Association Demands End To Tax Withholding Probe For Non-US-Based Crews

The Latin American Airline Transport Association, known as AITAL from its Spanish name (Asociacion Internacional de Transporte Aereo Latinoamericano), with the full support of IATA, has issued a warning to the Internal Revenue Service to cease its attempts to force non-US-based crews of its member airlines to pay withholding taxes.

The IRS is allegedly engaging in a tax probe of crew members who work flights within US airspace, in an attempt to force them to pay taxes on income earned while in the US. AITAL is strongly opposing the IRS on this issue for several reasons, not the least of which that the probe is allegedly targeting employees of airlnes based out of Brazil, Chile, Costa Rica, El Salvador, Guatemala, Peru and Panama, but not employees of other international transport carriers such as cruise ship lines. AITAL also says the IRS has advised other carriers in other countries that they may become targets of the tax probe.

In a strongly worded response to news of the probe, AITAL is warning of potential retaliation against US airlines operating routes to/from Latin America. The Association has pointed out crew members of US airlines normally earn quite a bit more money than their counterparts in the targeted countries, and the tax and administrative burden could be much higher than what the IRS could gain if the probe continues.

According to AITAL, the probe is based on a 10-year-old IRS regulation which "in theory would apply to all types of vessels, yet they are not going after the cruise and maritime industry."

Furthermore, AITAL believes the actions on the part of the IRS are in violation of treaties between US and the target countries which include "express provisions that exempt the air carriers from US income tax requirements."

The member airlines are already complaining to AITAL that the administrative burden alone of the probe could be extremely onerous. "Airlines would be required to research more than 100,000 individual time sheets over the last decade, [to] try to figure out when each employee was over US airspace and for how long, and when they reported for work," AITAL said.

IATA has placed its support squarely on the side of the airlines. "This initiative is not fair and it does not pass the common sense test," IATA DG and CEO Giovanni Bisignani said in a statement. "It will adversely impact international trade and wrongfully discriminates against the airline industry."

FMI: www.aital.org, www.iata.org