Tax Free Import of Aircraft in Switzerland
Import into Switzerland of Business Aircraft commercially operated and listed in an Air Operator certificate (AOC) free of Swiss Value Added Tax (VAT).
A Swiss or foreign AOC-operator may import the business aircraft in Switzerland free of Swiss VAT provided that the aircraft is made permanently available for charter to that AOC-holder under an operation and charter arrangement or a lease agreement with the owner. This Swiss VAT free import also applies if the ultimate (beneficial) owner of the aircraft resides in Switzerland. It reliefs the owner of the cash intense and cumbersome exercise to reclaiming Swiss import VAT.
Generally, an aircraft that is ultimately supplied to and used by Swiss residents and is brought into Swiss customs territory (irrespective of whether registered in Switzerland or elsewhere) is subject to Swiss customs clearance and to payment of customs duty pursuant to the Swiss Customs Act and Swiss import VAT pursuant to the Swiss VAT Act.
The Swiss Customs Authorities thereby applies a substance over form approach and considers a supply to that person who ultimately enjoys actual possession, control and use of the aircraft. Hence, the concept of factual control of the Aircraft is a facts and circumstances test.
Planning opportunity: VAT free import of Aircraft
With effect to 1 January 2020, the Swiss Customs Authorities have published guidelines pertaining to the VAT free import of aircraft into Switzerland; although, no breaking news is conveyed in this publication, the relevant paragraphs of these guidelines if read in the light of the leading decision handed down by the Swiss Supreme Court in 2013, offers a great planning opportunity: If the right to use the aircraft for charter is with the AOC-holder, the aircraft can be imported free of VAT and customs duties into Switzerland.
Under Article 53 paragraph 3 cipher e of the Swiss VAT Act, a duly licensed operator who predominantly uses aircraft in international transport of passengers for reward (the AOC-holder), may import such aircraft free of VAT into Switzerland provided a) the aircraft is delivered to him outside of Switzerland; and b) the aircraft is used for the charter business of the operator.
The importer of record, therefore, is the AOC-operator of the aircraft who may benefit of that Swiss VAT import privilege. According to the 2013 court ruling, where we have represented the successful AOC-holder, the key factor to achieve this benefit is to renounce the owner’s preferential rights relating to the usage of the aircraft; hence, the owner has to accept a first come – first serve charter reservation system; however, every charter request to the AOC-holder is notified to the owner in advance.
That import privilege also applies in the event the owner is resident in Switzerland or incorporated here; hence, if all facts and circumstances are thoroughly considered, the practise of the Swiss Customs Authorities allows sophisticated Swiss VAT planning and the tax optimized structuring of aircraft holding and usage, however, subject to a ruling of the competent authorities. And, on top of that, it has the potential to boost the aircraft operating business in Switzerland, again.