Cyprus Aircraft Leasing Scheme
What is a Private Aircraft Leasing Agreement?
A Private Aircraft Leasing Agreement is an agreement according to which the lessor (the owner of the aircraft in question) leases the aircraft to the lessee (the person who leases the aircraft). At the end of the lease period, the lessee may opt to purchase the private aircraft.
What is the VAT Treatment of the Private Aircraft Leasing Agreements?
The leasing of the private aircraft is considered as a supply of services and is taxable at the standard VAT rate of 19%, to the extend of the use of the aircraft within the airspace of the European Union. However, keeping exact records and logs of the movement of the aircraft is quite complicated. The Cyprus Aircraft Leasing Scheme provides a solution to this issue. The percentage of the time the aircraft is used within the EU is determined in advance according to the type of the aircraft (piston, turbo, jet) and its take-off weight.
How is calculated the use of the Aircraft within EU airspace?
AIRCRAFT TYPE: PISTON
| WEIGHT ON TAKE OFF | Percentage of the use within EU | Effective Tax Rate |
| Light: 1kg – 3 000kg | 100% | 100% of the consideration x 19% |
| Small: 3 001kg – 5 700kg | 80% | 80% of the consideration x 19% |
| Medium: 5 701kg – 15 000kg | 60% | 60% of the consideration x 19% |
| Large: over 15 001kg | 40% | 40% of the consideration x 19% |
AIRCRAFT TYPE: TURBO
| WEIGHT ON TAKE OFF | Percentage of the use within EU | Effective Tax Rate |
| Light: 1kg – 3 000kg | 55% | 55% of the consideration x 19% |
| Small: 3 001kg – 5 700kg | 45% | 45% of the consideration x 19% |
| Medium: 5 701kg – 15 000kg | 35% | 35% of the consideration x 19% |
| Large: over 15 001kg | 25% | 25% of the consideration x 19% |
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AIRCRAFT TYPE: JET
| WEIGHT ON TAKE OFF | Percentage of the use within EU | Effective Tax Rate |
| Light: 1kg – 3 000kg | 50% | 50% of the consideration x 19% |
| Small: 3 001kg – 5 700kg | 40% | 40% of the consideration x 19% |
| Medium: 5 701kg – 15 000kg | 30% | 30% of the consideration x 19% |
| Large: over 15 001kg | 20% | 20% of the consideration x 19% |
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What conditions should be fulfilled in order to participate to the Cyprus Aircraft Lease Scheme?
The Lessor
- The lessor must be a company incorporated in Cyprus and fulfill the following:
- The lessor must be registered with the Cyprus VAT Authorities for VAT purposes.
- The profits the lessor should derive from the lease agreement should be at least 5% of the aircraft’s original value (50% of the profits shall be included in the monthly installments and 50% in the final installment).
The Lessee
- The lessee can be an individual or a legal entity, whose primary place of residence/establishment is in Cyprus and must fulfill the following:
- The lessee should not claim input VAT, meaning that s/he should use the aircraft for leisure and not for business purposes.
- The initial installment the lessee should pay the lessor should not be less than 40% of the value of the aircraft.
Other Provisions related to the Lease Agreement
- The aircraft should fly in Cyprus within 2 months from the date the lease agreement. For an extension to this deadline, the interested parties must ask for the authorization of the Cyprus VAT Department.
- The lease agreement period should not be less than 3 months and should not exceed 60 months.
- Lease installments should be payable every month and VAT every quarter.
In order to enter the Cyprus Aircraft Leasing Scheme, the interested parties must apply in writing in advance to the Cyprus VAT Authorities.
If you are interested in this Cyprus Aircraft Scheme, please get in touch.