The Aerospace Association of Ukraine positively assesses the beginning of a substantive dialogue on resolving the issue of taxation of Ukrainian airlines’ leasing payments to non-residents. At the same time, industry representatives expect the discussion to produce a practical result in the near future, namely the establishment of a unified state approach to the taxation of such transactions. Ruslan Melnychenko, chairman of the legal committee of the Aerospace Association of Ukraine, who took part in a meeting of the Tax Committee of the Public Council under the Ministry of Finance, said this in a comment to UNN.
The aviation industry expects a practical result regarding the taxation of aircraft leasing
According to Melnychenko, it is fundamentally important for Ukrainian airlines that the issue to which the industry has been drawing attention for a considerable time has finally become the subject of discussion involving the aviation industry and state representatives.
We at the Aerospace Association welcome the fact that a substantive dialogue has finally begun on resolving the issue of taxing aircraft leasing as royalties, as the Economic Security Bureau is attempting to apply. This is an extremely important issue for the aviation industry, requiring not piecemeal decisions but a clear and unified position of the state, since airlines are currently facing criminal pressure. Therefore, we view positively the very fact that representatives of the Ministry of Finance, the expert community, and the aviation business have sat down at one table and begun discussing possible ways to resolve the situation
At the same time, he said, it is important for the aviation industry that the dialogue that has begun not be limited to discussions, but result in a specific decision that will eliminate legal uncertainty and differing approaches to the taxation of aircraft leasing.
Following the first meeting, there is an understanding of the issue and a willingness to seek solutions. It is fundamentally important for us that this dialogue produce a practical result as soon as possible, namely a clear clarification that will eliminate differing interpretations of tax legislation regarding leasing payments to non-residents
The Association hopes that the relevant generalized tax clarification will be developed in the near future, since differing approaches to interpreting the same tax provisions create risks for the operations of Ukrainian airlines.
We hope this work can be completed in the near future. The aviation business needs legal certainty and clear operating rules in order to be able to plan its activities. The sooner a unified state position on this issue is established, the sooner it will be possible to eliminate the risks and contradictions faced by Ukrainian air carriers today
The Ministry of Finance plans to develop a tax clarification
As UNN previously reported, following an appeal by representatives of the aviation industry, the Tax Committee of the Public Council under the Ministry of Finance held a meeting dedicated to the issue of taxing leasing payments to non-residents. As a result, it was decided to initiate the creation of a working group under the Ministry of Finance, which is to develop a draft generalized tax consultation.
The need for such clarification arose amid the Economic Security Bureau’s interpretation of aircraft leasing transactions as royalties. The Bureau believes that such an interpretation provides grounds for charging a 15% tax on the income of non-residents from the relevant leasing payments. In connection with this, investigators opened criminal proceedings against at least five air carriers, including UIA, "Constanta Airline," "Urga," H3Operations, and "Skyline Express." The ESB equates leasing payments with royalties and interprets airplanes and helicopters not as vehicles but as "equipment."
Law enforcement officials received analytical conclusions after, in 2024, the previous State Tax Service team published an article proposing that leasing operations involving transport owned by nonresidents of Ukraine be taxed as royalties. Documents that, according to representatives of the aviation market, are similar to one another and appear to have been written "using the same template" formed the basis for criminal cases against air carriers.
Lawyers interviewed by UNN point out that investigators are ignoring the existing international conventions on the avoidance of double taxation ratified by the Verkhovna Rada. According to them, the automatic assessment of an additional 15% tax in Ukraine without taking into account the provisions of the specific convention is, at the very least, disputable.
It is worth noting that, according to data from the State Tax Service, it stated that the airlines had undergone tax inspections, and only one of them established violations in the taxation of leasing. The remaining tax inspections did not reveal such violations.
At the same time, in response to a request from UNN, the Ministry of Finance reported that the taxation of aircraft leasing transactions is carried out in accordance with the Tax Code and Ukraine's international treaties. The ministry separately recalled paragraph 3.2 of Article 3 of the Tax Code: if an international treaty, the binding nature of which has been approved by the Verkhovna Rada, establishes rules other than those provided for by the Code, the rules of the international treaty shall apply.
International conventions on the avoidance of double taxation do not provide for the possibility of taxing aircraft leasing as royalties.
It is worth noting that the Economic Security Bureau refused to comment to UNN on the grounds on which it classifies aircraft leasing operations involving nonresidents of Ukraine as royalties and seeks to force air carriers to pay for the rental of aircraft and helicopters as though it were the use of intellectual property.
Representatives of the aviation industry have repeatedly emphasized that the absence of a unified state approach has created a situation in which carriers are subjected to criminal pressure because of the interpretation of tax regulations. Therefore, a general tax clarification from the Ministry of Finance could become key to resolving the tax dispute, which has already gone beyond a purely fiscal issue and has led to the criminal prosecution of airlines.