Do you still remember the VAT file? For more than 20 years, VAT asked on a pilot training has been a point of discussion. Students find it outrageous that they pay 21% too much on an already expensive training to the Belgian state. Why is the government not helping them…

By Bart Smet, BeCA VP for Thomas Cook Airline Belgium

Well here is a small recap of the file but let us first start with some background.

Background

Let us look at School A. School A is a flight school that chooses to bill its students without VAT. As a consequence, they cannot deduct VAT from their bills neither. If school A has a net operating cost to give a pilot training of 70,000€ they need to pay 21% VAT on this. Meaning an extra 14,700€. So a total cost of 84,700€. If they want to make a 10% profit, they will need to charge the student an extra 8,470€. So a total bill of 93,170€ that the student must pay.

Then there is School B. School B is a flight school that chooses to bill its students VAT. By doing so, they can deduct VAT from their own bills by Belgian law. Suppose this school has the same costs as School A. They will receive bills for a total cost of 84,700€ as well. But School B can deduct the VAT. So the net operating cost will be 70,000€ for School B. If they want to have the same profit as School A, they need to charge the student an extra 8.470€. This totals to 78,470€ VAT not included. But School B chooses to work under the VAT rule, so they need to present the student a bill with 21% VAT. Meaning the student will get a total bill of 94,948.70€. This is only a 1,800€ difference compared to School A.

Most people think that getting rid of the VAT on the pilot training will make the training cost 21% cheaper. This is not the case, the difference is only the VAT on the profit made by the school, i.e. only a few percents.

As BeCA, we have proven once more that being part of a group pays off.

Now what happened in Belgium? In a nutshell: European law was badly translated into Belgian law or not even put in Belgian law. This led to confusion for every school active in Belgium. The VAT administration sent around letters to the different schools (after some lawsuits), explaining that they needed to charge VAT and choose this system. However the Belgian law was not adapted in a correct way to reflect the European law. This situation was finally corrected in January 2014 by changing the Belgian law. This created a situation where students were illegally charged VAT, according to Belgian law, until January 2014. While the schools got instructed to charge VAT. Some lawsuits were started against some schools to claim back the undue VAT. The schools had no choice but to involve the Belgian state to pay back the VAT. The Belgian state threatened on its turn to claim back the deducted VAT on the bills of the costs of the school. On top of that students could claim back unduly paid VAT up to 10 years after invoicing whilst schools could only claim it back from the Belgian State for 3 years. This created a really dire situation for the already cash strained flight schools.

The attentive reader will have noticed that our members are the ‘lucky-winners’ who could take advantage from a European law, badly translated into Belgian law: the cost of their training was calculated free of VAT but they were not charged the VAT in the end.

The situation has now been clarified, and VAT is well due since January 2014. But as explained before, charging or not VAT on pilot training does not make a big difference.

What did BeCA do?

It took us some time to find the right lawyer and to fully understand the situation. As a first measure we paid for our members the legal actions to extend or even freeze the 10-year limit on their VAT claims. But our hands were tied, since we had no way to defend our members without risking to harm flight schools. After finding the right lawyer, we put the wheels in motion. After months of talks with some schools and meetings with the Ministry of Finance, a deal was found at the end of 2016. The Belgian government will pay back all pilot students represented by our lawyer. We still have a pending lawsuit against one of the ATOs, but we are convinced we will have a positive outcome here as well.

It took a few months to get the heads at the VAT department aligned, but we are very proud to announce that we received the first payback in June 2017. Meanwhile, in July we had another 16 members who received a payback.

As BeCA, we have proven once more that being part of a group pays off. This file is just one in a long list. And we would like to take this opportunity to thank you all for your years of support.