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… deliberately undervalue aircraft to escape import duties
The Nigeria Customs Service (NCS) recently conducted a 60-day corporate and business jet aircraft verification exercise to determine and separate the private fleet from commercial aircraft operated by Nigerian domestic airlines.
In the course of the verification exercise, the agency said it uncovered gross and flagrant abuses of the Temporary Importation Permit (TIP) concession by most private aircraft owners in the country.
The abuse of the TIP concession was essential to evade the payment of the statutory import duty charged at 5 percent on the assessed value of their aircraft.
At the last count, the NCS verification committee identified about 90 privately owned aircraft that have not paid the statutory import duties estimated at over N30 billion.
Among those that defaulted or connived to fleece the government are popular clergymen, prominent businessmen, and influential citizens whose names are withheld.
Sources close to the verification committee said a billionaire businessman who owns two state-of-the-art Bombardier aircraft had reached out to the NCS for settlement of over N500 million, promising to settle the balance of over N600 million in due course.
Another defaulter, a prominent pastor (name withheld) had settled his debts after he was convinced that the duties he failed to pay for his luxury jets.
According to Aviation Metric sources, these are monies due to the federal purse and must be fully recovered, with applicable sanctions brought to bear on all who have illegally imported their private aircraft into the country, irrespective of their stature or position in society.
The TIP is the fallout of the Istanbul Convention of June 26, 1990, which sought to simplify and harmonize customs procedures internationally to facilitate global trade.
The TIP is required to be presented to the customs post at the port of entry, where an inspection of the aircraft would be conducted to determine that the aircraft imported is that for which the TIP was issued.
Upon successful inspection, a Customs Bill of Entry would be issued indicating the particulars of the imported aircraft and the date and time of entry amongst other pertinent information.
Similarly, at the expiration of the temporary admission tenure, the reverse process is expected, whereby the aircraft is re-exported permanently out of the Nigerian territory.
In this case, the aircraft is expected to be presented again to the Customs post at the port of departure, which can be any designated port of departure in the country, and not necessarily the port of entry as provided for under Article 11 of the Convention.
A thorough review of the provisions of the Convention on Temporary Admission vis-à-vis the findings of the NCS’ 60-day aircraft verification exercise by Aviation Metric shows that amongst the several issues established during the course of the NCS aircraft verification exercise included the applicability of the temporary admission concession for disguised personal use, the interpretation of re-exportation of goods, the undervaluation of goods, among others.
The NCS Verification Committee established that most aircraft on temporary admission have in the main exceeded their legitimate stay in the country and, in some other cases, procured the TIP’s mere as a means of regularising the stay of their aircraft in the country.
A Customs source, who participated in the verification exercise, told our correspondent under the condition of anonymity, as he was not authorised to divulge the findings of the Committee, that private aircraft owners and their representatives deliberately ignored the second leg of the aircraft re-exportation process involving the Ministry of Aviation, which is necessary to bring closure to the process.
“Unfortunately, whereas the private aircraft owners and or representatives have usually fulfilled the necessary aircraft importation requirements in order to bring their aircraft into the country, they have, however, flagrantly side-stepped or intentionally ignored the two-legged exportation procedures.
“This has been found to be done with a view to deliberately beat the system, with the sole intention of feigning an exportation of the subject aircraft, when in actual fact they had only in most cases undertaken foreign trips for personal reasons or to perform scheduled maintenance on their aircraft”.
“Either way, the aircraft was never fully re-exported as required by the terms of the Convention on temporary admission. By not informing the Ministry of Aviation to procure the required ‘Permit to Export ‘ and thereafter not liaising with the NCAA, the private aircraft owners and or representatives have deliberately left the door open for the supposedly “re-exported” aircraft to surreptitiously return to the country for continued use, without arousing the suspicions of the NCS or NCAA, with the sole intention of evading the payment of the statutory import duties and associated taxes and charges for the importation of their aircraft.”
The re-exportation processes undertaken by the various private aircraft owners as found out by the NCS’ aircraft verification Committee were mere ruses, exercises designed to hoodwink the system to believe that the subject aircraft had been formally re-exported as mandated by the provisions of the convention when in reality they had only undertaken foreign trips for convenience with alleged deceptive intentions.
Rather than explore this window of opportunity for the continued legal use of their aircraft assets within the country, the Committee disclosed that private aircraft owners and their representatives have exploited their “bogus re-exportation procedure to misrepresent to the NCS as if they were just bringing these aircraft into the country for the first time, and then proceeding to re-apply for fresh TIP’s with a new start date for another possible 24-month sojourn.”
Private aircraft owners on TIP are usually required and to do post-Bonds, equivalent to a cumulative total of 30 percent, plus of the aircraft value as security for the 24-month period for which the temporary admission is sought.
“Of course, tying down 30 percent of the value of an aircraft asset worth over $45 million would be unfathomable for these owners, hence the need to grossly undervalue the asset solely for the purpose of posting a Bond far less than required, thereby defeating the essence of the security required in the first instance.”
It would be recalled that similar precedents have been set in other climes under similar circumstances. For instance, the Brazilian government in June 2012, acting through a combined team of its Tax, Police, and aviation authorities seized and auctioned nine business jets owned by some of their elites.
The Brazilians were found to own and use such aircraft but registered them overseas to avoid Brazilian state and federal import taxes of nearly 35 percent.
Incidentally, Brazil employs the 60-day tax rule allowing foreign registered aircraft to remain in the country for a cumulative period of a maximum of sixty days in any calendar year without paying import duties.
Some of the private owners have reacted to the insistence of the Nigeria Customs Service that private jets operating in Nigeria must pay customs duties, saying aircraft registered outside Nigeria ought not to be requested to pay the levy.Google+