VAT exemption of the transmission of an aircraft aimed to international flight
Binding tax ruling V5083-16, issued by the Spanish General Tax Directorate on November 23 2016.
The consultant entity acquired an aircraft which it leased to another company for exploitation essentially dedicated to international commercial flight. However, the consultant entity paid Spanish VAT on the purchase of this aircraft.
This entity requests clarification on if the acquisition of the aircraft and its subsequent lease are exempt of the VAT and, in case of charge wrongful of the tax, what the procedure would be for get its refund.
Once this body sets out the criteria that would locate the transaction in the Spanish VAT territory, it focus on whether such services would be exempt from the VAT.
In this sense this body mentions that article 22, paragraph four, of the Spanish VAT Law establishes that shall be exempt from the tax:
“The suppliues, transformations, repair, maintenance, chartering total or lease of the following aircraft:”
1st . Those used exclusively by companies essentially engaged in international air navigation in the exercise of commercial activities of paid transport of goods or passengers.
2nd. Those used by public entities in the execution of their public duties.
The exemption is conditioned upon the purchaser or recipient of the indicated services is the company that carry out the above-mentioned activities and use aircraft in the development of such activities or, where appropriate, the public entity operating the aircraft in public functions.
Based on this article, since the company acquiring the aircraft does not use it directly in the international commercial flight, it would seem that the acquisition of the aircraft by the consultant company would be subject and not exempt from VAT.
However, this aspect has been analysed by the ECJ in its judgment of 19 July 2012, case C-33/11 A Oy in the sense that this exemption is also applicable even if the acquirer is an operator other than itself a carrier of air navigation which is essentially dedicated to paid international traffic, but that acquires this aircraft for exclusive use by a company of this nature.
In this sense, the Spanish General Tax Directorate resolves that the acquisition of the aircraft by the consultant for exclusive use by a company primarily engaged in gainful international traffic shall be exempt from VAT.
Also, it will also be exempt from VAT the lease by the consultant of an aircraft to other company, provided that the tenant entity use the aircraft exclusively for paid international traffic.
Finally, this body details the procedure to be follow for the rectification of the VAT wrongly charged in the transmission of the aircraft which, when the correction involves a reduction of the quotas initially charged, the taxable person may choose by either of the two following alternatives:
(a) Initiate before the Spanish Tax Authorities the procedure for rectification of VAT returns and asking for the VAT quota wrongly paid.
(b) Regularize the tax situation in the following VAT return corresponding to the period in that should be done the rectification. In this case, the seller of the aircraft would be obliged to refund the consultant company the amount of the VAT wrongly charged.