU.
How does the Netherlands Navigator work?
Martyn Fiddler Aviation have fiscal licenses in the Netherlands, meaning they have limited fiscal representation which allows MFA to stand in the shoes of a client as their tax representative. This license enables MFA to import the aircraft and also to reclaim the VAT on that importation on behalf of a business aircraft client.
This solution is suitable primarily for corporate clients, chartered companies and AOC's. Martyn Fiddler Aviation have represented over a hundred different corporations around the world including the US, Australia, Russia using the Netherlands Navigator solution. As long as those companies are producing "taxable" goods or services, then Martyn Fiddler Aviation can represent them in the Netherlands.
The Netherlands Navigator offers a seamless import solution as there are no additional requirements for records or data outside of the normal operations after the import.
Advantages of the Netherlands Navigator
- From a tax perspective, once the aircraft is imported using the Netherlands Navigator solution, the aircraft owner has free EU circulation and is accepted in all of the EU 27 member states
- The Netherlands Navigator solution provides certainty of use compared to TA
- As the import VAT is paid and reclaimed via the fiscal representative's records, this provides a significant cash flow benefit
- The Netherlands Navigator allows for an import to take place through the Netherlands, followed by one (intra-community) supply, with a subsequent additional cash flow efficient receipt of the aircraft into that second member state
Disadvantages of the Netherlands Navigator
There are few disadvantages to the Netherlands Navigator solution. The main point to note would be if there were any subsequent changes to the use to the aircraft, the suitability of this solution may need to be reconsidered.
What is the VAT liability for the Netherlands Navigator and how does it last?
As fiscal representatives of the client, Martyn Fiddler Aviation are liable for any VAT due on behalf of the client , and are responsible for the importation status of that business aircraft for the following six years.
Fact, Fiction or Fantasy – Busting the Netherlands Navigator myths
Does a business aircraft owner need a VAT registration or a company established in the Netherlands to use this?
No, and in fact if you did have a VAT registration or registered company in the Netherlands then you would be able to import it yourself, this solution is for people who don't.
Does the aircraft need to be registered in the Netherlands?
No. The business aircraft can be on a civilian aircraft register anywhere in the world – not just the Netherlands.
Does the aircraft need of travel to the Netherlands?
The aircraft must travel to the Netherlands to allow for a full customs procedure. Potentially the aircraft has to be available for customs should they wish to inspect the aircraft. Martyn Fiddler Aviation's preparations mean the aircraft needs to be in Rotterdam for around five hours.
What is the lead in time?
Generally the lead time can be as little as 3 days where all paperwork is available and tax advice, if required, is in place.
- There are just 36 working days left until the transition period ends on 31 December 2020
- Temporary Admission is great for private, pleasure use aircraft and the occasional visitor but does come with some tricky requirements and big tax liabilities if you get it wrong
- The Netherlands Navigator is great for corporate, commercial and business aircraft and will be available to UK and IOM businesses once the UK leaves the EU.
- Hope for the best; prepare for the worst – is the watchword!