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Leasing (chartering) of aircraft is chargeable to VAT on the deemed use of the aircraft within the European Union’s airspace. In order to establish the percentage of use of an aircraft within EU’s airspace, the VAT Department has issued a formula that takes into account essential features of the aircraft on the basis of which the percentage of use is established. The formula takes into account the following features:

  1. type of aircraft;
  2. take-off weight;
  3. fuel capacity;
  4. fuel consumption;
  5. altitude;
  6. cruising speed.

Through such a scheme, the lessor would be entitled to claim the original VAT incurred upon the acquisition of the aircraft as it becomes engaged in performing the economic activity of chartering the aircraft. Each charter is made by the lessor to the lessee at the established standard rate of VAT at 18%.