The Economic Security Bureau cannot independently expand the concepts of the Tax Code or establish new taxation rules — lawyer
Kyiv • UNN
The Economic Security Bureau may assess payments within the framework of criminal proceedings, but it does not have the authority to independently expand the concepts of the Tax Code or establish new taxation rules. Against the backdrop of criminal cases against airlines due to the interpretation of leasing payments as royalties, the issue requires a unified approach by the state.
The Bureau of Economic Security may provide a legal assessment of payments during criminal investigations, but it does not have the authority to independently expand the concepts defined by the Tax Code or establish new tax legislation norms. This was stated in an exclusive comment to UNN by Oleksandr Latenko, a lawyer and head of the tax law practice at Prikhodko & Partners Law Firm.
BES interprets aircraft leasing as royalties
As UNN previously reported, since 2024 the Bureau of Economic Security has begun interpreting transactions involving the leasing of air transport from nonresidents of Ukraine as the use of equipment. According to the investigation, Ukrainian air carriers were supposed to pay royalties for leasing aircraft and helicopters. Based on this approach, the BES opened criminal proceedings against at least five air carriers, including MAU, Constanta Airlines, Windrose, H3Operations 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 of the air carriers had successfully passed tax inspections, and the tax authorities' only leasing-related objections concerned one company.
Representatives of the aviation industry insist that the problem arose because of an ambiguous interpretation of the legislation and requires the establishment of a unified state approach.
In response to a request from UNN, the Ministry of Finance stated that the taxation of transactions involving the leasing of aircraft is carried out in accordance with the Tax Code and Ukraine's international treaties. At the same time, the Tax Code of Ukraine does not provide for the taxation of aircraft leasing as royalties. Therefore, the Bureau's approach to interpreting aircraft leasing without changing the tax legislation is described as pressure that could destroy the entire passenger and freight transport industry. After all, according to data from the State Register of Civil Aircraft of Ukraine, 86% of the aircraft fleet of Ukrainian companies is leased.
That is why the issue of aircraft leasing was submitted for consideration by the tax committee 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, which is to develop a draft generalized tax consultation on the taxation of leasing payments made to nonresidents.
The BES does not have the authority to expand the concepts of the Tax Code
According to lawyer Oleksandr Latenko, it is fundamentally important what the legislation itself means by the concept of "royalties." This refers to a regular monetary payment (remuneration) that a user (licensee) pays to an owner (licensor) for the right to use intellectual property or natural resources.
The Bureau of Economic Security of Ukraine may provide its own legal assessment of payments within criminal proceedings, but it cannot "create" a new category of royalties beyond the definition established by law
He recalled that subparagraph 14.1.225 of the Tax Code of Ukraine defines royalties regardless of what the parties called the relevant payment in the contract, based on its legal and economic substance. In particular, this concerns payments for the use of, or the granting of the right to use, specified intellectual property objects—trademarks, patents, copyrights, software and other objects.
At the same time, the Tax Code also establishes a list of payments that are not considered royalties.
The Bureau of Economic Security of Ukraine does not have the authority to independently establish tax legislation norms
Thus, the Bureau may examine the actual substance of a specific monetary transaction and verify whether other legal relations are concealed behind its formal documentation. However, such an assessment must be carried out within the framework of definitions already established by law, rather than by BES investigators formulating their own tax rules.
What powers does the BES have during an investigation
At the same time, as Oleksandr Latenko explained, the Criminal Procedure Code provides the BEB with a broad range of tools for collecting evidence as part of criminal proceedings.
In particular, detectives may question witnesses, conduct searches and inspections, obtain temporary access to items and documents pursuant to a ruling by an investigating judge, obtain information constituting bank secrecy, and examine payments and their purpose. Covert investigative (detective) actions may also be conducted in cases provided for by law.
According to the lawyer, such measures may make it possible to establish, for example, whether certain monetary transactions were fictitious and whether the actual substance of the payments corresponds to how they are documented.
At the same time, Oleksandr Latenko draws attention to the delineation of the competences of tax and law enforcement authorities.
In particular, the State Tax Service is the direct regulatory authority in the field of taxation. It is the STS that has powers defined by the Tax Code regarding tax administration and the provision of individual tax consultations.
The BEB of Ukraine is not a tax administration body and is not vested with the authority to establish generally binding rules for interpreting the Tax Code of Ukraine; the task of the BEB of Ukraine is different – to detect and investigate criminal offenses in the economic sphere, including criminal offenses related to tax evasion
In this context, it is important to understand that, according to the State Tax Service, the airlines against which the BEB raised claims over its interpretation of aircraft leasing as royalties successfully passed tax audits. The tax authorities' remarks regarding leasing concerned only one company.
As a result of one audit of companies in the aviation sector, lease payments were reclassified as royalties. Only one audit
The situation with aircraft leasing shows that the BEB's legal assessment cannot substitute for the provisions of the Tax Code and the position of the regulatory authority. Criminal proceedings cannot be used as a tool for establishing a new taxation practice not provided for by law. In the case of aircraft leasing, the Ministry of Finance should put an end to the divergent approaches to interpretation by ensuring uniform rules for tax authorities, law enforcement agencies, and businesses.