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Taxation of aircraft fuel

Council Directive 2003/96/EC provides for a mandatory exemption from the harmonised excise duty for energy products supplied for use as fuel for the purpose of air navigation other than in private pleasure-flying. However, it introduced for the first time provisions which allow Member States to tax aviation fuel for domestic flights and, by means of bilateral agreements, fuel used for intra-Community flights. In such cases, Member States may apply a level of taxation below the minimum level set out in this Directive.

Tax exemption of aircraft fuel contained in the tanks of an aircraft arriving at a Community airport is based on the provisions of the 1944 Chicago Convention. However, the exemptions granted to aircraft fuel, loaded to a carrier at an EC airport, are granted on the basis of bilateral Air Service Agreements concluded between Member States and third Countries and among Member States themselves.

The Commission favours taxation of aircraft fuel, as is the case for fuel used by other means of transport. The Commission presented a Communication on taxation of aircraft fuel in 2000 (COM(2000) 110 of 02/03/2000) and brought this issue for discussion at the ICAO's 33 rd Assembly in September 2001. It appeared from the discussions that it will be very difficult, if not impossible, to reach an agreement on this issue at ICAO level.

During the discussions, which preceded the adoption of Directive 2003/96/EC, all but two Member States agreed that as a matter of principle commercial aircraft fuel should be taxed on the same basis as any other fuel. However, the question of competition with third countries needs to be taken into account and any distortion of competition with socio-economic implications has to be avoided.

The issue of taxation of aircraft fuel has attracted particular attention in connection with the assistance to developing countries. In the context of its drive to enhance development aid's effectiveness (see IP/05/423 Choose translations of the previous link  ) the Commission services put forward, among other things, a working paper on "New Sources of Financing for Development: A Review of Options" (SEC(2005) 467 of 5 April 2005pdf(403 kB) Choose translations of the previous link  ). This paper also deals with tax instruments such as kerosene and flight departure taxes and is expected to fuel debate at European and national levels. More...