Ukraine must begin forming a cohesive economic model for post-war development today, in which civil aviation can become one of the key drivers of economic growth. This was stated by Oleksiy Movchan, Deputy Chairman of the Verkhovna Rada Committee on Economic Development, in a comment to UNN.
"In my opinion, today Ukraine has individual strong elements of a post-war economic recovery strategy, but the key challenge lies in forming a cohesive economic model for the state's development after the war. And civil aviation can become one of the important drivers of such recovery,"
According to him, the aviation industry has a multiplier effect on the economy. It is not just about passenger transportation. It involves logistics, tourism, international trade, services, engineering, aircraft repair, component manufacturing, personnel training, and the integration of Ukraine into global economic chains.
"Restoring the operation of Ukrainian airports after security risks subside will be an important signal to investors and businesses that the country is returning to normal economic life. In fact, the opening of airspace will be not only a transport event but also a symbol of economic stabilization. It is particularly important to create conditions for the return of Ukrainian airlines to the domestic market,"
He noted that Ukraine has great potential as a transit state between Europe, the Caucasus, the Middle East, and Asia. "Before the full-scale war, the Ukrainian aviation market demonstrated rapid growth, and after the war, we can see a new wave of development, provided there is correct state policy and competition," Oleksiy Movchan explained.
Also, in his opinion, it is strategically important not to lose competencies in aircraft construction and repair.
"Ukraine has a unique engineering school, production base, and human capital. In the modern world, the aviation industry is part of a state's technological sovereignty. And here we must talk not only about preserving existing enterprises but also about integrating the Ukrainian aviation industry into European and global production chains,"
He is convinced that after the war, Ukraine should bet on sectors with high added value: mechanical engineering, the defense industry, IT, logistics, energy, and aviation. According to him, these specific areas are capable of creating long-term economic growth, jobs, and a new quality of economy.
"Therefore, civil aviation can and should become one of the symbols of Ukraine's new economic stage – an open state, integrated into the world economy and technologically modern,"
Context
Currently, the civil aviation industry is going through one of the most difficult times in the entire history of independent Ukraine. With the start of Russia's full-scale invasion of Ukraine, airspace was closed to civilian aircraft. Airlines were forced to completely relocate their operations abroad. In addition to the difficulties associated with working abroad, the Ukrainian aviation business has faced criminal prosecution.
Almost all Ukrainian airlines after 2024 faced unprecedented pressure from the Bureau of Economic Security (BES). BES investigators opened a series of criminal proceedings involving 5 Ukrainian companies that lease aircraft abroad from non-resident companies of Ukraine. The Bureau is convinced that airlines should have paid royalties in Ukraine, i.e., a fee charged for the use of intellectual property. At the same time, the fact that transport is not intellectual property is completely ignored, and Conventions on the avoidance of double taxation are in force between Ukraine and a number of countries. According to these agreements, Ukrainian companies pay taxes for leasing in the countries where the leasing companies are residents. UIA, Constanta Airline, Urga, N3OPERATIONS, and Skyline suffered from BES pressure. Furthermore, court materials indicate similar approaches in other industries, with attempts to impose an additional levy on leased railway transport and even agricultural machinery.
At the same time, the BES deliberately ignores judicial practice, which does not allow taxing transport leasing as royalties.
It is important to understand that for over 30 years, the legislation regarding the taxation of leasing in Ukraine has not changed, and previously it did not raise questions or remarks from either tax or law enforcement authorities. The situation changed after the State Tax Service of Ukraine published an article on May 24, 2024, with clarifications regarding the taxation of leasing operations by airlines. Tax officials indicate that the leasing of aircraft from non-resident companies must be taxed as royalties. In doing so, the fiscal authorities juggle articles of international conventions on the avoidance of double taxation, claiming that for aircraft rentals, airlines must pay fees as if for the use of intellectual property.
Such an approach is not just an erroneous interpretation of tax law norms, both Ukrainian and international, but a "tax on the Ukrainian flag," which makes Ukrainian air carriers uncompetitive in the global market, believes Mykola Shcherbyna, an expert in transport and mechanical engineering and executive director of the Public Union "Ukrainian Air Transport Association."