AUSTRIA Law and Practice Contributed by: Farid Sigari-Majd and Mathias Lehner, Freshfields
2. Aircraft and Engine Leasing 2.1 Overview 2.1.1 Non-Permissible Leases
1.2.3 Enforceability Against Domestic Parties See 1.1.2 Enforceability against Domestic Parties regarding translations in legal proceedings. 1.2.4 Registration, Filing and/or Consent From Government Entities For a bill of sale to be enforceable, it is not required to be registered or filed or subject to consent from any government authority in Austria. An application for registration with the aircraft regis - ter ( Luftfahrzeugregister ) requires submission of proof of ownership, which can be established by way of (a chain of) bills of sale. The Austrian regulator, ACG, further requires, inter alia, the submission of an own - ership transfer form available on its website, Austro Control , which must be signed by the transferor and the transferee. 1.2.5 Taxes/Duties Payable Upon Execution of a Bill of Sale The disposal of an aircraft or an engine by a corporate entity having its seat or place of management in Aus - tria (unlimited tax liability) generally triggers Austrian corporate income tax on any capital gain from the sale, irrespective of where the aircraft or the engine is located. If it has neither its seat nor its place of management in Austria (limited tax liability), the disposal is – subject to the application of relevant double tax treaties – only subject to Austrian corporate income tax on capital gains from the sale if it has sufficient nexus to Austria (eg, a permanent establishment to which the sale is attributable or if a permanent representative in Austria is involved). In such a case, where the asset is located is not relevant. Such sale should be exempt from VAT if the aircraft is designated to be used by airlines mainly providing international flights or flights entirely outside of Austria in return for payment. The taxation of the sale of an ownership interest in an entity that owns an aircraft or an engine depends on the type of entity (eg, part - nership or corporation) and the individual structure of the sale.
Operating leases, wet leases, finance leases and leas - es concerning only engines or components are gener - ally permissible and recognised under Austrian law. 2.1.2 Application of Foreign Laws The parties to a lease agreement are generally free to choose the governing law in accordance with and subject to the limitations of the Rome I Regulation. In a purely domestic context (ie, all parties and place of performance are in the same country), an Austrian court may apply the mandatory provisions of the law of that country, irrespective of the choice of law. Austrian courts may refuse to uphold a choice of law if its application would be manifestly incompatible with Austrian public policy ( ordre public ), or apply overrid - ing mandatory provisions of Austrian law or the law of the place of performance if the performance of the lease agreement would be unlawful under such law. 2.1.3 Restrictions Concerning Payments in US Dollars There are no material restrictions imposed on an Aus - trian lessee making lease payments to a foreign lessor in US dollars (subject to applicable sanctions, if any). 2.1.4 Exchange Controls There are no exchange controls under Austrian law which would prevent payments or the repatriation of realisation proceeds under a lease out of Austria. Aus - trian law may give effect to foreign exchange control provisions of a member state of the International Mon - etary Fund (IMF). Further, parties may be subject to anti-money launder - ing or counter-terrorism regulations, and payments to foreign entities may be restricted under (international) sanctions. Some cross-border transactions (including loans or leases subject to certain thresholds) must be reported to the Austrian central bank ( Oesterreichische Natio- nalbank ) for statistical purposes. If the transaction is
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