The Ukrainian aviation business operating abroad has faced the problem of double taxation and claims from the Bureau of Economic Security in the last two years, even in cases where taxes have already been paid in another jurisdiction. Due to the full-scale war, airlines were forced to completely relocate their operations outside Ukraine, not only to save aircraft but also to retain professional staff. In such circumstances, attempts to accrue additional taxes in Ukraine seem not just strange; it is obvious pressure on business, bordering on an attempt to completely destroy civil aviation in Ukraine, writes UNN.
The issue of double taxation has become one of the most painful for companies operating through foreign jurisdictions. Formally, Ukrainian regulatory and law enforcement agencies are trying to question the reality of such a business structure, claiming that although the company is registered abroad, it is actually managed from Ukraine, and therefore should pay taxes here. At the same time, lawyers emphasize that the mere registration of a business in another country is not a violation, and the key is not the formal address, but where income is actually generated and where economic activity is actually conducted.
Dmytro Kasianenko, founder of the law firm "Kasianenko and Partners", noted in an exclusive comment to UNN that in cases where a company performs flights outside Ukraine and receives income precisely where it actually carries out its activities, international conventions on the avoidance of double taxation apply.
If flights are performed outside Ukraine and income is generated where the activity is actually carried out, in such cases, Conventions on the Avoidance of Double Taxation apply. Their essence is very clear: the same income cannot be taxed twice. If the activity is actually carried out abroad and the tax is paid there, Ukraine either has no right to additionally accrue tax or applies a limited rate, in accordance with an international agreement.
– explained the lawyer.
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This is where the biggest conflict between business and the Bureau of Economic Security arises. In practice, claims against airlines are based not on a deep analysis of the company's real economic activity, but on a formal approach based on the principle "if there is a Ukrainian beneficiary or a connection with Ukraine, then income must be taxed here." However, such an approach does not correspond to the logic of international tax law or judicial practice.
Such conclusions require a very serious evidentiary base: analysis of actual management, beneficial owner, economic substance of operations, movement of funds. Without this, any claims look weak and, as a rule, do not withstand judicial scrutiny.
– Kasianenko noted.
After the start of Russia's full-scale invasion, the sky over Ukraine remains closed, and therefore a significant part of Ukrainian airlines have moved their operations abroad. This applies not only to the flights themselves, but also to the placement and maintenance of aircraft, crews, technical personnel, logistics, contracts with foreign customers, and financial settlements. That is, in many cases, the real center of income generation is objectively not in Ukraine.
At the same time, airlines, as UNN previously reported, do not buy aircraft, but replenish their fleet through leasing, i.e., renting aircraft. This model is used by all international airlines, not just Ukrainian ones, because it is much cheaper.
However, the Bureau of Economic Security decided that Ukrainian air carriers must pay tax for leasing in Ukraine, despite the fact that their lessors are residents of other countries and, accordingly, taxes have already been paid in other countries. Therefore, if aircraft are used abroad, flights are carried out outside Ukraine, and payments are made within international contracts, then the BEB's attempt to "tie" all this income exclusively to Ukraine requires very serious legal justification.
Lawyer Dmytro Kasianenko draws attention to the fact that in wartime conditions, the relocation of activities abroad is not a tax evasion scheme, but a forced way for businesses to survive.
In wartime conditions, this is a particularly sensitive issue: Ukrainian airlines actually do not operate flights in Ukraine, aircraft and operations are moved abroad, personnel and operations are also often outside Ukraine. And this is precisely an argument in favor of the fact that income is not generated in Ukraine.
– he emphasized.
It should be added here that Ukrainian airlines pay income taxes in Ukraine and thus ensure a regular inflow of foreign currency earnings into the Ukrainian budget.
At the same time, the issue of selective law enforcement remains a separate problem. When identical or very similar models of international activity are evaluated differently by the state depending on a specific company, this goes far beyond a purely tax dispute. In such a case, it is a matter of the risk of selective pressure, which can be used as a tool to influence business.
Currently, 5 Ukrainian air carriers are known to have faced persecution for alleged non-payment of tax for leasing.
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If models of work that are identical in essence are evaluated differently for different companies, this is no longer a matter of tax law, but a matter of law enforcement. In such cases, this is often used as an argument in courts as a sign of bias or selective pressure.
– Kasianenko noted.
It should be noted that BEB investigators show particular interest in companies operating in the jurisdictions of Cyprus and the UAE, as the tax burden there is lower than in Ukraine. According to Dmytro Kasianenko, if in Ukraine the basic corporate income tax is 18% and VAT is 20%, then in Cyprus the corporate tax rate is 12.5%, and in the UAE, depending on the business structure, it can range from 0 to 9%. This often becomes a formal reason for suspicions from the state. But a more favorable tax jurisdiction in itself does not mean a violation, the lawyer notes.
That is why it is critically important for businesses not just to have a foreign company or an account abroad, but to be ready to prove the reality of the entire model: where management decisions are made, where employees are located, where contracts are executed, where property is located, how funds move, and what economic logic stands behind each operation.
According to the lawyer, in a situation where the Bureau of Economic Security has claims, businesses should not automatically agree with them. On the contrary, such actions must be challenged and legal protection built, relying not only on Ukrainian legislation, but also on international Conventions, which have higher legal force.
What businesses should do in such a situation is not to automatically agree with the BEB's position and actively defend themselves in the legal field. An effective tool is to challenge the BEB's actions in court, emphasizing that Ukraine's international agreements on the avoidance of double taxation have priority and apply as norms of direct action.
– Kasianenko emphasized.
He added that in court it is necessary to prove the reality of foreign activity, the fact of tax payment abroad, the absence of a permanent establishment in Ukraine, and the presence of the economic substance of operations. With proper evidentiary base, according to him, such disputes have prospects, as courts, as a rule, side with businesses where tax authorities, as well as the BEB, act formally or exceed their powers.
In conclusion, the story of attempts to additionally accrue taxes to Ukrainian companies operating through foreign jurisdictions goes far beyond a technical tax dispute. For the aviation business, which during the war was actually forced to move its operations abroad, this issue directly concerns the survival of the civil aviation industry. And if the state begins to interpret any international structure as a potential "scheme" without delving into the real content of operations, this will be a signal not about the fight against tax evasion, but about the risk of systemic pressure on businesses that are already operating in extreme conditions today.
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