Clarification of Customs Terms for Temporary Aircraft Admission to EU
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1 Clarification of Customs Terms for Temporary Aircraft Admission to EU Thursday March 26 th hrs PRESENTED BY: Terry Yeomans Program Director for IS-BAH International Business Aviation Council International Operators Conference San Antonio, TX March 23 27, 2015
2 Viewer discretion advised Dull subject matter warning! 2
3 Sales and Use Tax.assessed upon tangible personal property purchased by a resident of the assessing state for use, storage, or consumption in that state (not for resale), regardless of where the purchase took place. If an aircraft is brought into XXXXXXXX within one year of purchase and is either regularly based within this state or more than one-half of the aircraft's operating hours are within this state, such aircraft is taxable in this state. No use tax is due if the aircraft is hangared outside YYYYY and more than 50 percent of its use is outside the state. 3
4 ISTANBUL CONVENTION On Temporary Admission (Istanbul, 26 June 1990) "temporary admission" means : the Customs procedure under which certain goods (including means of transport) can be brought into a Customs territory conditionally relieved from payment of import duties and taxes and without application of import prohibitions or restrictions of economic character; such goods (including means of transport) must be imported for a specific purpose and must be intended for re-exportation within a specified period and without having undergone any change except normal depreciation due to the use made of them. 4
5 In Feb 2014, The International Business Aviation Council (IBAC) requested clarification from the World Customs Organization (WCO) on the interpretation of the term private use and commercial use in the context of temporary importation of aircraft. The terms were allegedly interpreted not in a harmonised manner by Customs Authorities, which caused confusion among third country non-european Union operators flying into the EU. IBAC highlighted that the terms commercial use and private use of means of transport (MoT) as defined in the Istanbul Convention have a meaningful difference compared to the definitions of the global air transport safety and economic regulatory regimes. 5
6 Examples of concerns Corporate aircraft used for business trips are commercial use. If operated by a corporation or management company, a flight is commercial and no internal flights allowed As a commercial charter operation, no internal flights in the EU are allowed. Third country aircraft flying within the EU are not allowed to carry EU residents as passenger and/or crew. 6
7 Scenario 1 A Canada-based corporation flies its Canadian-registered corporate aircraft from Montreal to Paris and Nice for businessrelated meetings with local offices, customers and suppliers. All on board are Canadian citizens. A Paris-based employee of the corporation flies from Paris to Nice for the meeting there. The aircraft departs Nice for Montreal. 7
8 IBAC position We deem above case to be the private use of company owned transport for a business trip. Would carriage of promotional materials (brochures etc.) change this? 8
9 EC position Private use as defined in Article 555(1)(b) CCIP (Regulation 2454/1993). As the use of means of transport in this case does not involve remuneration, it does not fall under the definition of commercial use but remains in the scope of private use. The transportation of company materials / brochures is not the main purpose for the usage of the means of transport and it is not a direct commercial activity but `transport of goods in commercial context`, therefore it is private use. 9
10 Scenario 2 A Canada-based corporation flies its Canadian-registered corporate aircraft from Montreal to Paris and Frankfurt for business-related meetings with local offices, customers and suppliers. All on board are Canadian citizens. A Paris-based employee of the corporation flies from Paris to Frankfurt for the meeting there. The aircraft departs Frankfurt for Montreal. 10
11 IBAC position We deem above case to be the private use of company owned transport for a business trip. 11
12 EC position There is no direct remuneration involved for the transportation of company employees as it is carried out by the corporate aircraft. Direct payment means that a person using the service pays for the service. The case fulfils the conditions of private use. 12
13 Scenario 3 A U.S. citizen, resident of the U.S., owns his aircraft but pays a management company on a monthly basis to provide crew and support. He chooses to use his aircraft to fly from the U.S. to various destinations in the EU to watch a football tournament and invites some U.S. citizen friends to join him at no cost to them. The aircraft owner pays all transportation expenses. 13
14 IBAC position We believe this means of transport, is a not-for-remuneration operation, meets the conditions under temporary admission 14
15 EC position Private use. The payment involved in this case is not remuneration for the transport of persons as stated in the definition of commercial use but is regarded as indirect payment by the owner of the means of transport. 15
16 Scenario 4 A UAE-based company charters a UAE-registered jet to take employees, all non-european citizens, from Dubai to Amsterdam, Paris, and Rome. The aircraft carries only the same passengers throughout the journey. The operator obtains the appropriate traffic right permissions from the individual states. The flight returns from Rome to Dubai. 16
17 IBAC position We believe this means of transport is a for-remuneration operation, meets the conditions under temporary admission where the operator obtains the necessary traffic rights. 17
18 EC position Private use. The payment made by the company is not direct payment for the transportation of employees but for the lease of the jet. Therefore, it remains private use. 18
19 Internal traffic For purposes of customs regulations, an "internal" flight is between any two points within the EU. "Private use" flights may operate between any two points under temporary admission. "Commercial use" flights may also operate between any two points under temporary admission, provided such flights have received the necessary authorizations from the Member States concerned. Position of the EU Customs Code Committee: It agrees with above statements. 21
20 Commercial use? Regarding the definition of "commercial use" of means of transport, in this case business aviation, transport "for remuneration" means whether passengers paid for air transport service (i.e., a ticket) or whether the whole aircraft was chartered to provide transport service. Position of the EU Customs Code Committee: Commercial use as defined in Article 555(1)(a) CCIP means that passengers have paid for air transport service (i.e., a ticket). 22
21 Commercial use? Transport of brochures or materials for promotional purposes would not cross the threshold of "commercial use", but transport of items for sale, whether or not for remuneration, would qualify a flight as "commercial". Position of the EU Customs Code Committee: If the transportation of company materials/ brochures is not the main purpose for the usage of the means of transport and it is not a direct commercial activity but `transport of goods in commercial context`, then it is private use even if the company brochures or materials for promotional purposes are sold (which is usually not the case). 23
22 Registered owner Definition and use of person : According to the Convention, a person means both natural and legal persons. In considering private vs. commercial use, some Customs Authorities see private use of an aircraft as only personal use by an individual. If a corporation or company, i.e. a person according to the Convention, operates its aircraft for its own purposes, without holding out to the public for remuneration or hire, under what context is the operation of that aircraft considered commercial and under what context is it considered private? Position of the EU Customs Code Committee; in all scenarios given Private. 24
23 Crew Citizenship or residence of crew aboard: Does the citizenship or residence of the crew members, e.g., pilots, cabin crew, have a bearing on the decision as to whether a business aircraft is eligible for temporary admission? If so, please provide the policy basis. Position of the EU Customs Code Committee: Only the residence of the pilot / co-pilot matters. The citizenship or the place of residence of the cabin crew is not relevant in the case described. 25
24 Crew In the case when the owner of the aircraft is a corporate entity and the aircraft is used under TA by a contract pilot (natural person established in the EU), then Article 561 CCIP is applicable.. employed by the owner of the means of transport established outside that territory or otherwise authorised by the owner. The condition of this holder being in the customs territory at the time of use set in Article 560 is not relevant in this case. 26
25 Article 5 Conditions Istanbul Convention ANNEX C ANNEX CONCERNING MEANS OF TRANSPORT For the facilities granted by this Annex to apply : Means of transport for private or commercial use must be registered in a territory other than that of temporary admission, in the name of a person established or resident in a territory other than that of temporary admission, and be imported and used by persons operating from such a territory; 27
26 Article 9 Period of discharge ANNEX C ANNEX CONCERNING MEANS OF TRANSPORT 1. Means of transport for commercial use shall be re-exported once the transport operations for which they were imported have been completed. 2. Means of transport for private use may remain in the territory of temporary admission for a period, continuous or not, of six months in every period of twelve months. 28
27 Thank You CUSTOMS CODE COMMITTEE Section for Special Procedures Temporary Importation Commercial and private use of means of transport (request for clarification by IBAC) Brussels, 13 November 2014 TAXUD/A2/SPE/2014/010 EN-REV3 ry_importation/index_en.htm EN/FR/DE 29
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