The European Union value added tax (VAT) directive exempts (or
zero-rates) supplies of aircraft and parts that are used by
"airlines operating for reward chiefly on international
routes". There is a wide divergence between the Member States
as to the level of international flights an airline must operate to
qualify as such an airline – from more than 50% in Germany to
more than 80% in France.
This divergence in approach stems from the differences between
the various language versions of the VAT Directive. Each official
European language version has equal validity.
% of international traffic required for an airline to
qualify for the VAT exemption
On the basis of the German (hauptsächlich), the
English (chiefly) and the Italian
(prevalentemente) versions of the VAT directive, the
German, English and Italian authorities accept that an airline
operates for reward chiefly on international routes if more than
50% of its business involves international traffic.
The Dutch language version (hoofdzakelijk) has led the
Dutch authorities to set the threshold at over 70%. By contrast,
the French language version of the directive
(essentiellement), means that the French authorities
require an airline to have more than 80% of its business as
operating on international routes.
Limited guidance from the European Court
The only guidance to date as to what the threshold for operating
"chiefly" on international routes should be is found in
Cimber Air (case C-382/02). The court noted that the
interpretation must take account of the divergence between the
language versions of the VAT directive. The French, Italian,
Spanish and Portuguese versions use the word
"essentially" or an equivalent word. By contrast, the
Danish, German, English and Dutch versions use, respectively, use
"chiefly" or "mainly". The court acknowledged
that the language found in the French, Italian, Spanish and
Portuguese versions, suggested that an airline's international
operations needed to account for almost all of its business to
qualify for the exemption. By contrast, the language in the Danish,
German, English and Dutch versions suggests that all that is
required for the exemption to apply to an airline is for its
operations on international routes to exceed its non-international
operations. Having acknowledged this difference in the various
language versions, the European court did not reach any conclusions
as to the level of international operations required to fall within
An unclear position
Given the limited guidance, care will need to be given in
assessing whether an airline qualifies for the exemption in the VAT
directive. Counter intuitive though it may seem, because of the
different levels of international operation needed for an airline
to qualify for the VAT exemption, the same airline could qualify
for the exemption in one Member State but not in another. Those
Member States that require a high level of international activity
before accepting the VAT exemption is available, risk their
interpretation of the VAT directive being challenged before the
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