Aircraft Leasing And Leasing Chains

QUICK SUMMARY

In Part 1 of this series, we explored how international passenger transport enjoys a specific VAT exemption under Maltese law and the EU VAT Directive. But airlines do more than transport passengers, they need aircrafts to operate. In today's aviation industry, ownership is rarely straightforward. Instead, airlines rely heavily on leasing arrangements, and this is where VAT treatment becomes far more complex.

Dry Lease vs Wet Lease

In the aviation sector, the two most common types of leases are dry leases and wet leases, each carrying different VAT considerations:

• Dry Lease - The lessor provides only the aircraft, leaving all operational responsibilities (crew, maintenance, insurance) to the lessee. This is essentially a "bare aircraft hire".