Doc 8632-C/968 ICAO'S POLICIES ON TAXATION IN THE FIELD OF INTERNATIONAL AIR TRANSPORT SECOND EDITION Approved by the Council on 14 December 1993 Published by direction of the Council January 1994 INTERNATIONAL CIVIL AVIATION ORGANIZATION ICAO'S POLICIES ON TAXATION IN THE FIELD OF INTERNATIONAL AIR TRANSPORT Doc 8632-C/968 Second Edition — 1994 FOREWORD After a comprehensive study of the various existing iv) taxes related to the sale or use of and anticipated problems related to taxation in the international air transport. field of international air transport, the Council in 1951 adopted three Resolutions and one Rec- The Assembly, at its 26th Session in 1986, adopted ommendation on the subject which were published Resolution A26-15 which instructed the Council to in Doc 7145. In response to Assembly Resolution review compliance with these Resolutions and A15-16 which explored the possibility of a new Recommendation and to consider the need for new initiative in this field, the Council undertook a practical measures to reaffirm and strengthen the comprehensive review of all aspects related to this principles underlying its policies in this field. After subject matter and, at the Fourth Meeting of its consultation with States the Council reported the 59th Session, on 14 November 1966, decided to results of its review to the 29th Session of the recast the Resolutions and the Recommendation, Assembly which agreed with the Council's taking into account developments since 1951, while approach to the revision of the 1966 Resolutions reaffirming at the same time their underlying and Recommendation, the results of which are principles. Council further decided to publish them presented in this policy document. The revision in the policy document, Doc 8632, for action by maintains the previous format but, in view of the Contracting States and to provide certain explana- evidence of increased acceptance by States of the tory material for guidance to States and inter- policy therein, upgrades the Recommendation in national operators. Section II to a Resolution. It also incorporates certain enhancements to the first three sections The 1966 Resolutions/Recommendation dealt with: described above and a more substantive revision of i) taxation of fuel, lubricants and other con- the last section dealing with taxes related to the sale sumable technical supplies when an aircraft or use of international air transport. These changes registered in one State arrives in or departs take into account the realities of the current from a customs territory of another State; situation in civil aviation, while reaffirming the underlying principles of ICAO's policies in this field. ii) taxation of fuel, lubricants and other consumable technical supplies when an The 29th Session of the Assembly also reinforced aircraft registered in one State makes the importance of this policy statement by adopting successive stops at two or more airports in Resolution A29-18 which calls upon States to one customs territory of another State; follow the Resolutions of the Council as contained iii) taxation of the income and aircraft of in this document. international air transport enterprises; and (iii) TABLE OF CONTENTS Page INTRODUCTION ..............................................................1 SECTION I — Council Resolution of 14 December 1993 on taxation of fuel, lubricants and other consumable technical supplies when an aircraft registered in one State or leased or chartered by an operator of that State arrives in or departs from a customs territory of another State .....................................3 Commentary on Council Resolution in Section I ............................5 SECTION II — Council Resolution of 14 December 1993 on taxation of fuel, lubricants and other consumable technical supplies when an aircraft registered in one State or leased or chartered by an operator of that State makes successive stops at two or more airports in one customs territory of another State ................7 Commentary on Council Resolution in Section II ...........................8 SECTION III — Council Resolution of 14 December 1993 on taxation of the income of international air transport enterprises and on taxation of aircraft and other movable property associated with the operation of aircraft in international air transport ............................................9 Commentary on Council Resolution in Section III ..........................10 SECTION IV — Council Resolution of 14 December 1993 on taxes related to the sale or use of international air transport .........................................12 Commentary on Council Resolution in Section IV ..........................13 INTRODUCTION 1. It has long been recognized that international 3. Tax problems connected with aircraft air transport creates a number of special or unique equipment, spare parts, ground equipment and problems in the field of taxation. Unlike other types stores have also been pursued on a multilateral of enterprises of one State doing business in basis through the development, by the Facilitation another State, the earnings of international air Division, of International Standards and Rec- transport are based upon the use of aircraft ommended Practices for inclusion in Annex 9 requiring large amounts of fuel in operations (cf. Chapter 4, section G of the Annex). The between various tax jurisdictions, and a Council in 1951 adopted a Resolution and considerable percentage of these operations is Recommendation on the taxation of fuel, a conducted outside any tax jurisdiction, i.e. over the Resolution on the taxation of income and of high seas. Taxation in the field of international air aircraft, and a Resolution on taxes related to the transport is a complex subject and covers many sale or use of international air transport (cf. Doc aspects, considering the variety of items which may 7145) which were further amended and amplified be subject to taxes and the types of taxes that may by the policy statements in Doc 8632 published in be levied. Amongst the items which are usually 1966. The Resolutions and Recommendation taxable and have been considered in the past in concerned were designed to recognize the connexion with avoidance of multiple taxation are uniqueness of civil aviation and the need to accord those pertaining to fuels, lubricants and other tax exempt status to certain aspects of the consumable technical supplies used by aircraft operations of international air transport and were during flight, the income derived from operating adopted because multiple taxation on the aircraft, aircraft, the aircraft itself and its components, spare fuel, technical supplies and the income of parts and ground equipment necessary for its international air transport, as well as taxes on its operation. The taxes levied may include income sale and use, were considered as major obstacles to taxes, import, export, excise, sales, consumption or the further development of international air internal duties or taxes. transport. Non-observance of the principle of reciprocal exemption envisaged in these policies 2. The Chicago Convention on International was also seen as risking retaliatory action with Civil Aviation of 1944 did not attempt to deal adverse repercussions on international air transport comprehensively with tax matters. The Convention which plays a major role in the development and simply provides (cf. Article 24 (a)) that fuel and expansion of international trade and travel. lubricating oils on board an aircraft of a Contracting State, on arrival in the territory of another 4. In 1986, in view of the significant changes Contracting State and retained on board on leaving which international civil aviation had undergone, the the territory of that State, shall be exempt from 26th Session of the Assembly expressed concern customs duty, inspection fees or similar national or over certain taxes that were being imposed by some local duties and charges. The same Article of the States and considered there was a need for new Chicago Convention also refers to the temporary practical measures to reaffirm and strengthen the admittance, free of duty, of aircraft on a flight to, principles underlying ICAO's policies in this field. from or across the territory of another Contracting Subsequent deliberations finally led to the adoption State and to the exemption from customs duty, etc., by Council of the revised policy statements as of spare parts, regular equipment and aircraft shown on the following pages, which are more stores. responsive to the practicalities of present-day 2 ICAO's Policies on Taxation governmental requirements while preserving and designed to furnish the reader with some enhancing the basic thrust of the previous explanatory text. As in the previous edition, it is the statements. intention to publish and keep up to date a Supplement to this document, similar to the 5. This document is presented in four sections, procedure used for the Supplement to Annex 9, each one starting out with the text of the relevant whenever a sufficient amount of information has Council Resolution, followed by commentaries been received from Contracting States concerning their status of compliance with the Resolutions contained in this document. SECTION I COUNCIL RESOLUTION OF 14 DECEMBER 1993 ON TAXATION OF FUEL, LUBRICANTS AND OTHER CONSUMABLE TECHNICAL SUPPLIES WHEN AN AIRCRAFT REGISTERED IN ONE STATE OR LEASED OR CHARTERED BY AN OPERATOR OF THAT STATE ARRIVES IN OR DEPARTS FROM A CUSTOMS TERRITORY OF ANOTHER STATE