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Value Added Tax: VAT in Aviation 

Value Added Tax (VAT) is one of the most complex taxes within the European Union. Since the aviation business is operating globally, it is essential to have a complete overview of local VAT rules for purchases and sales linked to their air operation. For example, VAT can be relevant for the following supplies linked to an air operation: 

  • VAT for use of airport and its facilities, including the granting of permission to take-off and landing (e.g. airport facility charges VAT, VAT on airport services) 
  • VAT on fuel and fueling services  
  • VAT on route charges of air navigation service providers (invoiced by EUROCONTROL) 
  • VAT on catering services and food and beverages provided on board (in-flight catering) 
  • VAT for rental of space and hangars for parking the aircraft at airports 
  • VAT on accommodation and catering for crew members of an aircraft 
  • VAT on transport of crew members, e.g. by taxi, from the airport to the hotel and back 
  • VAT on accommodation and catering for passengers in the event of flight irregularities 
  • VAT on carriage of passengers and flight baggage, e.g. with a motor vehicle, to an alternate airport  

All these services may trigger VAT implications depending on the place of supply and applicable VAT regulations. 

Impact on companies in the aviation business in Germany 

In general, applying a VAT exemption for purchases linked to the air navigation could be an advantage for foreign companies operating in the commercial aviation business in Germany.  If such a VAT exemption applies and the supplier shows German VAT, in general, the VAT invoiced could be a cost if paid by the aviation company to the supplier. An input VAT refund or deduction requires that VAT is legally due. VAT could be a cost factor if VAT has been incorrectly shown on the invoice. 

Furthermore, passenger transport within German airspace is subject to the passenger transport VAT rules within the German VAT framework. However, for cross-border transport of passengers by air the German VAT framework regulates a special regime setting under certain condition a lower VAT rate or a waiver of VAT. In any case certain VAT obligations exist being VAT compliant. 

Aviation VAT in Germany

Air operations in EU Member States could trigger VAT implications in various EU countries, e.g.  

  • VAT on outgoing supplies (e.g. domestic flights, cross-border flights, separate in-flight catering) as well as  
  • VAT on purchases (fuel, air navigation services, VAT on ground handling services, EUROCONTROL, hotel and transport services for crew members, etc.) 

Failure to meet VAT compliance requirements may also affect eligibility for energy tax licenses using tax exemption regimes. Therefore, maintaining VAT compliance is essential. 

Your benefit: Our VAT Consulting Services

We provide comprehensive VAT advisory services and VAT consulting for aviation tailored to your business. Our experts review your air operations from a German VAT perspective and assess obligations such as: 

  • a VAT registration 
  • ongoing VAT compliance 
  • invoice review and potential corrections 

With our expertise in VAT in aviation and a deep understanding of VAT regulations in Germany, we manage communication with tax authorities and ensure efficient handling of your obligations under German VAT law. 

We advise and support your business

  • in applying special regimes for VAT exemptions to optimize the cash flow 

  • in preparing VAT returns, VAT refund applications and other compliance obligations 

  • in advising in Civil law aspects getting the optimal VAT position in the ongoing business in the supply chain 

  • in implementing processes for cash flow optimization 

  • in advising in tax audits if needed

  • in supporting you in disputes at the level of tax administration or in court cases 

High-quality service & interdisciplinary consulting

We especially manage communication with the tax offices in charge. Based on our long-term experience in the aviation sector, we maintain a close and valuable relationship with the local tax offices responsible for foreign companies (in the aviation business). This is essential to effectively administrate the obligations and the relevant tax benefits legally regulated for the aviation business, since in certain cases some challenges could arise.  

Let Tino Wunderlich and his team of experts advise you on all things VAT in aviation. Simply get in touch. 

FAQ: VAT in Aviation sector 

Many aviation-related services are subject to VAT, for other services special VAT regimes and VAT exemption can be applied. The VAT treatment of ingoing and outgoing supplies depends on the nature of the service and the location where it is supplied, defined by the relevant VAT law. 

Air carriers may benefit from VAT exemptions for certain international transport services and related supplies. These exemptions are regulated under VAT regulations in the EU and can significantly reduce costs if applied correctly. 

Typically, the supplier of the service is liable for charging VAT if no special VAT regimes for the aviation sector can be applied. However, in some cross-border VAT scenarios, the reverse charge mechanism may apply, shifting the liability to the recipient. Remaining VAT can be waived under certain conditions. 

Proper VAT compliance ensures that companies avoid penalties, recover input VAT, and optimize cash flow. Non-compliance can lead to significant financial risks and operational disruptions. 

Aviation companies can handle VAT audits effectively by maintaining accurate documentation, ensuring proper invoicing, and relying on professional VAT advisory services from the beginning of their operation. Structured processes and expert VAT compliance support are key to minimizing risks during audits. 

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