Ukraine's UATA forms working group to draft tax consultation on aircraft leasing, targeting October 14 submission to Ministry of Finance

The Ukrainian Air Transport Association (UATA) has set up a working group to draft a package of documents on the taxation of aircraft leasing payments that Ukrainian airlines make to non-resident lessors, with the full package due to Ukraine's Ministry of Finance by October 14. The group will be headed by Ruslan Melnychenko, chairman of the Legal Committee of the Aerospace Association of Ukraine and an attorney, and will compile specific examples of what it describes as incorrect interpretations before preparing a draft general tax consultation.

The effort follows a dispute triggered by Ukraine's Bureau of Economic Security (BES), which since 2024 has sought to classify aircraft leasing arrangements as royalties, opening criminal proceedings against at least five carriers: UIA, Constanta Airlines, Windrose, N3Operations, and Skyline Express. A sixth carrier, Urga, may also be involved in a similar case. The cases were opened despite the airlines regularly undergoing tax audits; as of now, only one company has faced objections specifically concerning leasing. The Ministry of Finance has stated that the Tax Code of Ukraine does not provide for taxing aircraft leasing as royalties, and that such transactions are governed instead by the Tax Code and Ukraine's international double-taxation treaties.

According to the State Register of Civil Aircraft of Ukraine, 86% of the aircraft fleet operated by Ukrainian companies is leased. The move to form the working group followed a first meeting of the Committee on Tax Policy, Accounting and Auditing of the Public Council under the Ministry of Finance, which decided to form the group under the Ministry to develop the draft consultation. The Ministry said it is awaiting specific examples of leasing transactions being interpreted as royalties, along with industry proposals on how to resolve the issue.

A dispute over how to classify cross-border lease payments touches nearly every Ukrainian carrier at once, because leasing is not a marginal financing choice in this market but the dominant one. When the share of a national fleet held under lease runs as high as it does here, a change in tax treatment of those payments is effectively a change in the cost base of the whole sector, not a single company's balance sheet.

General tax consultations exist precisely to settle this kind of cross-agency disagreement: once the Ministry of Finance adopts one, it becomes the government's official position and narrows the room for a separate agency, in this case the Bureau of Economic Security, to apply its own reading in criminal proceedings. That is why industry representatives are pushing to get examples and proposals in front of the Ministry before a position hardens the other way.

What happens next depends on whether the Ministry's draft consultation, once delivered on October 14, actually resolves the royalty-classification question the BES has been pursuing since 2024, and whether the open criminal cases against the five named carriers are reassessed once that position exists.