Criminal prosecution without tax violations: what is wrong with the BES cases against airlines
Kyiv • UNN
The Bureau of Economic Security is investigating cases against airlines, equating lease payments to royalties. Law enforcement officers ignore international conventions, existing court practice, as well as tax audits that found no violations.
The Bureau of Economic Security is investigating criminal proceedings against at least five airlines for leasing aircraft and helicopters from non-residents of Ukraine. Investigators equate such lease payments to royalties and believe that the companies should have paid an additional 15% tax in Ukraine. At the same time, the legislation on taxation of such transactions has not changed, and previously this practice did not cause complaints from regulatory authorities. Law enforcement officers are applying a new interpretation to transactions of past years, ignoring international conventions and existing judicial practice, writes UNN.
BES cases regarding leasing
The Bureau of Economic Security has opened a number of criminal proceedings against airlines. Investigators believe that at least 5 airlines, including MAU, "Aviation Company Constanta", "Urga", N3Operations and "Skyline", should have paid an additional 15% tax on non-resident income to the Ukrainian budget under aircraft and helicopter lease agreements. To do this, the BES equates lease payments to royalties, and interprets aircraft not as vehicles, but as "equipment".
Investigators began applying this approach after 2024, when the previous team of the State Tax Service published an article proposing to tax leasing transactions with transport from non-residents of Ukraine as royalties.
In this publication, the STS notes that from 2017 to 2023, companies paid UAH 13.1 million in income in the form of leasing to non-residents and at the same time did not pay 15% royalties in Ukraine.
Apparently guided by this publication, the BES received analytical conclusions from tax officials that Ukrainian airlines should have paid royalties for leasing aircraft, which later formed the basis of criminal cases. In addition to considering the lease of aircraft and helicopters as the use of equipment, law enforcement officers also ignore the existence of international conventions on the avoidance of double taxation. Treaties with foreign states ratified by the Ukrainian parliament take precedence over national legislation. It is these treaties that determine in which state and at what rate the corresponding income of a non-resident can be taxed. Therefore, the automatic additional assessment of 15% in Ukraine without taking into account the provisions of a specific convention is at least controversial.
It is worth noting that both before 2024 and after, Ukrainian tax legislation regarding the taxation of leasing has not changed. Moreover, according to the STS, airlines underwent tax audits and only one of them established a violation regarding the taxation of leasing. The rest did not reveal such violations.
As a result of one audit of companies in the aviation industry, lease payments were reclassified as royalties. Only one audit
However, the absence of violations did not prevent the BES from opening criminal proceedings against five airlines at once.
New interpretation – retroactively
One of the most controversial features of these criminal cases was the attempt to apply an approach to transactions of many years ago that had never been used by the state before.
As already noted, for decades, aircraft operating lease agreements were executed according to established practice that complied with the provisions of the Tax Code of Ukraine, international conventions on the avoidance of double taxation, and the official position of regulatory authorities.
This concerns the additional assessment of tax liabilities for transactions that were carried out many years ago in accordance with the practice of applying legislation in force at that time.
Lawyers have repeatedly emphasized that such an approach contradicts the principle of legal certainty, which is one of the fundamental principles of the rule of law. Business cannot be held responsible for the fact that a state body, after 7 years, independently decided to interpret norms differently that had been applied uniformly all this time.
In the entire history of Ukraine's independence, there have been no changes in legislation. So what has changed? 2024, war – what has changed? Nothing has changed.
According to him, tax officials together with law enforcement officers are trying to tax leasing as royalties not in the future, but retroactively.
Over the past seven years, analysts have been compiling so-called analytical conclusions that have no legal significance whatsoever.
Lawyers explain that analytical reports or conclusions cannot by themselves replace a tax audit report, a tax assessment notice, or a court decision. They do not establish an agreed tax liability and should not substitute for a full procedure of proving a violation.
Melnychenko claims that all these documents are essentially templates: only the names of companies and the amounts of lease payments change, while the text, arguments, and even errors remain the same.
In his opinion, if the demands for additional payments over seven years are implemented, most Ukrainian airlines will not be able to continue operating.
If we start collecting these taxes for the last seven years, the companies will all go bankrupt for sure.
Who should interpret the law.
Another problem cited by aviation industry experts is the very mechanism of the emergence of the new position.
Parliament has not adopted any amendments to the Tax Code regarding the taxation of lease payments. The provisions of international conventions, which take precedence over national legislation in the field of international taxation, have also not changed.
Despite this, law enforcement agencies have independently begun to apply a new interpretation of the law, equating lease payments to royalties.
Legal experts point out that the issue of official interpretation of legislation does not fall within the powers of law enforcement agencies. If there is legal uncertainty or different understandings of a norm, the final assessment should be given by a court, not by an investigator or detective within criminal proceedings.
Some analytical report from the tax office... We have a court that can interpret the norms of the law, and the legislator itself. The question is why the tax office does not follow the established procedure for interpretation.
It is worth noting that court practice on leasing issues has already been formed in Ukraine. In particular, the Sixth Administrative Court of Appeal in the case of LLC "Rail Logistics" concluded that vehicles are not objects of intellectual property, and therefore payments for their use cannot automatically be considered royalties. Courts in other cases have taken a similar position. However, the BEB apparently decided to ignore the position of the judges.
Risks for the entire industry.
Representatives of the aviation industry emphasize that the problem has long ceased to be exclusively a tax issue.
Ukrainian civil aviation has already survived the COVID-19 pandemic, the fourth year of full-scale war, the loss of the domestic market, and the forced relocation of operations abroad. At the same time, companies continue to pay taxes in Ukraine, maintain flight crews, engineers, and infrastructure necessary for resuming flights after the airspace is opened.
In particular, according to the head of the State Aviation Service of Ukraine, Daniil Menshykov, aviation industry enterprises paid almost UAH 27 billion in taxes and fees to the budget in 2022-2025. However, the criminal prosecution of air carriers threatens their continued operations.
Such an approach creates risks not for an individual company, but for the entire aviation industry. Ukrainian airlines are already operating under extraordinary challenges: the sky is closed, markets are lost or significantly restricted, operational activities are complicated by war, financing, insurance, and maintenance issues. Despite this, the industry has not stopped. It adapts, survives, and continues to operate under extremely difficult conditions, demonstrating resilience that commands the respect of the entire world.
Against this backdrop, criminal prosecution based on a new interpretation of legislation could have far broader consequences than individual tax disputes. Industry representatives warn that such practices create risks of losing Ukrainian civil aviation, driving businesses abroad, and reducing budget revenues.
Thus, the situation surrounding aviation leasing reveals several systemic problems at once: an attempt to apply a new interpretation of legislation to legal relations of past years, the substitution of judicial interpretation of norms with the position of law enforcement agencies, and criminal prosecution of companies whose activities previously did not raise any objections during tax audits. If such approaches become common practice, not only the aviation industry but also the fundamental principle of legal certainty—without which neither investment nor stable economic development is possible—could be at risk, experts emphasize.