The practice where tax authorities and the Bureau of Economic Security attempt to reclassify taxation of aircraft leasing transactions as royalties creates serious risks for the future of Ukrainian civil aviation. This was stated by the President of the All-Ukrainian NGO "Association of Taxpayers of Ukraine" and Chairman of the Supervisory Board of the "Ukrainian Business Council" Grigol Katamadze during a roundtable discussion, reports UNN.
According to Katamadze, the aviation industry is currently in a state of "turbulence," and the actions of regulatory and law enforcement agencies could lead to its actual destruction.
It concerns the fact that the State Tax Service in 2024, despite the absence of changes to tax legislation, published an article proposing to tax leasing transactions of air transport from non-residents of Ukraine as royalties. Tax officials believe that Ukrainian airlines should pay tax for the use of intellectual property.
The STS believes that from 2017 to 2023, companies using transport leasing, in particular leasing aircraft and railway cars from non-residents, paid UAH 13.1 million in income in the form of leasing and did not pay 15% royalties in Ukraine. At the same time, the tax authority decided to interpret international double taxation avoidance conventions in its own way, stating that it believes companies leased not transport, but equipment.
Guided by this approach, the Bureau of Economic Security opened a number of criminal proceedings against airlines. Investigators believe that at least five airlines, including MAU, "Aviation Company Constanta," "Urga," N3Operations, and "Skyline," should have paid an additional 15% royalties to the Ukrainian budget for leasing aircraft and helicopters.
"The steps taken by our tax service and the Bureau of Economic Security could lead to the destruction of Ukrainian civil aviation," warned Katamadze.
The President of the Association of Taxpayers emphasized that this is not about granting any benefits or preferences to airlines. Instead, according to him, the state should already be thinking about the competitiveness of Ukrainian carriers after the end of the war. After all, their return to the Ukrainian market will take some time.
"Now we are not talking about preferences; we are talking about the fact that sooner or later the war will end, and we will need to return to normal life. I periodically talk to representatives of the aviation industry and asked the same question. Let's say, how much time is needed for civil aviation, as soon as the war ends, to return to normal operations? At least six months, maybe a year, maybe more... And during that time, while Ukrainian civil aviation returns to normal operations, who will be here?" Katamadze noted.
He warned that while Ukrainian airlines are restoring their operations, the domestic market could be quickly taken over by foreign carriers.
"So now, I am addressing both colleagues from the Bureau of Economic Security and colleagues from the tax service, we must now think about ensuring that when that time comes (the end of the war - ed.), our civil aviation and our airlines are strong so that they can at least compete in their own market with powerful foreign airlines," he emphasized.
Separately, Katamadze stressed that the practice of essentially transferring tax disputes into the realm of criminal prosecution is unacceptable.
"Given that there have been no changes in (tax - ed.) legislation, making such conclusions (about airlines' non-payment of royalties for leasing transactions - ed.) based on analytical reports and transferring this dialogue into a criminal context, I think, is not entirely logical," believes the President of the Association of Taxpayers.
According to him, international practice clearly distinguishes between the concepts of "royalties" and "leasing," so attempts to introduce new approaches to their interpretation appear unfounded. Moreover, Katamadze emphasized that no country in the world has problems distinguishing between the definitions of "royalties" and "leasing."
"Attempts by tax authorities to introduce fiscal 'innovations' and arbitrarily interpret these concepts contradict global standards. Undoubtedly, the state budget needs to be filled, as the country's stability depends on it. However, both tax and law enforcement agencies have clear tools for finding additional financial resources where there are real risks, rather than creating artificial obstacles for legitimate businesses. The aviation industry today needs support, not additional fiscal pressure," – noted the president of the APPA.
Grigol Katamadze, together with other participants of the round table, supported the initiative of the deputy chairman of the Verkhovna Rada Committee on Transport and Infrastructure, Volodymyr Kreidenko. The MP proposed convening an urgent interagency meeting with the participation of representatives of the Cabinet of Ministers, including the Ministry of Finance, the State Tax Service, the Bureau of Economic Security, the Ministry of Communities and Territories Development, and relevant parliamentary committees, to consider the situation that has arisen around the taxation of leasing operations of aircraft from non-residents of Ukraine.
The round table participants also agreed that it is necessary to approve a generalizing tax consultation of the Ministry of Finance regarding the taxation of lease payments. This, in their opinion, will ensure a uniform interpretation of the norms in accordance with current legislation and prevent a subjective approach on the part of regulatory authorities.
In addition, a moratorium on fiscal pressure and a review of accruals is needed, and until a unified state position is formed, the existing disputed accruals to airlines must be reviewed and a template approach to market entities must be abandoned.
Also, the Bureau of Economic Security needs to distinguish between criminal offenses and tax disputes and clearly separate actual intentional tax evasion from classic disputes over the interpretation of tax legislation norms.