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Not offshore aircraft business aviation in Russia

Now the Russian government is currently implementing a series of measures aimed at stimulating growth and deofshorizatsiyu Russian economy. In the field of civil aviation policy deofshorizatsii can be realized by adopting a series of measures aimed at motivating owners Russian aircraft business aviation record belonging to them or to base aircraft on the territory of Russia. Paradoxically, the present international situation can create the right circumstances for the revival of the Russian civil aviation. Right now there is a unique opportunity to dramatically improve the situation in this sphere.
Part of the policy of the Russian government was deofshorizatsii gain control over the movement of funds from Russian organizations in the offshore companies. Under the new proposed legislation under special control may be the transfer of funds in offshore jurisdictions where there is no complete information on the beneficiaries of offshore companies - recipients of funds. In such cases, tightened fiscal control may be canceled tax deductions, and violation of the restrictions entails administrative and criminal liability. The government also encourages the Russian joint stock companies to register their shares on the stock exchange in Moscow, rather than abroad.
In these new circumstances, the Russian organizations and wealthy individuals may appear willing or able to optimize the cost of maintaining their aircraft registered outside Russia. Provided an appropriate legal framework to such persons may be advantageous to change the ownership structure and management of aircraft registered abroad, and the country of registration, then to use the services of the Russian air transport operator and get the proposed new restrictions on the transfer of money abroad.
One of the optimization opportunities for the maintenance business aviation is the use of art. 83 bis of the Convention on International Civil Aviation (Chicago, 1944), under which aircraft may be registered in Europe, but based on the territory of Russia and is leased by the Russian operator under a lease agreement (the control of airworthiness is divided between aircraft registration country and the country of registration of the operator). As a result, many operating expenses will be paid in Russia.
Currently about 450-500 business aircraft owned by Russian owners, registered outside Russia, mainly in Europe. Annual aggregate payment from Russian sources to the European service operators of such aircraft on European bases around 1 billion euros. We can expect that the Russian government will make efforts to ensure that redirect a significant portion of this cash flow in Russia.
In order to create conditions for mass registration in Russian business aircraft owned by Russian owners, the authorities need to make a few key actions.
First, and most importantly, it is necessary to exempt from import VAT import those types of aircraft that are not produced in Russia, similar to how it is done for a long time on the territory of the European Union. In the absence of such an exemption from VAT on imports into Russia Russian owners of large private capital unprofitable register aircraft in Russia due to an overpayment of 18% of their value in the form of VAT on imports, whereas these costs can easily be avoided by registering a ship in the EU or the United States.
Lack of exemption from VAT on imports business jets leads to the fact that about 95% of these aircraft, belonging to the Russian owners, currently registered in the EU. Should be able to create attractive conditions for their registration or based in Russia, it will help to build a business case for the development of infrastructure serving civil air operations in Russia.
Exemption from import VAT for foreign aircraft must not cause damage to the Russian aircraft industry. This exemption is justified only for those segments of civil aviation, in which Russia does not produce plans to produce aircraft of its own design. Definitely VAT exemption can be extended to imports of aircraft with a passenger seats up to 18, without creating competition Russian aircraft.
Second, Russia should extend exemption from customs duty on import of business aircraft weighing up to 30 tons to allow Russian organizations and individuals to bring into the modern Russian-haul aircraft without paying customs duty of 20%.
Third, the Russian government should launch legislative reforms and establish a list of the minimum required changes in air legislation of the Russian Federation, which would simplify the operation of modern ships in Russia, as well as management of ships registered outside Russia by Russian operators.
In my opinion, the third stage, regarding changes in the Russian legislation, is not the most important and may be delayed indefinitely. Such alterations capable tighten the whole reform process, thus constraining the development of business in this area. And although the Russian air legislation much to change, today is much more important to create favorable conditions for the development of commercial aviation business in Russia.
According to the industry experts, in the case of the introduction of VAT exemptions on imports within a few months after that from 150 to 200 aircraft will be re-Russian owners from Europe and the United States in Russia. The accuracy of these data the Russian authorities can check by taking the VAT exemption on imports for the initial period of 3 to 5 years. Accordingly, these measures can be considered as part of the anti-crisis program to strengthen the Russian economy, creating jobs and income in Russia.
In addition, if international sanctions against Russia, lead to difficulties in the Russian banking system and will create obstacles transfer funds to pay for the cost of maintaining aircraft in Europe, there will be additional arguments in favor of creating alternative ways of financing and servicing of aircraft on the territory of Russia . This development will increase the demand for services now existing and new Russian leasing companies from the Russian owners of business aircraft.
By Derek A. Bloom

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