I propose to take Questions Nos. 39 and 40 together.
Ireland’s excise duty treatment of fuel used for air and waterborne navigation is governed by European Union law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive (ETD). The ETD is transposed into national law in Finance Act 1999 (as amended). Under the ETD, Member States are obliged to exempt from excise duty, certain mineral oils used for commercial aviation purposes and all mineral oils used for commercial maritime navigation.
In relation to aviation fuels, the scope of the ETD exemption covers jet fuel, also described as heavy oil, which is the most commonly used fuel type in air navigation. The exemption must encompass all jet fuel used for intra-Community and international air transport purposes. A Member State may however waive this exemption for intra-community flights but only where it has entered into a bilateral agreement with another Member State to tax fuel. Ireland has no such agreements at present and therefore the exemption from taxation is applied to all jet fuel used for commercial intra-community flights. No other Member States currently have bilateral agreements in place to allow for taxation of jet fuel.
The ETD provides that Member States may opt to fully or partially exempt from taxation jet fuel used for commercial domestic air navigation. Currently Ireland’s Mineral Oil Tax (MOT) law provides for a full relief to apply to jet fuel used for all commercial air navigation, including domestic, intra-community and international.
Light oil, referred to as aviation gasoline, is also used as an aviation fuel, although much less commonly than jet fuel. Under the ETD, Member States may opt to fully or partially exempt aviation gasoline used for international or intra-community commercial air navigation. They may also opt to fully or partially exempt fuels used for domestic commercial aviation. MOT law currently provides for a partial exemption for aviation gasoline used for commercial air navigation. There is no distinction in national legislation between domestic, intra-community and international commercial aviation in the operation of the partial relief.
With regard to aviation fuel for commercial international transport, the scope for a Member State to take a unilateral approach on taxation of aviation fuels is limited not only by the ETD but by international law and a range of bilateral and multilateral agreements that operate under the 1944 Convention on International Civil Aviation (known as the Chicago Convention).
Jet fuel and aviation gasoline used for private pleasure flying, i.e. non-commercial purposes, are mandatorily taxed under the ETD. The relevant standard rates of MOT apply to all such fuel uses in the State.
The table below summarises the mandatory exemptions and excise duty measures for aviation fuels required under Article 14 of the Energy Tax Directive. It also summarises the MOT treatment of such fuels used for air navigation as set out in national legislation.
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Aviation Fuel/Use
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Energy Tax Directive
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Finance Act 1999
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Heavy oil (jet fuel) used for domestic commercial aviation
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No mandatory tax exemption, Member States may opt to exempt or partially exempt
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Full exemption
(section 100(2)(b) Finance Act 1999)
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Heavy oil (jet fuel) used for used for intra-Community/international commercial aviation
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Mandatory tax exemption, except where bilateral arrangement entered into with another Member State
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Full exemption
(section 100(2)(b) Finance Act 1999)
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Heavy oil (jet fuel) used for private pleasure flying
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Mandatory taxation
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Full MOT rate of €405.38 per 1,000 litres
(section 96 Finance Act 1999)
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Light oil (aviation gasoline) used for domestic commercial aviation
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No mandatory tax exemption, Member States may opt to exempt or partially exempt
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Partial relief from MOT, effective rate of €233.71 per 1,000 litres (section 97B Finance Act 1999)
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Light oil (aviation gasoline) used for intra-Community/international commercial aviation
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No mandatory tax exemption, Member States may opt to exempt or partially exempt
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Partial relief from MOT, effective rate of €233.71 per 1,000 litres (section 97B Finance Act 1999)
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Light oil (aviation gasoline) used for private pleasure flying
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Mandatory taxation
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Full MOT rate of €465.98 per 1,000 litres (section 96 Finance Act 1999)
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With regard to mineral oils used for commercial sea navigation, including fishing, the ETD mandates that such use is exempt from taxation. In line with the provisions of the ETD, light oils and heavy oils used for commercial sea navigation are exempted from MOT by section 100(2)(a) of the Finance Act 1999 (as amended).
In the same way as fuels used for private pleasure flying must be taxed under the ETD, all mineral oils used as fuel for private pleasure water borne navigation are mandatorily taxed. The relevant standard rates of MOT apply to all such fuel uses in the State, currently €465.98 per 1,000 litres for light oils and €405.38 per 1,000 litres for heavy oils. In the context of mandatory taxation for private pleasure flying and navigation the ETD defines private pleasure as the use by an owner or the natural or legal person who enjoys the use either through hire or through any other means, for other than commercial purposes and in particular other than for the carriage of passengers or goods or for the supply of services for consideration or for the purposes of public authorities.
A proposal to revise the Energy Tax Directive is currently being negotiated at EU level, and Ireland is actively engaged in these discussions.
