V.A.T. for Chinese air carriers flying over Germany

By Sven Ruecker, Ecovis Duesseldorf
Once air carriers will provide transport services of persons over Germany, this will be in principle subject to German V.A.T. This applies not only for German but also for foreign air carriers.
The tax can be waived for cross-border passenger transport by air if the air carrier has not billed a separate invoice showing V.A.T.
The reduction or remission assumes that there is a cross-border transport, ie, transport extends both on the German domestic as well as foreign countries.
It is also required that the services are provided by an air carrier (travel agencies and consolidators are not air carriers). It does not matter whether it is a German domestic or a foreign entrepreneur.
For air carriers without registered office in Germany the V.A.T. may only be reduced or abated in the case of mutuality. The country where the air carrier is based must reduce or abate V.A.T. on cross-border passenger transport as well.
A list of countries with which reciprocity is determined for purposes of the V.A.T. in air transport can be found in the appendix to the BMF letter dated 19.07.2013 (Case No.: IV D 3 – S 7433/11/10005) and includes among others the People’s Republic of China.
Thus, the cross-border air transport of people provided by Chinese air carriers is not subject to German V.A.T., even if such carriage takes place over Germany.