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Corporate Aircraft: Compliance When Purchasing Internationally

B uying a company jet is not as easy as buying a company car. In the ACC Docket’s previous aviation compliance article, we examined the considerations and concerns included that US buyers must face, including pre-purchase inspections, the federal and state sales taxes, and rules when buying across borders. Such rules aren’t intuitive and require a thorough legal team to make sure no laws have been violated.

Now we go global and focus on the rules and regulations for EU residents to buy aircraft. In particular, this article addresses the two significant issues that arose in the European Union in 2016 involving the ownership and operation of business aircraft: NCC and VAT.

NCC

The first issue is the Non-Commercial operations with Complex Motor-Powered Aircraft (NCC). This regulation applies to EU registered aircraft. However, the focus is on the “operator” and aircraft registered outside the European Union that are based in and operated from the European Union, and are also subject to this regulation.   

The regulation was adopted to add safety requirements for non-commercial aircraft operations and to try to eliminate “grey charter.” Grey charter involves an aircraft operated under the non-commercial/private regulations but receiving compensation or consideration for flights.

An example of how NCC might impact an operator is the effect on company accounting practices such as a charge-back to subsidiaries. Charge-backs are a common accounting action to appropriately allocate costs within a company or group of companies.

In the European Union, the aviation definition of a group that is acceptable for charge-backs may only include affiliates where the equity share is greater than 51 percent. If the accounting department uses a broader definition of group for aircraft charge-backs, the company may have additional risk of both regulatory non-compliance and of denial of coverage by its insurance in the case of an accident.

The final opt-out period ended on 24 August 2016 for this European Aviation Safety Agency (EASA) regulation. The description, regulations, and diagrams can be found at:  https://www.easa.europa.eu/easa-and-you/air-operations/non-commercial-operations-ncc-complex-motor-powered-aircraft

VAT and Temporary Admission/ Importation into the European Union

What seems like a standard business flight — carrying EU-resident company personnel from one facility to another within the European Union on a company aircraft that is registered outside the European Union — can carry significant compliance risk.  

New EU regulations were proposed in 2016 to address this. The proposed regulation can be found here and here, starting on page 5.

As of 2016, Temporary Admission has been expanded and with the implementation in Denmark can now help those who want to avoid uncertainty and maintain regulatory compliance for internal flights in the European Union with EU-resident personnel on-board. 

The Corporate Aircraft Series

Corporate Aircraft: Your Team, the Purchase Agreement, and Sales Tax Compliance

Corporate Compliance and Corporate Jet Registration

Compliance Considerations for Structuring Company Jet Operations

About the Authors

Dawn RogersDawn Rogers is an in-house attorney with Spirit AeroSystems Inc. Contact: [email protected]

Michelle WadeMichelle Wade is an attorney in private practice and regularly counsels clients on the acquisition, financing, and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Contact: LinkedIn.


The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.