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NEWS & INSIGHT - 16th April 2020

Thinking of buying a business jet?

 

Buying an aircraft and setting up the most beneficial ownership structure is complex and time consuming process.  It requires significant professional input from legal, corporate and tax experts.   One aspect often overlooked is identifying the most suitable jurisdiction and establishing the most suitable holding structure for the aircraft.  With in-excess of 70 low tax jurisdictions together with an array of different corporate and trust vehicle options, making the right decision can be challenging

 

The key benefits of using an offshore company or trust are summarised as follows:

 

  • Confidentiality of ownership
  • Asset Protection & Reduced exposure to potential liabilities
  • Easing the disposition of assets to heirs
  • Beneficial VAT planning & zero corporation tax – both of which can help owners reduce the overall operating costs of their aircraft
  • To meet qualified ownership requirements of certain registries

 

Identifying and choosing the best offshore jurisdiction company, partnership or trust requires careful consideration of several factors including where the aircraft will be registered, where it will operate, the type of structure used ie. charter structure, dry leasing structure etc., the nationality of the ultimate beneficial owner, VAT and tax objectives.

 

Further consideration needs to be given to the type of company, how it is structured in terms of Directors, shareholding, capitalisation as well as the need to tax and VAT registration.

 

The most important factor in choosing a jurisdiction is to be sure that your company will be incorporated in a country that has:

 

  1. Reliable means of communication
  2. Political and economic stability
  3. High regulatory standards and reporting requirements
  4. Sophisticated corporate laws
  5. A competitive tax and VAT regime

 

Where the above criteria is met by jurisdictions such as the Isle of Man, Banks are more willing to lend should finance be required.

 

In summary, professional advice should be sought at an early stage of the acquisition process.  The purchase and financing of an aircraft in an international forum is not without its complications and it is important to have the right team on board from the outset. Equip yourself with a legal advisor that has experience in the complete spectrum of international aviation specific issues that will almost certainly arise in any aircraft acquisition. Initial outlay on getting the right structure and procedures in place will go a long way to prevent having to unravel an unworkable structure and incur unnecessary associated costs.

 

There can be no standard reply as to which is the best offshore jurisdiction. That answer really depends upon the intended use of the offshore company, upon the personal and business circumstances of its owners and upon the various tax regulations in force in the countries where the offshore company will engage in business.

All the jurisdictions offered by respected corporate service providers enjoy the above mentioned advantages. However, the right choice of jurisdiction also depends on where you live and on the business you conduct. Given the right advice from the outset aircraft owners and their professional can advisors can assist you in finding the jurisdiction that makes the most sense with regard to your personal situation.

 

Ownership of an aircraft should never be contemplated without comprehensive advice being sought on the taxation implications of the proposed structure and acquisition of the aircraft.

NEWS & INSIGHT - 7th April 2020

FrancE WITHDRAWs VAT Regulations

 

On the 29th January, the French tax authorities published on their tax bulletin that the VAT lump sum reduction will be replaced with an effective reduction in proportion to the time spent outside of EU waters.  This would have impacted all charter contracts concluded after the 30th March 2020.

 

However, due to the Covid 19 crisis, the French Finance Minister has cancelled the implementation of the new regulation.  Consequently, the VAT lump sum reduction will remain in place provided that the yacht enters international waters during its charter.