On 16 September 2016, the Ministry of Finance published Circular 1130/2016 (the Circular) clarifying the VAT exemptions for international airlines. The most important details are summarized below.
(a) Background. Under Greek VAT law, VAT exemptions are applicable to airlines to the extent that their revenues from international flights exceed 50% of their total revenues from air transportation.
These exemptions include supply, import, modification, repair, chartering of aircraft and equipment incorporated or used therein, as well as the supply of goods for the fuelling and provisioning of aircraft and the supply of services that meet their direct needs.
(b) Clarification. With the Circular, the Ministry of Finance endorses Opinion No. 148/2016 of the Legal Council of State, and clarifies that the above exemptions are applicable also to foreign airlines that have a permanent establishment in Greece through which they operate domestic flights.
In such a case the total activity of the foreign airline is taken into account and not only its local activity, since the head office and the permanent establishment of the foreign airline are treated as a single legal entity. This means that the 50% condition, mentioned above, is met.