Circular letter concerning introduction of the air passenger tax

Circular Published: 20/05/2016

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1. Background

On 14 December 2015, the Storting (the Norwegian Parliament) decided to introduce a tax on passengers flying from Norwegian airports (the air passenger tax). Among other things, the parliamentary decision sets out the tax rate that will apply (NOK 80 per passenger for 2016) and tax exemptions. You will find the Storting's decision here.(in Norwegian) Proposal for statutory provisions concerning the scope of the tax obligation, calculation of the tax, the basis for the tax, exemptions and registration – in Regulation No. 1451 of 11 December 2001 on excise duties (the Excise Duty Regulation) - was distributed for consultation on 21 December 2015 with a deadline for receipt of responses set to 21 February 2016.

The Storting assumed that the tax would enter into force on 1 April 2016. However, EFTA's surveillance body (ESA) stated that the proposed exemption for transfer passengers could constitute State aid, which is unlawful under the EEA Agreement. The Ministry of Finance disputed the view that the exemption constituted State aid, but as ESA promised to consider the matter quickly, the Ministry decided to defer the introduction of the tax until 1 June 2016, until ESA has completed its deliberations

ESA has now stated that they do not consider the transfer exemption to constitute State aid, and the proposal is therefore not notifiable. The tax has consequently been approved for implementation with effect from 1 June 2016, and will apply to all flights from and including this date.

2. Statutory provisions concerning the tax

Statutory provisions concerning the air passenger tax were laid down in a new section (Section 3-22) of the Excise Duty Regulation on 13 May 2016 (all section references hereinafter refer to the Excise Duty Regulation). You will find the adopted regulations here. (in Norwegian)

The provision concerning scope (Section 3-22-1) states that the tax encompasses the commercial transport by air of passengers from Norwegian airports, with the exception of flights from the Norwegian continental shelf and air¬ports on Svalbard, Jan Mayen and the Norwegian dependencies. In this context, "commercial transport by air" means all flights with the exception of military flights and flights operated by the rescue, emergency or ambulance services. The definition of "military flights" follows from Chapter XVII of the Norwegian Aviation Act. Here, it is stated that military flights may take place either by aircraft entered in the military aviation register, or by civil aircraft which are equipped with special additional markings, and where the aviation authorities have been notified in advance. Private and non-commercial flights are not covered by the tax. Whether or not the flight is "commercial" is determined through a specific assessment.

The terms "rescue, emergency and ambulance services" must be interpreted in accordance with a general linguistic understanding. Consequently, "rescue service" must be understood as an official organised and immediate response to save people from death or injury as a result of acute accident or hazardous situations, which are not handled by specifically established bodies or through specific measures. An example of a rescue service covered by Section 3-22-1 are flights made by No. 330 Squadron of the Royal Norwegian Air Force¬, while an example of an ambulance service are the operations of Lufttransport AS and Norsk Luftambulanse AS.

During the consultation, it was proposed that the tax should not cover flights by aircraft which have been approved for carrying ten passengers or fewer; see Section 3-22-1 fourth paragraph of the consultation paper. This proposal was not accepted. The number of passengers which an aircraft is approved to carry is thus no longer a separate criterion for the tax obligation.

The tax obligation is triggered when the flight commences (Section 3-22-3), and is calculated per passenger who commences a taxable flight (Section 3-22-2). As a result of the special way in which the tax obligation arises, a reference to Section 3-22-3 has been incorporated in Section 2-1 fourth paragraph. Section 2-1 fourth paragraph regulates cases where the tax obligation arises in a way which deviates from the general rule in Section 2-1 first paragraph, which is that the tax obligation arises when taxable goods are withdrawn from an enterprise's approved premises, or upon import.

It follows from the Storting's tax resolution that exemptions are given for three groups of passengers: the carrier's employees on business travel, children under two years of age at the time of departure and transit and transfer passengers. As regards the first-mentioned exemption, this is not regulated further in the Regulation.

During the consultation, it was proposed that the exemption for children under two years of age (Section 3-22-4) be granted subject to the condition that the child does not have his or her own seat. This condition was not accepted. The same applies to the requirement for documentation of the child's age; see Section 3-22-4 fourth paragraph of the consultation paper.

It follows from Section 3-22-5 that exemptions are granted for "transit and transfer passengers". The exemption means that the first flight on a transit or transfer journey will be taxable when the departure airport is Norwegian, while all subsequent flights will be exempt from the tax (Section 3-22-5 second paragraph). In this context, "transit" and "transfer" flights means subsequent flights by the same aircraft and subsequent flights by a different aircraft respectively (Section 3-22-5). The exemption applies both to passengers who commence their journey in Norway and to passengers who commence their journey in a different country. In order to be covered by the transfer exemption, the subsequent flight must start within 24 hours after the previous one, and it must be directly linked to the first flight (Section 3-22-5 third paragraph).

It follows from Section 2-8 that it must be possible to document that the requirements for exemption from the tax are met. The documentation must show the scope of the requirement, and that the conditions for exemption are met. It is generally up to the declarant to decide in each case how the documentation requirement is met. Section 3-22-5 third paragraph (2) sets out the requirements for documentation for the transfer exemption: the travel documents should state the departure and arrival airports, and the date and time of departure and arrival according to the timetable, for all flights included in the journey, and the link between the flights, as well as a journey summary. The requirements are not absolute; note the word "should". It is also not a requirement for the travel documents to be physical (on paper). During the consultation, it was proposed as a condition for exemption that a transport agreement has been established concerning linked flights; see Section 3-22-5 third paragraph (2) of the consultation paper. This condition was not accepted.

The exemption in Section 3-22-5 applies to journeys made by both scheduled and charter flights, and even if the subsequent journey entails a change of carrier or airport (fourth paragraph).

3 Practical implementation

The reporting and payment of excise duties to the government, including the air passenger tax, take place through self-declaration, and are the responsibility of the party that is the registered enterprise for the tax concerned. Enterprises liable to registration are defined in Section 5-1. For the air passenger tax, it follows from Section 5-1 (h) and (i) that Norwegian enterprises that operate flights from a Norwegian air¬port and representatives of foreign enterprises that operate from a Norwegian airport must register. This means that foreign enterprises that are covered by the tax obligation cannot register themselves, but are obliged to report and pay the tax via a representative in Norway. In these cases, the representative is notifiable.

The obligations and responsibilities of the representative with respect to the foreign enterprise it represents must follow from a clear contractual basis. Registered representatives have the same rights and obligations with respect to the tax authority as other registered taxable enterprises.

Registered taxable enterprises are obliged to keep separate excise duty accounts (Section 5-8) and to submit monthly tax statements to the regional tax office by the 18th of the subsequent month (Section 6-1 first paragraph). Fixed tax codes and tax groups must be used when declaring taxes (submitting tax statements). More information on these tax codes and groups will be provided at a later date.

Enterprises liable to registration are asked to follow this link, which leads to information on practical matters concerning registration, and to the actual registration process, which takes place via Altinn 

The Directorate of Taxes will shortly publish an annual circular letter concerning the air passenger tax, corresponding to the ones issued for the other excise duties. The annual circular will contain relevant regulations for the tax, and the Directorate's supplementary remarks concerning the individual provisions.

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