Although the VAT treatment of aviation and shipping companies can be quite an intimidating topic, the accounts team at GCS Malta simplify matters in this article.
Aircraft Treatment of VAT
Companies within the aviation industry, i.e. companies that operate an airline, are subject to special VAT treatment. The following are all exempt with credit:
- The international transport of persons, luggage and vehicles accompanying passengers
- The supply of services relating to the international transport of passengers
- Services ancillary to the aircraft operation, necessary for landing, take-off, and stay in an airport
This means that no VAT is charged on the sale of such services, but the company in question may claim back any input VAT on expenses incurred on the provision of that supply.
Aircraft Leasing
New guidelines relating to VAT implications arising from aircraft leasing arrangements were issued in 2012 by the VAT department. These guidelines apply to all aircraft except for those used by airline operators in international traffic since these are exempt with credit.
Guidelines specify that services which take place in Malta are considered as taking place outside the EU if they are enjoyed and used outside the EU.
The guidelines also establish a percentage of the lease on which Maltese VAT will be due, considering the aircraft model and factors such as maximum fuel capacity in kilograms and optimum altitude in feet.
The standard VAT rate of 18% is payable only on that portion of the lease payment, which is deemed to be for the use of the aircraft within EU airspace.
Shipping company treatment of VAT
When it comes to the VAT treatment of shipping companies, the place of supply of goods transported from Malta is where the transport begins, in this case, Malta.
However, when the transport of goods is an intra-community transport of goods, i.e. the place of departure and arrival are within two different EU Member states, the place of supply shall be the country of destination of transportation.
Therefore, if a Maltese shipping company is transporting goods within Member states, like Italy, the place of supply shall be in Italy — where the transport ends. In this case, Italian VAT shall apply since it is out of scope of Maltese for Maltese VAT to be applied.
Why GCS Malta?
At GCS Malta, our accounts team, with a multitude of experienced individuals, can assist you with issues concerning the VAT treatment of aviation and shipping companies, as well as any other accounting needs. Contact us today for more information.
