Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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264. To ask the Minister for Finance the amount of tax revenue foregone through tax reliefs related to airplane leasing by income tax, corporation tax, capital gains tax, value added tax, gift and inheritance tax, stamp duty and other relevant tax relief in each of the years 2010 to 2019 and to date in 2022, in tabular form; and if he will make a statement on the matter. [53572/22]

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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265. To ask the Minister for Finance if the analysis and reasoning behind the tax reliefs in the aviation leasing sector will be provided; and if he will make a statement on the matter. [53573/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 264 and 265 together.

Within the tax code there are various generally available tax reliefs that may be claimed by aircraft leasing companies but are not specifically for use by these companies. Statistics in relation to tax costs for various reliefs are available on the Revenue website at: www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/costs-expenditures.aspx.

There are also some provisions in the Energy Tax and VAT Directives that are of relevance to the aviation sector.

I am advised by Revenue that the following provisions are of particular relevance to the aviation leasing sector:

1. Special Assignee Relief Programme (“SARP”):

SARP seeks to facilitate further investment by multinationals, including international lessors, in Irish operations by reducing the costs to these businesses of attracting key employees from overseas to work in either the Irish-based operations of their employer or an associated company.

Relief is given by way of disregarding 30 per cent of an assignee’s employment income between €75,000 and €1 million for Income Tax purposes for up to 5 years. The relief also allows for certain schooling and travel expenses to be exempted from the charge to tax in that period where certain conditions apply. SARP does not affect an individual’s USC or PRSI obligations.

Individuals in receipt of SARP will often remain part of the social security system of their home country while on assignment. As such, PRSI may not apply to such individuals.

The overall cost and number of claimants of this relief is available in the annual SARP reports available on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/research/statistical-reports/special-assignee-relief-programme.aspx. Table 8 of the 2020 SARP report provides a breakdown of claimants by employer sector, with the aircraft leasing sector included within the heading ‘Administrative and support service activities’, however additional claimants may be captured under the heading ‘Financial and Insurance Activities’ where the leasing company is a qualifying company for the purposes of Section 110 of the Taxes Consolidation Act 1997. This heading may also capture other companies involved in management or other activities related to aircraft leasing. I am advised by Revenue that a further breakdown of claimants specifically employed in the aircraft leasing sector only is not available.

2. Capital Allowances

Companies which hold equipment, plant & machinery assets, including lessors, are generally entitled to claim capital allowances in lieu of accounting depreciation. Capital allowances are typically given over an 8-year life irrespective of the life of the asset in respect of which they are granted.

Aircraft are high value items that can have a life of 20 or more years. As such, in the first 8 years of ownership of an asset aircraft leasing companies are often in a position where the available capital allowances are in excess of the income earning profile of the asset, resulting in losses in the first 8 years of leasing trades. Such allowances may be subject to clawback provisions when the capital asset is sold or otherwise disposed of and, to mitigate the impact on the Exchequer, excess leasing capital allowances are ring-fenced such that they can only be used against the lease rental income of the company or group.

While a breakdown by sector of these tax costs is not separately available, Revenue’s annual Corporation Tax research paper details claims in respect of losses and capital allowances by sector as reported in annual Corporation Tax returns. This is available on pages 14 and 16 of the paper, which is available on the Revenue website at: www.revenue.ie/en/corporate/documents/research/ct-analysis-2022.pdf.

The aircraft leasing sector is included within the heading ‘Administrative and support service activities’ and is responsible for the majority of the claims shown on these pages for this sector. Additional claimants may be captured under the heading ‘Financial and Insurance Activities’ where the leasing company is a qualifying company for the purposes of Section 110 TCA 1997. This heading may also capture other companies involved in management or other activities adjacent to aircraft leasing.

3. Stamp Duty

Relief is available from stamp duty under section 113 of the Stamp Duties Consolidation Act (SDCA) 1999 on instruments for:

- the sale or transfer of any ship, vessel or aircraft or

- any part, interest, share or property of or in any ship, vessel or aircraft.

This relief was introduced in 2013 to provide clarity for investors, although stamp duty was generally not chargeable on such transactions.

4. 4.Interest limitation

Interest limitation rules were introduced in Finance Act 2021 and seek to limit base erosion through the use of interest expenses that create excessive interest deductions which are disproportionate to the level of interest income earned by the company.

Provision is made in these rules to recognise the role leasing companies have in effectively providing financing for airlines who may otherwise be unable to acquire aircraft. As such, lease income amounts that are deemed to be interest income for accounting purposes are treated as interest income for the purposes of the interest limitation rules.

As interest limitation rules only commenced from 1 January this year, no data is currently available on the impact of this provision.

5. Excise duty treatment of aviation fuel

Ireland’s excise duty treatment of fuel used for air navigation is governed by European Union law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive (ETD).

Jet fuel, or heavy oil, used for commercial air navigation (including leased aircraft) is fully exempt from Motor Oil Tax (MOT). No such exemption applies to jet fuel used for private pleasure flying (non-commercial air navigation) and an MOT rate of €425.45 per 1,000 litres applies.

Aviation gasoline (light oil) used for commercial air navigation is partially exempt from MOT and an effective rate of €251.07 applies. The full MOT rate of €483.34 applies to aviation gasoline used for private pleasure flying.

I am informed by the Revenue Commissioners that data in respect of this measure, with regard to companies in the aviation leasing sector, is not readily available.

6. Although not a relief, it is noted for completeness that Article 148 of the VAT Directive states that Member States shall exempt the supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward chiefly on international routes as well as the supply, modification, repair, maintenance, chartering and hiring of those aircraft. VAT in the EU is governed by the VAT Directive with which Irish legislation must comply.