Common Aircraft Registry Myths & Realities

Business jet owners operate on a global scale, and have the ability to register their aircraft in a range of jurisdictions around the world. Many of these registries have been subject to a series of myths over the years, which are either exaggerated or wide of the mark, according to industry sources.

So, what are the biggest misconceptions, and how can the sector address the problem?

Myth 1: Offshore Registries are Tax Havens

Brian T Richards is director of RegisterAnAircraft, an aircraft registration consultancy and service provider that is part of Sovereign Group. Richards notes that when discussing aircraft registries – particularly those classed as ‘offshore’ – a common and instinctive reaction is that they are some sort of ‘tax dodge’.

This perception has been heightened by data disclosures in recent years, he adds, but it is often far from the reality. “The bottom line is that there can be tax savings as part of the decision to register in a jurisdiction that is not one’s own,” Richards says.

However, such savings “are part of legitimate tax planning rather than tax evasion (illegal) or tax avoidance (morally questionable). One of the key responsibilities on such registries is to be transparent and ensure that their due diligence is beyond reproach.”

This point is echoed by Aoife O’Sullivan, a Partner at the Air Law Firm. “A common misconception is that registration is somehow linked to the tax treatment of an aircraft,” she says.

“Registration certainly has a bearing on how we manage the tax exposure, but it is wrong to suggest that registering an aircraft in a certain jurisdiction will be more tax efficient than another,” she argues.

Myth 2: Less Established Registry = Lower Technical Standards

Another misperception, Richards said, is that such registries have lower technical standards against more ‘established’ registries. However, the reality is more double-edged than that, with most offshore registries offering a wide acceptance of technical standards from FAA, EASA and other bodies while still maintaining the highest levels of oversight and inspection.

“Some registries, such as Bermuda, have such trust and high standards that they have been able to enter into ‘83 bis’ agreements with other jurisdictions who have passed oversight to the offshore registry,” he adds.

So why the bad press? Richards hesitates to use the phrase, but it could be down to “what I would call the politics of envy. Anything, including the very existence of private aviation, can be seen as elitist, something for ‘them’, not ‘us’,” he argues.

For instance, the ‘tax dodge’ accusation is “regularly delivered with a sneer”, he notes, something that has perhaps not been helped by the surge of private aviation during the pandemic, when those who could afford it sought to escape the health risks of commercial airports by flying privately.

Myth 3: Aircraft Registries are Used for Money Laundering

For the Cayman Islands and other Overseas Territories, one of “the biggest misconceptions about aircraft registries is that an aircraft registry is used for money laundering purposes,” according to a spokesperson for the Civil Aviation Authority of the Cayman Islands (CAACI).

For CAACI specifically, “there is the misconception that it is very easy to register an aircraft or extremely easy to attain an Air Operator Certificate (AOC),” they add.

These misconceptions go hand-in-hand, and are tied to a view that it’s easy to register an aircraft on the Cayman Islands Aircraft Registry because of a “uniformed view that a Caribbean Island is a third world country with few, to no, regulations.”

On the contrary, the spokesperson says the reality is that “the Cayman Islands is one of the top financial centers in the Caribbean and our AML [Anti-Money Laundering] compliance and reporting has been a large part of what makes the Cayman Islands a reputable choice.”

According to the spokesperson, such processes are not just a checklist, but involve thorough reporting that ensures the registry only includes quality clients. “The Cayman Islands Monetary Authority (CIMA) has been responsible for regulation and supervision of our financial services industry for over 25 years,” they highlight.

“As such, the Cayman Islands has established its regulatory framework in conjunction with relevant international standards, with CIMA playing a central role in the AML and CFT [Combating the Financing of Terrorism] regime.”

To continue reading about more myths and realities about aircraft registries, click below to view the full article in the AvBuyer June digital edition…