Value Added Tax

Aviation is exempt from VAT

The EU’s exemption of airline tickets from VAT, while allowing airlines to deduct input VAT, remains amongst the most distorting features in the EU’s tax and transport policy.

There is not a single argument to justify this tax privilege:

  • Air tickets are a consumer product like any other consumer product. Still, air tickets are tax exempt while consumer products for everyday life (even those which serve basic needs) are subject to VAT;
  • The VAT exemption results in a tax revenue shortfall for the member states of about €10bn (assuming an average VAT rate of 20%). Revenue shortfalls due to non-existent aviation taxes need to be made up by higher taxes in other sectors of the economy, in particular in areas such as employment.

Although passenger travel by air is covered by VAT legislation1, EU Member States use a succession of historical derogations stemming back in some cases to their accession to the EU to exempt (zero-rate with refund of tax paid at preceding stage) airline tickets from VAT for all international flights (including intra-EU flights). Article 371 of the EU-VAT Directive allows Member States which had exempted passenger transport on 1 January 1978 to continue to do so. Countries which joined the EU after 1 January 1978 enjoy the same privilege according to Title XIII, Chapter 1, Section 2 of the EU-VAT Directive.

The exemptions apply to international passenger transport services within and outside the EU. VAT for tickets on domestic flights are charged in all EU member states (at varying rates) with just a few exceptions.

As a result there is no VAT on any aspect of international air travel, not on airline tickets, nor on purchase of aircraft, nor on their servicing, nor on their fuel, nor on air traffic control, nor on baggage handling, nor on aircraft meals. Everything to do with air travel after passport control is zero rated.

Abolishing zero-rating for air tickets broadens the tax base and moves taxation towards indirect taxation in line with the European Commission’s growth strategy, in addition it greens the tax system. In the Summary Report of the Outcome of the Public Consultation on the Green Paper on the Future of VAT, launched by the European Commission, participants have expressed serious concern about the distorting effects of the current VAT system, only air and maritime companies, which enjoy the privileges of the current system, prefer to maintain it.

We demand to abolish any form of VAT zero-rating and VAT exemptions of airline tickets and to include aviation into the VAT tax system of the European Union at standard rates.


1) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (as amended by Council Directive of 7 December 2010).