The Ministry of Finance of Ukraine continues to work on the application of the provisions of the Tax Code and international agreements on the avoidance of double taxation to lease payments made by Ukrainian airlines to non-residents. The ministry expects industry representatives to provide examples of the incorrect interpretation of these transactions and their positions on resolving the problem in order to prepare a generalized tax consultation. This is stated in the Ministry of Finance’s response to a request from UNN.
Details
The Ministry of Finance is working on an issue that concerns not the regulation of the leasing market in general, but the application of the provisions of the Tax Code of Ukraine and international treaties of Ukraine on the avoidance of double taxation to income received by non-residents in the form of lease or rental payments for the use of aircraft
What is the problem with the taxation of aircraft leasing?
As UNN previously reported, since 2024 the Bureau of Economic Security has begun interpreting transactions involving the leasing of air transport from non-residents of Ukraine as the use of equipment. According to investigators, Ukrainian air carriers were supposed to pay royalties for the rental of aircraft and helicopters. Based on this approach, the BES opened criminal proceedings against at least five air carriers, including MAU, "Constanta Airline," "Wind Rose," N3Operations, and "Skyline Express." According to UNN, another airline, "Urga," may also be involved in a similar case.
The criminal cases were opened despite the fact that almost all air carriers had successfully passed tax audits, and the tax authorities’ comments concerning leasing applied to only one company.
Representatives of the aviation industry insist that the problem arose because of an ambiguous interpretation of the legislation and requires the formation of a unified state approach.
Earlier, in response to a request from UNN, the Ministry of Finance said that the taxation of aircraft leasing transactions is carried out in accordance with the Tax Code and international treaties of Ukraine. At the same time, the Tax Code of Ukraine does not provide for the possibility of taxing aircraft leasing as royalties.
Therefore, representatives of the aviation industry describe the Bureau’s approach to interpreting aircraft leasing without amending the tax legislation as pressure that could destroy the entire passenger and cargo transportation sector. According to the State Register of Civil Aircraft of Ukraine, 86% of the aircraft fleet of Ukrainian companies is leased.
To resolve the situation, the issue of aircraft leasing was submitted for consideration to the Committee on Tax Policy, Accounting and Auditing of the Public Council under the Ministry of Finance. Following the first meeting, it was decided to initiate the establishment of a working group under the Ministry of Finance, which is to develop a draft generalized tax consultation on the taxation of lease payments made to non-residents.
The Ministry of Finance expects proposals from the aviation industry
The Ministry of Finance said that, following the meeting, the participants also agreed to provide the ministry with practical examples of leasing transactions for further analysis.
Following the discussion, an agreement was reached for interested participants to provide, for further consideration, practical examples of the relevant transactions, including taking into account the specifics of agreements concluded by airlines with companies that are residents of different states, as well as proposals and positions regarding the application of the provisions of the Tax Code of Ukraine and international treaties of Ukraine on the avoidance of double taxation to such transactions
The ministry plans to summarize and process the specified materials and, on their basis, prepare a draft generalized tax consultation.
The work will be coordinated by two specialized departments of the Ministry of Finance. In particular, the application of international treaties of Ukraine on the avoidance of double taxation to the income of non-residents is handled by the International Taxation Department, while the application of the provisions of the Tax Code is handled by the Tax Policy Department of the Ministry of Finance.