IN215 - Isle of Man Aircraft Register: Current Zero Rating for VAT and a Change to the Criteria

The UK and the Isle of Man have historically been attractive jurisdictions through which to import aircraft, especially planes for business and personal use. This is due to the zero rate of value added tax (VAT) for planes over 8,000kg.

Changes to the Criteria

From 1st September 2010 zero rating for aircraft will move from a weight based criteria to “aircraft used by airlines operating for reward, chiefly on international routes”.

This will remove the opportunity to benefit from the current zero rate for importations through the UK or the Isle of Man. The window of opportunity is therefore short before these importations will attract 17.5% VAT.

Current Regulations

If an aircraft is flying around the EU and carrying EU passport holders (passengers or crew), or persons with the right to reside in the EU, the aircraft must be able to show that it has paid appropriate tax within the EU. It will otherwise be considered un-taxed transport. This is applicable even if people have not been charged to fly on the aircraft

Regulations require that aircraft arriving from outside the EU must be imported at their first port of call in the EU. This process can be carried out in any EU member country.

Currently the UK (and the Isle of Man) are unique in that for qualifying aircraft above 8,000kg (approx 17,600lb) the rate of tax is ZERO (aircraft below 8,000kg attract VAT at the standard rate of 17.5%). To provide a comparison, you would pay 19% of the value of the aircraft if imported through France, and 20% plus 7% luxury tax if imported through Italy.

Further Information

If you require any additional information please contact Simon Kelly or Bruce Watterson at the Dixcart office in the Isle of Man bruce.watterson@dixcart.co.im or contact us.