GERMANY Law and Practice Contributed by: Konrad Schott, Jan Brinkmann and Johannes Vogel, Freshfields
man law can vet whether such title transfer de facto abides by mandatory German law. If the aircraft is not registered in a contracting state of the ICAO, and in the case of separate engines, the transfer of title is governed by the lex situs (Article 43 of the EGBGB). If German law does not govern the transfer of title, German conflict of law rules will look at the laws appli - cable to the title transfer to determine if the bill of sale is sufficient. German law does not express minimum substantive requirements applicable to bills of sale. However, a bill of sale should: • sufficiently determine the aircraft, the engines, and any other part as well as the aircraft documenta - tion; and • contain suitable wording regarding the transfer of title in accordance with the applicable domestic law. The German Civil Aviation Authority ( Luftfahrt-Bun- desamt or LBA) requires proof of ownership to reg - ister the aircraft or a change in ownership in the Ger - man aircraft register ( Luftfahrzeugrolle ), which can be established by a bill of sale. 1.2.3 Enforceability Against Domestic Parties It is not necessary for a bill of sale to be translat - ed, certified, notarised or apostilled/legalised to be enforceable against a domestic party. However, upon request of the competent German court, foreign lan - guage documents must be translated into German to be admissible in evidence in proceedings before such court. 1.2.4 Registration, Filing and/or Consent From Government Entities A bill of sale cannot be registered or filed and is not subject to any consent from any government entity. However, the change in ownership of an aircraft reg - istered in the German aircraft register has to be reg - istered in the German aircraft register for regulatory reasons but such registration is not a condition to the effectiveness of the title transfer. The application for registration of an owner in the German aircraft regis - ter requires, amongst other things, the submission of proof of ownership, which in practice can be estab -
lished by a bill of sale (with back-to-birth traceability, if applicable). 1.2.5 Taxes/Duties Payable Upon Execution of a Bill of Sale In general, the disposal of an aircraft or engine by a party that is tax resident in Germany triggers income taxation of any capital gain from the sale – so-called unlimited income tax liability. Also, the disposal of an aircraft registered in the German aircraft register by a non-German tax resident results in a capital gains taxation in Germany, irrespective of where the asset is located – so-called limited income tax liability, but subject to double taxation treaties. VAT should not be payable if the aircraft is designated to be used by airlines predominantly providing inter - national commercial air transport. The taxation of the sale of an ownership interest in an entity that owns an aircraft or engine depends particularly on the type of entity sold (eg, partnership or corporation) and the individual structure of the sale. No stamp duties or transfer taxes are triggered by the disposal of an aircraft or an ownership interest in an entity that owns an aircraft in Germany. Operating leases, wet/damp leases, finance leases and leases concerning engines or parts are permis - sible and generally recognised in Germany. 2.1.2 Application of Foreign Laws A lease involving either a domestic party or an asset situated in Germany can generally be governed by foreign law, provided that a German court may give effect to German public policy and overriding manda - tory provisions of either German law or of the laws of any other country pursuant to Regulation (EC) No 593/2008 (the Rome I Regulation), and must give effect to foreign exchange regulations pursuant to Article VIII 2 (b) of the Articles of Agreement of the International Monetary Fund. 2. Aircraft and Engine Leasing 2.1 Overview 2.1.1 Non-Permissible Leases
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