Aircraft Leasing VAT Programme

Aircraft Leasing VAT | Papilio Services Limited

Malta has become an attractive jurisdiction for aircraft owners or those thinking of purchasing an aircraft owing to the introduction of an aircraft leasing VAT initiative introduced by the Maltese VAT department.  The aircraft leasing VAT initiative is based on the successful Malta Super Yacht VAT registration programme and aims to reduce the VAT impact on the purchase of an aircraft and its engines. It should be noted, that the aircraft leasing VAT initiative is only available for aircrafts that are solely for private use only.

The Malta VAT department has established the exact time spent in EU airspace and based on the aircraft model seeks to establish a maximum percentage by applying certain guidelines. To establish the percentage of the aircraft lease agreement that is subject to VAT in Malta, a formula is applied which takes into consideration an experts technical study and the following variables:

  • Maximum take off mass in KG
  • Maximum fuel capacity in KG
  • Fuel Burn
  • Optimum altitude in feet
  • Optimum cruising speed in knots.

On completion of this process a percentage is established and is considered as the use of the aircraft within the EU’s airspace. This percentage of EU usage is then applied to the standard VAT rate of 18% which could lower the VAT charge to a possible effective rate of 5.4%.

Aircraft Leasing VAT Programme Conditions

  • An aircraft leasing agreement must be in place between a lessor and a lessee whom are both established in Malta.
  • The aircraft leasing agreement must not exceed a period of 60 months.
  • The lease installments within the aircraft leasing agreement must be paid on a monthly basis.
  • The aircraft leasing agreement can have an option to the lessee to purchase the aircraft at the end of the lease for a percentage of the original cost.
  • The lessee is not able to claim the input VAT derived from the aircraft leasing agreement but can claim back input VAT incurred on certain supplies associated with the continuation of its aircraft leasing activities.

Aircraft Leasing VAT Programme in Malta

On termination of the aircraft leasing agreement, a VAT paid certificate will be provided by the Maltese VAT department if the lessee exercises the option to purchase the aircraft.

Please select to continue:

Malta Aircraft Registration

Aviation Tax Planning