The VAT package changes - Impact on the aircraft leasing and related industries


1. Cross border supplies of services

The changes

At present Irish entities supplying or receiving certain services e.g. consultancy services, apply the “reverse charge” procedure. Where such services are received from abroad, an Irish business customer must self-account for VAT at the appropriate rate. The supply of such services from Ireland to non Irish customers are not subject to Irish VAT where certain conditions are met.

With effect from 1 January 2010, the range of services subject to the “reverse charge” procedure will increase for business to business supplies. The rules in respect of business to consumer supplies will remain the same.

Businesses in receipt of services from abroad will need to review whether they will be required to self-account for Irish VAT on services currently not within the “reverse charge” and amend their VAT accounting system accordingly. Similarly, any business charging Irish VAT on services to foreign customers will need to consider whether Irish VAT will be applicable post 1 January 2010.

Aircraft leasing

The changes will directly impact on aircraft leasing and after 1 January 2010 the reverse charge procedure will apply to the cross border lease of aircraft for business to business supplies.

Overall these changes will fundamentally affect the Irish VAT treatment of both the “lease in” and “lease out” of aircraft for business purposes by Irish entities as follows;

Current rules - pre 1 January 2010

New rules - post 1 January 2010

Positive Development

 “Lease out” of aircraft by Irish entities

Irish companies leasing “out” aircraft to non Irish lessees have to consider whether Irish VAT arises on the lease rentals.

If Irish VAT arises, VAT 60A clearance certificates are typically obtained to avoid the requirement to charge and collect the VAT.  Otherwise the Irish lessor has to charge Irish VAT and remit it to the Irish Tax Authorities.

An Irish company leasing aircraft “out” to a non Irish business lessee will generally no longer have to apply Irish VAT or consider the Irish VAT treatment. Instead the reverse charge procedure will apply to the aircraft lease payments.

VAT 60A clearance certificates will not be required for the cross border lease of aircraft after 1 January 2010.

Generally yes.  These changes simplify the VAT treatment. However, they remove the VAT advantage enjoyed by Ireland over other EU jurisdictions via the 60A process for aircraft operated by EU domestic airlines. 

“Lease in” of aircraft by Irish entities

Currently Irish VAT issues do not arise for Irish companies leasing “in” aircraft from non Irish lessors

Under the new rules, Irish lessees may be required to operate reverse charge Irish VAT on the lease rentals paid after 1 Janaury 2010 with potential additional Irish compliance obligations arising, e.g. VAT registration obligations, VAT filing obligations.


No changes arise to the VAT treatment of the cross border lease/hire of aircraft by an Irish lessor to non business customers e.g. private individuals, government bodies. Irish VAT will apply to the lease rentals other than in certain circumstances, for example, where the aircraft are used and enjoyed outside the EU.

There may be additional VAT compliance obligations where aircraft are leased to non EU lessees, or non EU intermediary lessors, and the aircraft are used and enjoyed within the EU. This would be dependent on the implementation of the VAT package changes by the Tax Authorities of each EU Member State.

Other related services

These changes will also impact on the VAT treatment of the cross border supply and receipt of other aircraft related services for business purposes e.g. aircraft repair and maintenance services, technical services, administration services, inter group management services.

For example:

Current rules (pre 1 January 2010)

New rules (post 1 January 2010)

Positive development

Repair work carried out on an aircraft located in France and invoiced to an Irish company

Risk of French VAT on the repair fee

No French VAT on the repair fee.  The reverse charge procedure should apply.  Irish recipient may be required self access for Irish VAT on the repair work fee.



Aircraft related management services provided by Irish parent  to German aircraft owning subsidiary 

Risk of Irish VAT arising on the management fee absent VAT 60A Authorisation

No Irish VAT arises on the management fee.  The reverse charge procedure applies.  German company to self access for German VAT


Other EU jurisdictions

Not only do these changes apply to Ireland but they also similarly apply in each jurisdiction of the EU. Any companies with operations in other EU Member States (e.g. intermediary leasing companies in France, Spain, Germany) will need to consider how these operations will be impacted in that Member State.

2. Additional compliance requirements – VIES returns

The changes

Under the current VAT system, an Irish supplier supplying goods to VAT registered customers in other EU Member States is required to submit a quarterly statement (known as a VIES return) to the Irish Revenue showing details of the value of goods sold to each VAT registered EU customer in that period. This information is shared between Member States in order to combat fraud and seek to prevent entities from incorrectly availing of the zero rate.

Under the VAT Package rules, the requirement to submit VIES returns is being extended to the cross border supply of certain services.

VIES returns

After 1 January 2010, Irish businesses supplying services of a VATable nature to VAT registered customers in other EU jurisdictions (this will include services such as aircraft leasing, aircraft repair and maintenance services, intergroup management services) will be required to submit a quarterly (or monthly) VIES return. In a VAT group scenario this obligation will apply to each member of the VAT group and not just the VAT group remitter.

The details required on the VIES returns include;

  • The nature and value of the services provided,
  • The name, address and VAT registration number of EU customers,

These changes will impose an additional administrative burden on businesses and will necessitate system changes to ensure that the VIES return can be prepared with effect from 1 January 2010. Businesses to which this obligation applies are required to register with the Irish Revenue for VIES return filing. Businesses will face penalties for non compliance.

Our comments above are based on draft VAT legislation and guidance published by Revenue (the legislation remains to be published in final form). We are in discussions with Revenue with a view to reducing the VIES return reporting requirements in respect aircraft leased to EU international airlines.

Other EU jurisdictions

These changes are EU wide and apply not only apply to Irish businesses but also operations in other EU jurisdictions (e.g. intermediary leasing companies in Spain, France, UK etc). Any business with operations in other EU Member States should consider whether these operations need to register and file local VIES returns.

3. Refund of foreign VAT incurred

Under the current cross-border VAT refund procedure, an Irish entity wishing to claim foreign VAT must file a paper VAT refund claim in every Member State in which it incurs VAT. The current paper system is burdensome and obtaining VAT refunds in some jurisdictions can be problematic.

The VAT package introduces a new system for cross border VAT refunds. With effect from 1 January 2010, Irish entities will no longer have to file VAT refund claims in each Member State where they incur VAT. Instead they will submit their VAT reclaim electronically to the Irish Revenue. The Irish Revenue will review the claim and if satisfied that the reclaim is in order, they will then forward the VAT refund claims electronically to the Member States concerned.

Other changes arise to the refund procedure which should make it easier for businesses to submit cross border VAT refunds and also speed up the timeframe in which VAT refund claims are received.

If you would like to speak with someone on the above in more detail, please contact your usual KPMG contact or one of the following members of our VAT team.

Niall Campbell
VAT Partner
00 353 1 410 1174

Terry O’Neill
VAT Partner
00 353 1 410 2425

John McGlone
VAT Partner
00 353 1 410 1773


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