The Ministry of Finance is ready to help develop clarification on the taxation of aircraft leasing

The Ministry of Finance of Ukraine stated that it is ready to participate in developing clarifications regarding the taxation of lease payments for aircraft. This is stated in the Ministry of Finance's response to a request from UNN.

Representatives of the aviation industry publicly stated that they were under pressure from the Economic Security Bureau, which is investigating criminal cases involving at least 5 airlines simultaneously. According to their words, civil aviation is under threat of destruction due to the actions of state regulatory bodies, which could ultimately finish off companies that survived the closure of the airspace and relocation abroad because of the full-scale war. 

The Ukrainian Air Transport Association appealed to the Verkhovna Rada Committee on Transport and Infrastructure, as well as to the Public Council under the Ministry of Finance, calling for a unified approach to the application of tax legislation in the field of aviation leasing to be developed. The Economic Security Bureau has begun independently interpreting the taxation of aircraft leasing as royalties and demanding that airlines pay an additional 15% tax for the past 7 years. Following its consideration, the Public Council will initiate a general tax clarification from the Ministry of Finance.

In response to a request from UNN , the Ministry of Finance reminded that the taxation of aircraft leasing transactions is carried out in accordance with the provisions of the Tax Code of Ukraine. At the same time, if Ukraine's international treaties on the avoidance of double taxation establish rules other than those provided for by national legislation, the provisions of the international treaties apply. 

It is worth noting that the Tax Code does not provide for the classification of aircraft leasing transactions as royalties. 

The Ministry of Finance explained that the ministry itself generalizes individual tax consultations and analyzes cases involving the ambiguous application of tax legislation. Based on the results of this work, generalized tax consultations may be prepared, approved by orders of the Ministry of Finance and published on its official website.

To prepare such documents, the Ministry of Finance has an Expert Council on the Preparation of Generalized Tax Consultations, which is a permanent advisory body that provides proposals and recommendations regarding their development.

The ministry also reported that it had not received any relevant requests from the tax authorities or the Economic Security Bureau, and had not yet received an invitation from the relevant parliamentary committee to establish an interagency working group.

"The Ministry of Finance of Ukraine is ready, within the scope of its competence, to participate in addressing the issues raised if the relevant proposals are submitted in accordance with the established procedure," the response to the request states.

In addition, the Ministry of Finance added that issues concerning the practical application of tax legislation may also be the subject of individual and generalized tax consultations. In particular, the State Tax Service of Ukraine provides taxpayers with individual tax consultations containing explanations from the controlling authority regarding the practical application of tax legislation in a specific situation, upon a request from the relevant taxpayer

Thus, the Ministry of Finance confirmed its readiness to participate in developing a unified approach to the application of tax legislation regarding aviation leasing through the Expert Council.

We remind you

Despite the fact that Ukrainian tax legislation, which has remained unchanged with regard to leasing for decades, and international treaties clearly describe how taxes on helicopter and aircraft leasing should be paid, the Economic Security Bureau decided to change this approach at its own discretion. The ESB is investigating cases involving MAU, "Constanta Airline," "Urga," H3Operations, and "Skyline" over the alleged failure to pay an additional 15% tax on non-residents’ income to the Ukrainian budget under aircraft leasing agreements. Investigators equate leasing payments with royalties and treat aircraft and helicopters not as means of transport, but as "equipment."

Law enforcement agencies obtained the analytical conclusions after the previous team at the State Tax Service published an article in 2024 proposing that leasing operations involving transport assets owned by non-residents of Ukraine be taxed as royalties. The documents, which aviation market representatives say resemble one another and appear to have been written "using the same template," formed the basis for criminal cases against air carriers.

Lawyers interviewed by UNN point out that investigators are ignoring the existing international conventions on the avoidance of double taxation ratified by the Verkhovna Rada. According to them, automatically imposing an additional 15% tax in Ukraine without taking into account the provisions of a specific convention is, at the very least, debatable.

It is worth noting that, according to the State Tax Service, the airlines underwent tax audits, and only one of them established violations in the taxation of leasing. The remaining tax audits did not identify any such violations.

"As a result of one audit of companies in the aviation sector, leasing payments were reclassified as royalties. Just one audit," said Viktoriia Kasian, Deputy Director of the Transfer Pricing Department of the State Tax Service of Ukraine.

However, the absence of violations did not prevent the ESB from opening criminal cases against the airlines, alleging that they had failed to pay 15% royalties over the past seven years. At the same time, the list of airlines facing law enforcement claims over leasing may expand at any moment, since approximately 40 air carriers use leasing. Thus, the entire civil aviation sector could come under threat.