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Look let’s be real, anything “offshore” today, be it a bank, aircraft or yacht registration and in most cases a corporation, means someone is hiding something from the tax man, assets or income, usually illegal tax evasion and not tax avoidance which is legal. The Isle of Man government approved tax avoidance schemes that have refunded more than $1bn to the super-rich and to multinationals on the import of hundreds of private jets into Europe. The Paradise Papers reveal how Manx customs worked closely with the offshore law firm Appleby and the big four accounting firm EY, to approve schemes which have ultimately helped some of the world’s wealthiest individuals reduce import VAT bills to zero. The arrangements allowed jet owners to claim 100% VAT refunds on the grounds that their jets were part of leasing businesses. What the leak of 6.8m files from the archives of Appleby reveal is that these businesses involved millionaires leasing their own aircraft from themselves, and some of that appears to be illegal for sure.

 

https://www.linkedin.com/in/tomas-chlumecky-aviation-doctor-3200a021/

 

 

Paradise Papers: Commission follows up on illegal tax breaks for yachts and aircraft

Brussels, 8 November 2018

http://europa.eu/rapid/press-release_IP-18-6265_en.htm

 

Abusive VAT practices in the Isle of Man. VAT is only deductible for business use.

Supplies of aircraft, including leasing services, meant expressly for private use should not be VAT-exempt. The Commission believes that the UK has not taken sufficient action against abusive VAT practices in the Isle of Man with regard to the supplies and leasing of aircraft.

 

The Paradise Papers revealed widespread VAT evasion in the yacht and aviation sectors, facilitated by national rules which do not comply with EU law. These infringements follow a first package of infringements launched against Cyprus, Malta and Greece on reduced VAT basis for the lease of yachts and for which the Commission received assurance from all these Member States that the legislation would be amended.

 

In addition to the infringement procedures launched today by the Commission, the European Parliament has recently indicated that its TAX3 committee following up on the Paradise Papers would also look at this issue. The committee is due to visit the Isle of Man in November.

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EU clamps down on Isle of Man tax loophole for private jets and yachts

European commission writes to UK over ‘abusive practices’ in crown dependency

 

The Guardian, November 9, 2018  

https://www.theguardian.com/uk-news/2018/nov/09/eu-takes-action-against-isle-of-man-over-tax-loophole-on-private-jets

 

The European commission has launched infringement proceedings against the Isle of Man and Italy over what it says are illegal tax breaks given to some of the world’s wealthiest people over their purchases of private jets and yachts.

The Guardian and the BBC revealed last November how the Isle of Man, a crown dependency that officially belongs to the Queen and is answerable to the British government, had allowed billionaires and multinational companies to avoid £790m of VAT on more than 200 aircraft imported to Europe since 2011.

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How Isle of Man gives big refunds to super-rich on private jet imports

Paradise Papers reveal some of the world’s wealthiest people use Manx customs to pay zero VAT on luxury planes

 

The Guardian, November 6, 2017

https://www.theguardian.com/news/2017/nov/06/isle-of-man-refunds-super-rich-private-jets-paradise-papers

 

 

The Isle of Man government approved tax avoidance schemes that have refunded more than $1bn to the super-rich and to multinationals on the import of hundreds of private jets into Europe.

 

The Paradise Papers reveal how Manx customs worked closely with the offshore law firm Appleby and the big four accounting firm EY, to approve schemes which have ultimately helped some of the world’s wealthiest individuals reduce import VAT bills to zero.

 

The arrangements allowed jet owners to claim 100% VAT refunds on the grounds that their jets were part of leasing businesses. What the leak of 6.8m files from the archives of Appleby reveal is that these businesses involved millionaires leasing their own aircraft from themselves.

 

Experts who have reviewed the structures allege they are open to challenge as an abuse of tax law, which is punishable by a fine. In some cases the experts allege there could be challenges for tax evasion, which is a crime.

 

The Isle of Man government approved tax avoidance schemes that have refunded more than $1bn to the super-rich and to multinationals on the import of hundreds of private jets into Europe.

 

The Paradise Papers reveal how Manx customs worked closely with the offshore law firm Appleby and the big four accounting firm EY, to approve schemes which have ultimately helped some of the world’s wealthiest individuals reduce import VAT bills to zero.

 

The arrangements allowed jet owners to claim 100% VAT refunds on the grounds that their jets were part of leasing businesses. What the leak of 6.8m files from the archives of Appleby reveal is that these businesses involved millionaires leasing their own aircraft from themselves.

 

Experts who have reviewed the structures allege they are open to challenge as an abuse of tax law, which is punishable by a fine. In some cases the experts allege there could be challenges for tax evasion, which is a crime.

 

There is nothing unlawful about legitimate tax avoidance schemes. Appleby and EY say they have both ensured they followed legitimate commercial practice.

 

Appleby helped clients, including the Formula One world champion, Lewis Hamilton, and oligarchs from Vladimir Putin’s inner circle, receive about $300m in VAT refunds, the data indicates.

 

Three Russians appear to have kept their refunds despite being put under US and European sanctions after Appleby took them on as clients. Most private clients were from Russia, Ukraine, the Middle East and Africa, with their business empires run outside Europe and typically offshore.

 

A glance at the Manx aircraft registry reveals some big British names, though they were not Appleby clients and there is no suggestion they used structures to avoid tax.

 

The tax exile Richard Branson sold a jet, registered M-VGIN, to one of Appleby’s clients. The former Formula One supremo Bernie Ecclestone’s 94-seat British Aerospace plane, M-STRY, is also Manx-registered, while the Brexit financier Jim Mellon, resident in the Isle of Man, holds M-ELON via a Manx company.

 

Following questions from the Guardian and other media partners, the island, which is a crown dependency and ultimately answerable to the British government, has called in the UK Treasury to oversee a review of the refunds it has issued to 231 jet-leasing companies since 2011. It has now admitted that all of those schemes paid no import VAT, and a total of £790m was refunded – equal to just over $1bn. Many of the jets were paid for in US dollars.

 

In a rushed press conference, the Isle of Man’s chief minister, Howard Quayle, said an initial internal review had found no evidence of wrongdoing, but “it is imperative we take steps to defend the Isle of Man’s position”.

 

The island’s private jet register is the second biggest in Europe after Germany’s. Set up in 2007, it is expected to notch up its 1,000th aircraft this year.

 

 

How to avoid paying VAT by owning a private jet through a shell company in the Isle of Man

1

Client buys a jet through their offshore company

2

Jet is imported to the EU through a shell company in the Isle of Man

3

Another offshore company of the client then leases the jet from the Manx shell company

4

Client then pays their offshore company to lease the jet

 

 

Owns:  1.Offshore Company  2.Manx shell Company  3. Offshore Company

The jet is declared a business asset. No VAT is paid on import. VAT should be paid in relation to the amount of leisure use

VAT Import

 VAT running costs

 Money circulates between several offshore companies all owned by the client

VAT should have been paid on the cost of leasing, crewing and flying the jet on leisure flights made in Europe

 

Evaluation of benefits for registering an aircraft in the Isle of Man

  • No insurance premium tax
  • No Isle of Man corporation tax
  • Customisable registrations
  • Can register helicopters alongside private jets
  • Aircraft can be located anywhere in the world
  • Worldwide reach
  • Aircraft operator needn’t be located on the Island
  • Straightforward process
  • Secret stuff?

 

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About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 30+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (50+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems in the business for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com I write a lot of Articles and Posts on LinkedIN: https://www.linkedin.com/in/tomas-chlumecky-3200a021/

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