Denmark Plans VAT Exemption for Domestic Airline Operations

Denmark is set to revolutionize its domestic aviation sector by exempting local airlines operating exclusively within the country from value-added tax (VAT) regulations. Announced by Taxation Minister Jeppe Bruus during a press conference at Karup Midtjyllands Airport on March 4, this pivotal move aims to level the playing field for Danish carriers, encouraging the growth of domestic air travel.

Scheduled to be formalized in a proposal this autumn, the new regulations are targeted to become effective on January 1, 2025. Transport Minister Thomas Danielsen highlighted the government’s intention to eliminate the penalization of airlines for operating solely domestic flights, thereby fostering an environment conducive to the expansion of domestic aviation services.

The rationale behind this legislative adjustment is to ensure fair competition among airlines. Under the current legal framework, Danish airlines are subjected to VAT if their international operations do not exceed 55% of their total traffic. This places domestic-only carriers at a disadvantage compared to foreign airlines operating within Denmark, which are not bound by the same VAT obligations.

The forthcoming change follows the recent development where AIS Airlines (Netherlands) emerged as the sole operator on the Midtjyllands to Copenhagen Kastrup route, following DAT – Danish Air Transport’s withdrawal from scheduled service on this route last September. As AIS Airlines operates under Dutch tax regulations, the updated Danish VAT legislation will not affect its operations.

According to ch-aviation capacities data for the week starting March 11, 2024, Denmark’s domestic airline market includes six airlines, with Danish scheduled carriers DAT and Sunclass Airlines, as well as virtual carriers Alsie Express and WorldTicket. However, the primary players in terms of seat and frequency capacities remain Norwegian Air Sweden AOC and SAS Scandinavian Airlines.

This legislative amendment signals Denmark’s commitment to enhancing its domestic aviation sector, promoting sustainable growth, and ensuring that Danish airlines can compete on equal footing with their international counterparts within the national airspace.