The aviation industry is unlike any other when it comes to VAT.
An aircraft may depart from Malta, land in Italy, be leased by a
company in Ireland, and owned by an entity in France. In such a
cross-border environment, determining where VAT applies becomes one
of the most intricate challenges in indirect taxation. Unlike
traditional industries, where the place of supply rules are
relatively straightforward, aviation is governed by a layered set
of rules, exemptions, and leasing structures.
International Passenger Transport
One of the most visible and frequently encountered areas where
VAT applies in aviation is passenger transport.
Under Maltese VAT law, specifically item 4(1) of Part
One of the Fifth Schedule to the VAT Act, “the
international transport of persons, the transport of luggage and
services related to the international transport of
passengers” are treated as an exempt with credit
supply.
