13 May, the Norwegian Ministry of Finance decided that an air passenger excise duty will be introduced as planned from 1 June 2016, i.e. only two weeks from now. It is thus necessary for the airlines comprised by the passenger tax to act fast to make sure that systems for collecting and reporting the tax are in place from 1 June.
The air passenger excise duty was supposed to be introduced from 1 April, but was postponed when the EFTA Surveillance Authority (ESA) expressed that the exemption for transit- and transfer passengers could constitute state aid. The EFTA Surveillance Authority has now concluded that the exemption will not be considered as state aid. The air passenger tax will thus be introduced as planned from 1 June.
Details about the air passenger tax
The tax liability will apply for all flights from Norwegian airports, except military flights and flights part of a rescue, emergency or ambulance service.
The air passenger tax is calculated per passenger on flights from Norwegian airports. The rate is flat and will be NOK 80 in addition to VAT at a rate of 10 %, in total NOK 88 per passenger per departure. Exemption from the tax is to be granted for children under two years of age on the time of departure.
Further, it will be an exemption for transit- and transfer passenger. This imply that only the first flight as part of a transit or transfer flight will be taxable. All subsequent flights will be exempt from the passenger tax.
Only two weeks to do the necessary preparations!
As mentioned, the passenger tax will have effect from 1 June, only two weeks from now. Thus, the airlines will have to ensure systems for both collecting the tax from the passengers and for reporting and payment to the Norwegian authorities.
The fact that the passenger tax will be imposed on all flights from Norwegian airports entails that a number of foreign airlines will be covered by the tax liability. We assume that the foreign airlines will have some challenges to be compliant with the new tax and to get the necessary systems in place with only two and half week’s notice.
The first payment of the passenger tax is due 18 July 2016. The Directorate of Taxes will be the responsible authority for the passenger tax.
What about all flights already booked and paid for?
As mentioned, the passenger tax shall be paid per passenger for all flights from Norwegian airports from 1 June. This entails that the passenger tax will be applicable on a number of flights that have already been booked and paid.
It has not been given any transitional rule etc. to ward off this problem. The airlines will thus have to pay the passenger tax on all of these flights, even though the tax has not been charged to the passenger.
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My name is Synne Hangeland and I work as a lawyer at PwC Tax and Legal Services. I assist clients with general VAT advice on Norwegian and international VAT matters, as well as in connection with national and cross border restructurings. I have worked at PwC Tax and Legal Services since 2013. If you have any questions, comments or input, feel free to contact me!