Private Jet Source Bing.com
Private jets are a symbol of luxury and status. For many high-net-worth individuals and corporations, owning a private jet is a necessity. However, purchasing and operating a private jet comes with significant costs, including taxes such as VAT (Value Added Tax) and FET (Federal Excise Tax). In this article, we’ll discuss everything you need to know about VAT/FET private jets.
What is VAT?
Vat Source Bing.com
VAT, or Value Added Tax, is a tax on the value added to goods and services at each stage of production and distribution. It is a consumption tax that is ultimately paid by the end consumer. In the European Union, VAT rates vary from country to country and can range from as low as 17% to as high as 27%.
How does VAT apply to private jets?
Private Jet Interior Source Bing.com
When you purchase a private jet in the European Union, VAT is applicable. The VAT rate is determined by the country where the aircraft is registered. For example, if you register your aircraft in Malta, which has a VAT rate of 18%, you will pay 18% VAT on the purchase price of the aircraft. However, if you purchase an aircraft from outside the EU and import it into the EU, you will also be required to pay VAT based on the value of the aircraft at the point of import.
What is FET?
Fet Source Bing.com
FET, or Federal Excise Tax, is a tax that is imposed by the U.S. federal government on certain products and services, including transportation by air. The current FET rate for domestic flights is 7.5% of the fare, while the FET rate for international flights is 0%. However, private jet owners are subject to a different FET rate.
How does FET apply to private jets?
Private Jet Landing Source Bing.com
Private jet owners are subject to a 7.5% FET on the purchase price of the aircraft, as well as on the amount paid for any maintenance, management, and charter services. This tax applies to both domestic and international flights. However, there are certain exemptions and deductions that private jet owners can take advantage of to reduce their FET liability.
What are the exemptions and deductions for FET?
Private Jet Takeoff Source Bing.com
Private jet owners can be exempt from FET if they use their aircraft for non-business purposes, such as personal travel. In addition, certain services, such as aircraft management and maintenance, are exempt from FET if they are provided by a separate entity that is not affiliated with the aircraft owner.
Another way to reduce FET liability is through deductions. For example, if a private jet owner uses their aircraft for business purposes, they can deduct the FET paid on the amount charged to their clients for those flights. Additionally, if the owner sells their aircraft within a certain period of time, they can receive a refund of the FET paid on the aircraft.
Conclusion
Purchasing and operating a private jet comes with significant costs, including VAT and FET. However, with proper planning and knowledge of the tax laws, private jet owners can reduce their tax liability and enjoy the benefits of private air travel.
