Aviation industry representatives are preparing a draft tax consultation on aircraft leasing for the Ministry of Finance — UATA
Kyiv • UNN
UATA has established a working group in response to the Economic Security Bureau’s cases against at least five airlines. Proposals on the taxation of leasing will be submitted to the Ministry of Finance by October 14.
The Ukrainian Air Transport Association (UATA) has established a working group to prepare a package of documents on the taxation of leasing payments made by Ukrainian airlines to non-residents for consideration by the Ministry of Finance of Ukraine. This became necessary because the Bureau of Economic Security attempted to classify aircraft leasing as royalties, affecting at least five carriers. Mykola Shcherbyna, Executive Director of the Public Union "Ukrainian Air Transport Association," told UNN in an exclusive comment.
Why airlines insist on a unified approach to aircraft leasing
As UNN previously reported, since 2024 the Bureau of Economic Security has begun treating transactions involving the leasing of air transport from non-residents of Ukraine as the use of equipment. According to the investigators’ version, Ukrainian air carriers were required 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 UIA, "Constanta Airlines," "Windrose," 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 the airlines regularly undergo tax audits; as of today, only one company has faced objections concerning leasing.
Representatives of the aviation industry insist that the problem arose because of an ambiguous interpretation of legislative provisions and that it requires the establishment of a unified state approach.
Earlier, in response to an inquiry from UNN , the Ministry of Finance reported 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 changes to tax legislation, as pressure that could destroy the entire passenger and freight transportation sector. According to data from 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 by 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 creation of a working group under the Ministry of Finance that would develop a draft general tax consultation on the taxation of leasing payments made to non-residents.
The Ministry of Finance is awaiting documents from the aviation industry
The creation of the working group continued the dialogue between the aviation business and the Ministry of Finance on resolving the issue of taxation of aircraft leasing.
"The Ministry of Finance is working on an issue concerning 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 leasing or rental payments for the provision of aircraft for use," the Ministry of Finance reported in response to an inquiry from UNN.
The ministry added that it is awaiting specific examples of leasing transactions being interpreted as royalties, as well as proposals from the aviation industry on how to resolve this issue. After receiving them, the Ministry of Finance plans to develop a general tax consultation that will serve as a mechanism for establishing a unified approach to applying the relevant provisions.
UATA is preparing a draft general tax consultation on aircraft leasing
According to Mykola Shcherbyna, representatives of the aviation industry decided to establish a working group under the Ukrainian Air Transport Association to quickly develop proposals for the Ministry of Finance.
The Ukrainian Association of Aviation and Aerospace (UATA) decided to establish a working group comprising representatives of the aviation industry. It will be headed by Ruslan Melnychenko, chairman of the Legal Committee of the Aerospace Association of Ukraine, an attorney and business protection expert, and chairman of the Legal Committee of the Aerospace Association of Ukraine. Our task is to prepare specific examples for the Ministry of Finance of the incorrect interpretation of leasing transactions as royalties and to develop a draft general tax consultation
He added that Ukrainian airlines had encountered the problem of the Bureau of Economic Security incorrectly interpreting leasing transactions as royalties, and that it was important for this issue to be resolved as soon as possible so that carriers could continue operating under clear rules.
"Leasing aircraft and helicopters is a global practice. Neither Ukrainian legislation nor international law provides for the payment of royalties on the leasing of aircraft. The unilateral change by government agencies in the interpretation, without amendments to legislation, and the criminal prosecution of airlines constitute pressure on responsible businesses that are forced to survive under conditions of closed airspace and pay taxes in Ukraine. This approach poses a threat to the entire civil aviation industry, and this problem must be resolved," Mykola Shcherbyna emphasized.
According to him, the UATA working group plans to collect specific examples of attempts to tax the rental of air transport from nonresidents as royalties, as well as prepare proposals for a unified approach to their taxation. The cases, along with the draft general tax consultation, are planned to be submitted to the Ministry of Finance for consideration by October 14.
A unified position of government agencies on the taxation of aircraft leasing is necessary, one that complies with the provisions of the Tax Code of Ukraine and international conventions on the avoidance of double taxation
He is convinced that this format will enable industry representatives, together with the Ministry of Finance, to develop a specific solution to the problem within a short period. If adopted, the general tax consultation should establish the Ministry of Finance's official position on the application of tax rules to leasing payments for the use of aircraft and reduce the scope for government agencies to interpret identical transactions differently.