Dáil Éireann Debate, Wednesday - 18 September 2013
147. Deputy Pearse Doherty asked the Minister for Finance the supports available from his Department to the aviation leasing industry including exemptions from VAT and other forms of taxation and an estimation of the value of the exemptions to the Exchequer and the number employed in this sector. [36901/13]
View answerIn relation to the taxation of the aviation leasing industry, I am informed by the Revenue Commissioners that the following treatment applies:
Corporation Tax
A company carrying on a trade of aircraft leasing would, similarly to any other company carrying on a trade, be charged to corporation tax in respect of its trading income at a rate of 12.5%. When computing its profits for an accounting period, any company is entitled to claim capital allowances in respect of the wear and tear on plant and machinery owned by it and in use for the purposes of its trade at the end of that accounting period. In the case of an aircraft leasing company, this means that the company could claim a capital allowance in respect of the cost of acquiring an aircraft. The allowance is granted over a period of 8 years at a rate of 12.5% per annum.
Stamp Duty
Section 113 Stamp Duties Consolidation Act 1999 exempts from stamp duty instruments for the sale, transfer, or other disposition , either absolutely or otherwise, of any ship, vessel or aircraft, or any part, interest, share, or property in any ship, vessel or aircraft. Section 85 Stamp Duties Consolidation Act 1999 (as amended by FA 2013) provides that stamp duty is not chargeable on the issue, transfer or redemption of an enhanced equipment trust certificate. An enhanced equipment trust certificate is defined as meaning “loan capital issued by a company to raise finance to acquire, develop or lease aircraft”
VAT
Irish VAT is not charged on lease payments in respect of an aircraft where the aircraft is effectively used wholly outside the EU.
The leasing of aircraft to qualifying international airlines is subject to VAT at the zero rate. The aircraft must be used by an airline flying chiefly for reward on international routes. The lessor is entitled to deduct VAT incurred on the acquisition of the aircraft and other expenditure in connection with the leasing activity, subject to the usual restrictions. In such circumstances, the lessor will be in a continuous VAT repayment position.
A range of other services which lend support to the aviation leasing industry are also zero-rated for VAT purpose:
- the supply, repair, maintenance and hiring of equipment incorporated or used in aircraft flying chiefly for reward on international routes;
- the supply of goods for the fuelling and provisioning of aircraft flying chiefly for reward on international routes; and
- the supply of navigation services by the Irish Aviation Authority to meet the needs of aircraft flying chiefly for reward on international routes.
The 23% standard rate of VAT is applicable to other aviation leasing arrangements. In such cases, the lessor is entitled to deduct VAT incurred on the acquisition of the aircraft and on expenditure incurred in connection with the taxable leasing activity.
Cost to the Exchequer of these exemptions
There is no overall costing of the value of the Stamp Duty exemption referred to above. As indicated in my reply to the Deputy’s questions on the tax revenue generated by the aircraft leasing sector, the sector is in a net repayment position in respect of VAT as a result of the zero rating of services.
Numbers employed by the aircraft leasing industry
Surveys on the aircraft leasing industry in Ireland indicate that it supports around 1,000 direct employees and around 500 indirect employees in high-value employments.
