A new approach to taxing aircraft leasing could destroy Ukrainian civil aviation
Kyiv • UNN
Attempts to retroactively charge Ukrainian airlines 15% royalties for aircraft leasing could lead to the bankruptcy of most market players. The Aerospace Association of Ukraine calls on the state to ensure legal certainty on the issue.
Attempts to tax Ukrainian airlines an additional 15% royalty on aircraft lease agreements retroactively could put an end to the existence of Ukraine's civil aviation. This was stated during a round table by the head of the legal committee of the Aerospace Association of Ukraine, Ruslan Melnychenko, reports UNN.
The problem arose after in 2024 the State Tax Service and the Bureau of Economic Security began to interpret aircraft leasing operations as royalties, although for decades prior to this such practice had not been applied in Ukraine.
In essence, from 2024, aircraft began to be interpreted not as a means of transport, but as equipment. And the leasing operation began to be called a royalty... We communicate with financiers, tax officials, and lawyers of the "Big Four" in Ukraine and abroad. In no country in the world is aircraft leasing called a royalty. In no country in the world"
Particular concern in the aviation industry is caused by the fact that the new approach is proposed to be applied retrospectively.
The Tax Service claims to tax these operations not only for the future, but also retroactively. For the last seven years... If we collect these taxes, the companies will all certainly go bankrupt, all companies on the market will certainly go bankrupt
With the average profitability of the Ukrainian aviation business at only 7-10%, such an additional financial burden would become critical. Moreover, due to the closed sky, airlines were forced to relocate aircraft abroad, restructure business models, and work on international markets to preserve personnel and competencies. Therefore, today Ukrainian civil aviation is in unprecedentedly difficult conditions.
"Rules of the game" changing without changes to legislation?
And this despite the fact that throughout the entire period of Ukraine's independence, the legislation on taxation of such operations has not changed. However, from 2024, the STS began to apply a new interpretation of lease payments, and the BES began to build criminal proceedings against Ukrainian airlines based on it.
Additional questions are also raised by the fact that, according to the Ukrainian Air Transport Association, airlines that have faced this problem have previously undergone tax audits. No violations regarding non-payment of repatriation tax on leasing operations were established at that time.
At the same time, airlines are not demanding tax benefits or a special regime from the state. According to the State Aviation Service, in 2022-2025, aviation industry enterprises paid almost UAH 27 billion in taxes and fees to the state budget.
Recall
The BES is investigating a number of criminal proceedings against at least five Ukrainian airlines, including MAU, "Aviation Company Constanta", "Urga", "N3OPERATION" and "Skyline". These air carriers lease aircraft abroad from non-resident companies of Ukraine. The Bureau is convinced that airlines should pay royalties in Ukraine, i.e., a fee levied for the use of intellectual property. At the same time, the fact that transport is not intellectual property, and that Conventions on the avoidance of double taxation are in effect between Ukraine and a number of countries, is completely ignored. According to these agreements, Ukrainian companies pay taxes specifically for leasing and in those countries where the lessor companies are residents.
It is on this legal construct, not supported by legislation, that criminal proceedings for tax evasion are based. However, the problem is that this position contradicts both international practice and court decisions that have already been formed in Ukraine.