The issue of taxing Ukrainian airlines’ leasing payments to non-residents requires a solution not only going forward, but also with regard to tax and criminal proceedings that have already been initiated. A general tax consultation (GTC) from the Ministry of Finance of Ukraine could resolve the contradictions. Since a GTC is not a regulatory legal act and does not create new tax rules, but explains how to apply the current legislation, its conclusions will also be taken into account when considering disputes that arose earlier. The Ministry of Finance has already used this approach to eliminate ambiguities in tax legislation, UNN writes.
Airlines faced problems because of a new interpretation of aircraft and helicopter leasing
Since 2024, the State Tax Service and the Economic Security Bureau have begun reclassifying Ukrainian airlines’ leasing payments to non-residents as royalties. This led to tax claims and criminal proceedings involving at least five Ukrainian air carriers.
The key contradiction lies in the legal classification of such transactions. Airlines pay foreign aircraft owners rent or lease payments for the use of aircraft. The Economic Security Bureau, however, treats these transactions as the lease of equipment rather than air transport and regards such payments as royalties, which entails a different tax treatment.
At the same time, the relevant provisions of the Tax Code and Ukraine’s international treaties on the avoidance of double taxation were in force before 2024 as well. There were no legislative changes that directly established a new taxation procedure for such transactions. At the same time, airlines have successfully undergone tax audits and, according to the State Tax Service, only one carrier had faced a claim concerning aircraft leasing.
Representatives of the aviation industry point out that aircraft leasing is a global practice and that no country treats it as royalties. For the industry, this contradiction is systemic, since more than 80% of the aircraft operated by Ukrainian commercial air carriers are leased. Accordingly, the ambiguous interpretation of such payments creates risks for the vast majority of airlines.
The situation is complicated by the fact that, due to russia’s full-scale invasion, Ukrainian airspace remains closed to civil flights, while Ukrainian airlines are forced to operate abroad in order to preserve their fleets and personnel. Despite this, from 2022 to 2025, aviation industry enterprises paid almost UAH 27 billion in taxes and fees to the Ukrainian budget.
Under such circumstances, additional pressure creates risks of lost liquidity, reduced operations, and even the cessation of activities by individual air carriers.
To resolve the situation, they approached the Ministry of Finance of Ukraine, which, as the regulator, can put an end to differing interpretations of the legislation. The Ministry of Finance agreed to develop a general tax consultation (GTC) to resolve the issue. The Ukrainian Air Transport Association has now established a working group to prepare specific examples of the incorrect interpretation of leasing transactions and develop a draft general tax consultation, which it plans to submit to the ministry for consideration.
Eliminating the ambiguous interpretation of the legislation going forward will not fully resolve the problem. After all, the claims of the supervisory authorities cover previous tax periods. That is why representatives of the aviation industry insist on the need for a comprehensive settlement of the situation, which would not only prevent new disputes but also create legal grounds for resolving those that already exist.
The Ministry of Finance’s GTC may put an end to disputes over aircraft leasing
It is important to understand that a GTC does not establish new taxation rules, but explains how to correctly apply the provisions of the legislation that are already in force.
Pursuant to paragraph 52.6 of Article 52 of the Tax Code of Ukraine, the Ministry of Finance analyzes the circumstances indicating ambiguity in the application of certain provisions of legislation and approves generalized tax consultations. At the same time, the Procedure for Providing GTCs, approved by Order No. 811 of the Ministry of Finance dated September 27, 2017, expressly stipulates that such consultations "are not regulatory legal acts".
This is a fundamental legal distinction. A regulatory legal act may establish new rules of conduct and change the rights and obligations of participants in legal relations. A GTC, by contrast, merely explains the procedure for applying legislative provisions that already exist; it does not create new tax rules.
It is precisely this feature that creates the legal grounds for taking the conclusions of a GTC into account when considering disputes that arose before its approval.
Why a GTC may be applied to existing tax disputes
The issue of applying a GTC to previous tax periods is directly related to its legal nature.
Since a GTC is not a regulatory legal act, rules concerning the entry into force of new legislative provisions cannot be applied to it mechanically. It does not change the legal framework but clarifies the meaning of provisions that were previously in effect.
Therefore, if the Ministry of Finance determines the correct procedure for applying a provision of the Tax Code that has remained unchanged for many years, the relevant clarification may be used to assess transactions carried out during that period.
At the same time, it should be taken into account that a GTC does not have automatic retroactive effect. However, its conclusions may be used as an argument in existing disputes if they concern the same legislative provisions that were in effect at the time the relevant transactions were carried out.
Otherwise, a legal contradiction arises, because identical transactions carried out under unchanged legislation receive different tax classifications solely depending on when the Ministry of Finance published its clarification.
This is particularly significant in the case of aviation leasing, since tax claims against airlines concern past periods.
If a future GTC confirms a particular procedure for taxing lease payments on the basis of provisions that were in effect for decades, its conclusions should be taken into account when considering the relevant disputes.
The Ministry of Finance has already used GTCs to eliminate contradictions concerning provisions in force
The practice of the Ministry of Finance shows that generalized tax consultations have repeatedly been used to resolve ambiguities that had already arisen in the application of legislation.
In particular, by Order No. 22 dated January 19, 2021, the Ministry of Finance approved a GTC on the application of certain provisions of the Tax Code to financial institutions and companies engaged exclusively in leasing activities.
The purpose of the consultation was to eliminate differing interpretations of the relevant provisions of tax legislation. In other words, the Ministry of Finance clarified provisions that were already in effect and being applied in practice, rather than establishing new taxation rules.
Another example is Order No. 673 of the Ministry of Finance dated August 3, 2018, by which four generalized tax consultations on VAT matters were approved. They concerned, in particular, the taxation of transactions of permanent establishments of non-residents, documentary confirmation of the destruction of fixed assets, and the transfer of property under a financial lease. The Ministry of Finance established a unified approach to applying the provisions in force instead of the contradictory clarifications previously issued.
A similar mechanism was used in Order No. 7 of the Ministry of Finance dated January 12, 2022, concerning certain issues related to the registration of taxpayers. The basis for preparing the consultation was ambiguity in the application of legislation, amendments to which had been adopted as early as 2014 and which created preconditions for tax disputes.
The examples cited confirm that the Ministry of Finance has a practice of resolving contradictions in the application of current legislation without amending the Tax Code itself. These decisions demonstrate the possibility of reviewing the approaches of the controlling authorities to legal relations that already existed at the time these consultations were approved.
For Ukrainian airlines, it is fundamentally important that the future general tax consultation not be limited to determining the procedure for taxing lease payments going forward. In that case, it would prevent new disputes from arising, but would not resolve the problem of tax assessments already made or criminal proceedings already opened.
Undoubtedly, the GTC itself does not cancel tax notices-decisions or terminate investigations into criminal proceedings. However, it will be a significant legal argument during the administrative or judicial appeal of additional tax assessments, as well as when assessing the validity of claims by law enforcement authorities. This is particularly so if the Ministry of Finance expressly determines that the approach set out in the consultation follows from the provisions of the Tax Code and international treaties that were in force during previous tax periods as well.
It is also important that the consultation contain a clear position on the application of Ukraine’s international treaties on the avoidance of double taxation. Representatives of the aviation industry emphasize that only a comprehensive solution to the problem will restore legal certainty for Ukrainian airlines, reduce the risks of further tax claims, and create conditions for preserving an industry that continues to operate and contribute to the state budget despite the war and the closure of Ukraine’s airspace.