Ukraine's Finance Ministry Seeks Industry Input to Resolve Aircraft Leasing Tax Dispute
Why It MattersAn unresolved tax classification dispute over leasing payments threatens Ukraine's air transport sector, where 86% of the operated fleet is leased from non-resident lessors.
Ukraine's Ministry of Finance is developing a unified approach to taxing aircraft leasing payments that Ukrainian airlines make to non-resident lessors, and is calling on aviation industry representatives to submit practical examples of leasing transactions along with their positions to help prepare a generalized tax consultation. The dispute originates from the Bureau of Economic Security, which since 2024 has classified such leasing payments as royalties for equipment use rather than as lease or rental income, a reinterpretation that led to criminal proceedings against MAU, Constanta Airline, Wind Rose, N3Operations and Skyline Express, with a sixth carrier, Urga, potentially facing a similar case, despite most of these airlines having previously passed tax audits without issue.
Industry representatives contend that the Tax Code of Ukraine does not support taxing aircraft leasing as royalties and warn that the Bureau's approach, without a legislative amendment, amounts to pressure that could damage the passenger and cargo transport sector, noting that 86% of the fleet operated by Ukrainian companies is leased according to the State Register of Civil Aircraft of Ukraine.
The matter was referred to the Committee on Tax Policy, Accounting and Auditing of the Public Council under the Ministry of Finance, which after its first meeting decided to form a working group to draft a generalized tax consultation on taxation of lease payments to non-residents. Participants agreed to supply the ministry with practical transaction examples, including those under agreements with companies resident in different states, along with proposals on applying the Tax Code and Ukraine's double-taxation treaties; the ministry will process this material into a draft consultation, with the work coordinated by the International Taxation Department and the Tax Policy Department.
