The state must listen to the aviation industry, otherwise civil aviation in Ukraine may be destroyed — Katamadze
Kyiv • UNN
The President of the Association of Taxpayers of Ukraine, Grigol Katamadze, called on the state to develop unified rules for the taxation of aircraft leasing. He warned that further pressure on air carriers through criminal cases initiated by the Economic Security Bureau could destroy Ukrainian civil aviation.
The state must develop unified rules for the taxation of international aircraft leasing as soon as possible and stop putting pressure on the aviation business, because otherwise, after the war ends, Ukraine risks being left without its own civil aviation. Hryhoriy Katamadze, president of the Association of Taxpayers of Ukraine, expressed this opinion in a comment to UNN.
Context
Representatives of Ukraine’s aviation industry said during a roundtable that civil aviation is at risk of destruction due to the actions of state regulatory authorities. According to them, the new interpretation of the taxation of aircraft leasing transactions with nonresidents of Ukraine as royalties, criminal proceedings, and attempts to levy additional taxes for seven years could finally destroy companies that survived the closure of the airspace and relocation abroad because of the full-scale war.
Volodymyr Kreidenko, deputy chairman of the Verkhovna Rada of Ukraine Committee on Transport and Infrastructure, acknowledged that the combination of tax disputes with criminal proceedings is causing the greatest concern.
The roundtable participants called on the Cabinet of Ministers, the Ministry of Finance, the State Tax Service, and the Economic Security Bureau to urgently develop a unified official position on the taxation of aircraft leasing payments, based on Ukrainian legislation and international law. Later, the Ukrainian Air Transport Association officially 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 applying tax legislation in the field of aviation leasing.
At the roundtable, it was proposed to bring together all interested parties from the state, law enforcement agencies, and the executive and legislative branches to develop an appropriate document so that these criminal prosecutions would not occur. I hope that the appeal by my colleagues to the relevant committee (of the Verkhovna Rada – ed.) and the Ministry of Finance will nevertheless produce results. It seems to me that now is the time for the state to listen to them
According to him, Ukrainian civil aviation has been unable to operate for the fifth consecutive year because the airspace is closed, while companies that have maintained operations abroad are preserving and sustaining the industry until the airspace is reopened.
The president of the Association of Taxpayers of Ukraine emphasized that putting pressure on businesses would not produce a positive result for the state. He warned that continued pressure on air carriers through arbitrary interpretations of tax rules by regulatory and law enforcement agencies could lead to the loss of Ukrainian civil aviation. As a result, foreign air carriers would enter the Ukrainian market instead of domestic airlines.
Pressure on businesses will produce no result, only one result, and it will be negative. This industry will simply be destroyed. I hope that those sitting in government offices do not think in terms of destroying Ukrainian businesses
In addition
The Economic Security Bureau has already opened a number of criminal proceedings against air carriers. The ESB is investigating cases involving at least five airlines, including Ukraine International Airlines, Constanta Airline, Urga, H3Operations, and Skyline, allegedly over failure to pay an additional 15% tax on the income of nonresidents to the Ukrainian budget under aircraft and helicopter leasing agreements. Investigators equate leasing payments with royalties and treat aircraft not as means of transport but as "equipment."
The ESB received analytical findings after the previous State Tax Service team published an article in 2024 proposing that leasing transactions involving transport with nonresidents of Ukraine be taxed as royalties. The documents formed the basis for criminal cases against air carriers.
However, according to the lawyers surveyed by UNN, during the investigation, investigators ignore the existing international conventions on the avoidance of double taxation. Treaties with foreign states ratified by the Verkhovna Rada take precedence over national legislation and determine in which state and at what rate the relevant income of a non-resident may be taxed. Therefore, the automatic assessment of an additional 15% tax in Ukraine without taking into account the provisions of a specific convention is at the very least disputable, the experts emphasize.
It is worth noting that Ukrainian tax legislation concerning the taxation of leasing has not changed for decades. Moreover, according to the State Tax Service, the airlines underwent tax audits, and only one of them found 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. Only one audit
However, the absence of violations did not prevent the Economic Security Bureau from opening criminal cases against the airlines, believing that they had failed to pay 15% in royalties over the past 7 years. At the same time, the list of airlines against which law enforcement authorities have claims because of leasing may expand at any moment, since about 40 air carriers use leases. Thus, the entire civil aviation sector may come under threat.