All aircraft - from corporate jets to light propeller aircraft to helicopters - have to be registered in an internationally recognised jurisdiction to provide proof of nationality and ownership. An aircraft assumes the nationality of the jurisdiction where it is registered and is therefore subject to the regulations laid down by the governing register.

Whether you are purchasing, selling or chartering an aircraft, there are a number of issues to be carefully considered. Very often companies and private individuals enjoy major advantages and legal tax savings by registering their aircraft in an appropriate jurisdiction, providing confidentiality and the protection and privileges offered by such registration.

Which jurisdiction is most suitable for registering a particular aircraft depends on a number of factors such as in which country the owner is resident, in which countries the aircraft will be mainly used, whether the aircraft will be chartered to third parties or only privately used, etc.

Through our own offices as well as through highly specialised affiliates in key jurisdictions we are able to provide comprehensive services to private aircraft owners, including:

· Registrationof private and corporate aircraft · VAT registration and VAT mitigation · Financing of private and corporate aircraft · Set-up/management of aircraft ownership structures · Aircraft administration and accounting · Aircraft insurance

The following is an outline of the key issues to be considered prior to the purchase, registration and use of private and corporate aircraft. This overview is of course not exhaustive and all individual issues and factors are discussed with each client prior to the decision to proceed.

Purchase

When purchasing an aircraft you should take care in reviewing the terms and conditions of the contract and must ensure that the specification is sufficiently detailed and delivery of the aircraft is suitably defined and provided for. In case of new aircraft, often the builder's standard form contracts are used, which are normally one-sided in favour of the seller. For example, in most legal systems aircraft are defined as being chattels so that title to them passes by delivery. Form contracts that provide for the builder to pass title upon completion are putting pre-completion deposits at risk.

Although all the key points are usually covered in such contracts, advice on issues such as the warranties which a purchaser should request, security for port dues or other liens, the documents which should be taken up (e.g. a VAT paid certificate), the tax implications of the sale for a seller, and liens and mortgages concerning a buyer may be necessary. For instance, certain navigation charges such as those levied by air traffic control services follow the aircraft which could be detained for navigation charges incurred by a previous owner or operator notwithstanding the sale.

The aircraft and its engines need physical inspection and the technical records showing the history of the maintenance of the aircraft need to be closely examined. Without full and complete technical records the aircraft will not be granted a certificate of airworthiness. Where parts of the aircraft have been changed, such parts need traceability through documentary evidence. It is this change of parts which make an aircraft unique - in that if some part breaks or is in need of overhaul, the part is removed and exchanged and interesting questions of ownership and title arise. Aviation authorities will deem maintenance work not done unless it can be proved by appropriate paperwork that such work was done and carried out by maintenance facilities duly qualified in respect not only of the aircraft but also recognised by the country of registration of the aircraft.

There is usually a test flight to show that all systems are working in accordance with the appropriate parameters. Questions of cost and liability can arise.

Many aircraft transactions are cross-border transactions in which the place of delivery is important for reasons of tax. Arrangements must be made to co-ordinate the transfer of funds, delivery and acceptance of the aircraft, deregistration and re-registration and this can be made more difficult if there is a change of country of registration.

Registration

All owners have to register their aircraft in an internationally recognised jurisdiction to provide proof of nationality and ownership. One of the most important decisions after the purchase concerns the jurisdiction of registration and whether to register the aircraft directly (under one's own name) or on a company, which usually provides several important advantages over direct ownership (see below under "Ownership structure").

Important points to be considered when choosing the jurisdiction include the reputation and respectability of the jurisdiction of registration, the costs of registration, the ease of registration, and the insurance, employment, regulatory, charging, succession and tax implications of the jurisdiction.

There are normally nationality requirements to be met before aircraft can be registered in any particular country but in many cases these can be met by the formation of an appropriate corporation or fiduciary arrangement. Once registered, operation and maintenance of the aircraft will be governed by the aviation authority in the country of registration. Tax issues again can arise depending on the country of registration.

We can register aircraft on any of the world's registers, but have traditionally recommended to our clients to register in the United Kingdom, United States of America, Switzerland and a number of other countries depending on the clients individual situation.

Ownership Structures

The majority of our clients choose to have their aircraft owned by a company, which provides several important advantages over direct ownership. Besides these considerations, registration in a some countries may require the formation of a local company in order to gain access to that country's aircraft register.

Aircraft owners often prefer to keep their ownership confidential. The ownership of an aircraft through a company provides for a good level of confidentiality. In addition, having a company owning the aircraft limits the client's exposure to potential and contingent liabilities which can arise through the ownership of the aircraft.

Many of the countries in which clients are resident have complex inheritance laws which can frustrate clients wishes regarding the disposition of their assets on death. These problems can in certain cases be avoided by settling the shares of the company owning the aircraft into a trust.

We are able to incorporate companies for the purpose of aircraft holding and operation in all key jurisdictions worldwide. However, for aircraft ownership structures, it is usually necessary to incorporate in the country of registration.

VAT and Customs Implications in the European Union

As with yachts the operation of non-European registered aircraft within the European Union (EU) can lead to the assessment of VAT on aircraft operating, say, from France, where any person on the aircraft (whether flight crew or passenger) is a EU national. The French authorities are known to have claimed that such aircraft have been imported into Europe and then assess them to customs duties, VAT and fines. This is a problem which may in fact be overcome by the importation of the aircraft into Europe in a country such as the United Kingdom which does not assess VAT on aircraft.

Henley & Partners work closely together with VAT specialists to provide advice and facilities for the mitigation and of VAT on aircraft. Our VAT specialists will be glad to assist you in deciding whether you need to pay VAT on your newly purchased aircraft when operating within EU countries.

Insurance

Appropriate insurance cover in respect of the usual risks (e.g. collision, personal injury, employer's liability etc) must be looked at carefully. This is an important area because of the exposure to potentially significant third party risks (especially collision and pollution). Consequently, in addition to hull cover, protection and indemnity (i.e. third party risks) has to be placed. Depending on the areas where the aircraft is to be operated, war risks may be desirable as well. The limits of the Warsaw Convention which arise on international flights for public transport do not arise on private flights and with liability for injury now often exceeding very large sums, substantial cover is necessary.

Administration Services

Through specialised service companies we can provide ongoing budgetary advice, cash management and maintenance of financial and accounting records. We also control and process expenses relating to the aircraft as well as handling the contracting and payment of crew. Settlement can either be made from funds held in the bank accounts of the holding company or itemised invoices can be prepared and forwarded to third parties for settlement.

Contact Henley & Partners

Every day, individual clients as well as other law and consulting firms worldwide rely on us for specialised advice for all matters regarding aircraft purchase, registration and ownership structures. No matter how complex your needs are, Henley & Partners will be able to advise and assist you. Contact us today for individual advice and comprehensive, yet cost-effective solutions.