Purchase of Aircraft in Poland / Europe

Aircraft / Jet Purchase – Formal Requirements

The provisions of Polish law do not establish any specific formal requirements as for the contract of sale of the aircraft, which determine the validity and effectiveness of the transfer of ownership to the aircraft. The contract may be concluded in any legally permissible form.

Consequently, for a successful aircraft transaction, it is sufficient to comply with the usual written form. The written form of the contract will enable the parties to the transaction to fulfill all public and legal obligations, in particular to register the new owner of the aircraft in the register of civil aircrafts kept by the Civil Aviation Authority.

However, sometimes due to the course of negotiations for a given transaction, the form of a notarial deed may be necessary. For example, such a necessity will arise when the seller wants to obtain from the buyer a security of payment of the price in the form of a mortgage on real estate or a declaration of voluntary submission to enforcement by the buyer.

In addition, the contract for the sale of the aircraft shall meet the basic and typical requirements for sale contracts, set out in the Polish Civil Code, in particular precisely define the parties to the contract, the subject of sale and the price of the aircraft or the method of its determination, as well as the date and method of payment of the price.

Aircraft Due Diligence

Due to the fact that the purchase of the aircraft is a high-value transaction, in order to minimize the transactional risk for the buyer, it is recommended that a detailed due diligence audit is carried out before signing the sale contract.

As part of the due diligence audit of the aircraft, its current legal status shall be verified, in particular:

• verification of the validity and correctness of the aircraft ownership held by the seller,
• verification if any encumbrances have been established on the airplane,
• verification if the aircraft is subject to any proceedings or seizure.

Aircraft related certificates

The above can be done in particular through:

• obtaining certificates from the register of pledges,
• obtaining certificates from the register of treasury pledges,
• analysis of the aircraft’s registration files at the Civil Aviation Authority.

Certificates from the register of pledges and treasury pledges will exclude the burdening of the aircraft with a registered pledges or treasury pledges.

Risks not covered by certificates

However, the aircraft may be subject to other rights and claims of third parties, about which there is no information in the above-mentioned pledges registers. For this purpose, it will be necessary to obtain the access to the aircraft’s registration files kept by the Civil Aviation Authority.

On the basis of the analysis of registration files at the Civil Aviation Authority, the buyer shall be able to verify whether the aircraft is subject to use by an entity other than its owner (the seller), and if so, on what legal basis and to what extent, because in such a case the relevant use or lease agreement shall be submitted to the registration files of the aircraft, and the aircraft user shall be the subject to formal registration by the Civil Aviation Authority.

The analysis of registration files will also enable verification of the validity and correctness of the ownership title of the aircraft held by the seller, as well as determining whether there are no administrative proceedings conducted by the Civil Aviation Authority in relation to the aircraft or its owner.

It shall be remembered that the aircraft registration files are not public and the Civil Aviation Authority can share them only to a limited group of authorized persons, to which the buyer usually does not belong. For these reasons, it may be necessary to obtain a power of attorney from the owner of the aircraft to analyze these files.

Aircraft encumbrances check

Bearing in mind the above, it shall be noted that the most common encumbrances of the aircraft include:

• registered or treasury pledge,
• use right,
• lease right.

A registered or treasury pledge is usually established in situations where the owner of the aircraft has unsettled liabilities towards third parties. Then the creditor obtains priority to satisfy his claims from the aircraft, which may include, inter alia, the sale of the aircraft or take over its ownership by way of court execution. The sale of the aircraft does not terminate or limit the effectiveness of the registered or treasury pledge, and consequently the creditor’s rights may be exercised against the buyer of the aircraft. For these reasons, verification of the existence of the above-mentioned pledges is a key element of the due diligence audit, which should precede the conclusion of the contract for the sale of the aircraft.

The sale of the aircraft also does not lead to the termination of the right of use established for the third party. The user will be entitled to operate the aircraft on the current terms, and preventing him from the performance of his rights may expose the buyer of the aircraft to claims and litigation. Similarly, if the aircraft was leased, the buyer usually replaces the seller in the lease agreement, being bound by it on the same terms, however with the right to terminate the lease agreement.

Deregistration of the aircraft

The sale of the aircraft may result in the obligation to de-register the aircraft from the Polish register of civil aircrafts kept by the Civil Aviation Authority.

The above obligation will arise in particular when:

• the buyer is a person who does not have Polish citizenship,
• the buyer is a foreigner who has no permanent place of residence in the territory of the Republic of Poland,
• the buyer is a foreign legal person (e.g. a company with its registered seat outside the territory of the Republic of Poland),
• the aircraft is to be entered in the foreign register of civil aircrafts.

However, the Civil Aviation Authority may, in justified cases, grant a consent to the registration of the aircraft in the Polish register of civil aircrafts for the benefit of persons and entities referred to in points 1-3 above.

Registration of a new owner of the aircraft

If the sale of the aircraft is not connected with the obligation to de-register the aircraft from the Polish register of civil aircrafts kept by the Civil Aviation Authority, as mentioned above, it will be necessary to update the aircraft’s registration data.

In the above situation, immediately after the conclusion of the contract for the sale of the aircraft, the buyer shall submit an application to the Civil Aviation Authority for entry of changes in the register consisting in the disclosure of the new owner of the aircraft and deletion of the previous one. For the above, it will be necessary to submit the contract for the sale of the aircraft.

Airplane Transaction – Tax

If the sale of the aircraft is subject to the Polish tax regime, the contract for the sale of the aircraft may be subject to VAT tax if the seller is an entrepreneur, or to tax on civil law transactions, if the sale is made by an individual owner.

The payment of the tax on civil law transactions is borne by the buyer, who shall fulfill this obligation within 14 days from the date of the sale agreement, on the basis of which the ownership of the aircraft is transferred.

The rate of the tax on civil law transactions is 2% of the market value of the aircraft.

The contract of sale shall specify the price of the aircraft, which will correspond to its current market value. Otherwise, the tax office may request the taxpayer (buyer) to increase or decrease this value, which will affect the amount of due tax, which shall be paid.

Airplane / Jet – Selling & Buying related services

Our attorney offer a comprehensive range of services related to aircraft purchase and sale transactions. Our offer is aimed at both the buyer and seller of the aircraft.

In terms of the services provided, our law firm offers:

• conducting the due diligence audit of the aircraft,
• preparation or analysis of the contract for the sale of the aircraft,
• representation in negotiations,
• making registration changes at the Civil Aviation Authority,
• consultancy in the field of tax and customs law.

FAQ – Aircraft Purchase

Is purchase of aircraft in Poland subject to transaction tax?

Purchase of aircraft in Poland may be subject to 2 % value transaction tax (PCC). Nonetheless, depending on the circumstances of the transaction the tax may or may not arise.

Is it obligatory to deregister aircraft from Polish register after purchase?

No, it is only necessary when:

• the buyer is a person who does not have Polish citizenship,
• the buyer is a foreigner who has no permanent place of residence in the territory of the Republic of Poland,
• the buyer is a foreign legal person (e.g. a company with its registered seat outside the territory of the Republic of Poland),
• the aircraft is to be entered in the foreign register of civil aircrafts.