Civil Air Transport

DEFINITION

A foreign company that acts as aircraft operator can be approved by the competent national aviation authority to use the aircraft for commercial purposes. Such approval is laid down the the air operator’s certificate (AOC).
A foreign company with an AOC qualifies for purposes of Swiss VAT as an airline. When applying for refund of Swiss VAT under the regulation of refund of VAT  to foreign companies, a copy of the AOC must be enclosed with the refund documents.

 

APPLICABLE LAW

Article 23 Par. 2 No. 8 Swiss VAT Act lays down the conditions for zero rating on supply, modification, assembly, repair, maintenance of airline aircrafts, or the supply of  goods or services for the direct needs of airline aircrafts. Article 41 Swiss VAT Regulation (‘MWSTV’) lays down the conditions for zero rating inbound/outbound, passing or domestic parts of international air transport.
Article 23 Par. 2 No. 3 Swiss VAT Act lays down the conditions for zero rating supply of goods that are placed under customs control. Articles 7 and 8 Swiss VAT Act determines the place of supply of goods or services.

 

USUAL ISSUES

  • supply of goods: supplies -within the Swiss tax territory- of fuel, water, on board meals for direct need of airline aircraft are subject to a zero rate when supplied to commercial airlines whose earnings are mainly realized in connection with international flights. Regularly it can be seen that Swiss suppliers charge Swiss VAT on these supplies, but the Swiss tax authorities systematically denies refund. Instead the foreign company must claim repayment directly from the Swiss supplier.
  • airport handling: services like commonly described as handling, landing charge, noise surcharge, air traffic control approach charge, emission value charge, airport fees disbursement, lavatory services, cleaning services, push back charges, fall under the scope of Article 8 Par. 1 Swiss VAT Act, and consequently are charged without Swiss VAT to the foreign company. Regularly it can be seen that Swiss service suppliers nevertheless charge Swiss VAT to foreign companies/airlines. The Swiss tax authorities do not refund Swiss VAT that should not have been charged. Instead the charged, but undue, Swiss VAT must be claimed directly from the Swiss supplier.
  • training: normally, training courses in Switzerland attended by cockpit, cabin or maintenance crew of foreign airlines will be charged with Swiss VAT. In the scope of the regulation for refund of Swiss VAT to foreign companies the latter can claim refund -provided all conditions have been fulfilled.
  • accommodation/hospitality: foreign airlines that use accommodation services in Switzerland for their crew will be charged Swiss VAT like any other hotel guest. However, under the conditions of the regulation for refund of Swiss VAT to foreign companies they will be able to reclaim the charged VAT. Normally, hotel accommodation -whether or not due to (inter)national regulations- offered by foreign airlines to their flight guests without charge, for example in case of delays or similar situations, will be subject to the zero rate. The same applies to expenditures for hospitality for flight guests (on board meals and drinks) supplied by suppliers within Switzerland; they are normally subject to the zero rate (see supply of goods above). Recharging of taxi fees, accommodation or similar costs in connection with stays in Switzerland to flight guests will block the entitlement to refund of Swiss VAT under the regulation for refund of Swiss VAT to foreign companies -regardless the height of the recharge.
  • maintenance/repair: maintenance of repair services are for purposes of Swiss VAT treated as a supply of goods (Article 3 letter d No 2 Swiss VAT Act). Under the conditions stipulated in Article 23 Par. 2 No. 8 Swiss VAT Act, these services are subject to a zero rate -namely when supplied to commercial airlines whose earnings are mainly realized in connection with international flights.
  • domestic flights: one of the conditions for entitlement to refund of Swiss VAT under the regulation of refund of VAT  to foreign companies is that the foreign company has not made domestic supplies in the Swiss tax territory during the period for which refund is claimed. Foreign airlines that make commercial flights (transport of persons) between airports within Switzerland -e.g. Zurich to Geneva- will lose their entitlement to refund under the regulation of refund of Swiss VAT  to foreign companies.
  • sale of civil aircraft: regularly, Switzerland is chosen as place of delivery of civil aircrafts used for international commercial aviation. A foreign company, not registered for purposes for Swiss VAT, that decides to have the plane flown to Switzerland and subsequently delivers the plane in Switzerland to the buyer -often also a foreign company, will have to register for purposes of Swiss VAT when the conditions for compulsory VAT registration are fulfilled -even for a one-time sale. Even when according to Article 23 Par. 2 No. 8 Swiss VAT Act such sale would be subject to a zero rate. For purposs of Swiss customs law civil aircrafts are placed under customs control by applying the prescribed procedures for landing on and taking off from international airports in Switzerland.