Leonardo Business Centre
19-21 Bohdana Khmelnytskoho St.
Kyiv 01030, Ukraine
Do tax authorities assess taxes, duties, or other impositions in connection with any of the following events and, if so, at what rates and under what circumstances?”
Sales of Aircraft and Lease Rentals
Generally, 20 % VAT (17 % starting from 1 January 2014) is applicable to an aircraft supply (sale), including import operations but excluding ‘temporary import regime’.
In particular, a special VAT exemption applies to Ukrainian airlines importing rented aircrafts in the customs regime of ‘temporary import’ (i.e., with the obligation of subsequent export of such an aircraft).
However, due to some discrepancies between tax and customs laws, such a temporarily imported aircraft could be used only for international flights. Otherwise, i.e., using the aircraft for domestic flights, the unpaid import VAT should be accrued and paid together with penalties.
The supply (sale) of an aircraft for export is subject to 0 % VAT provided the export is documented by a customs declaration.
Generally, no. However, in some cases the aircraft operator may be subject to the Ecology Tax.
The Ecology Tax is generally payable by an entity causing pollution of the environment, e.g., air pollution, water pollution, waste maltreatment, etc. Therefore, an airline operating an aircraft might be subject to the Ecology Tax. However, the application of the Ecology Tax should be considered in each case separately to define if a pollution caused by the aircraft operator is subject to the Ecology Tax and to determine exact tax rates applicable to a particular pollution type, if any.
Finance (mortgage tax, promissory note tax, conditional sale tax, tax on loan payments, tax on interest)
Mortgage Tax – no.
Promissory Note Tax – no.
Conditional Sales Tax – no.
Tax on Loan Payments and Tax on Interest –
For Ukrainian residents and permanent establishments of non-residents in Ukraine the Corporate Profit Tax (‘CPT’) will be levied on the Ukrainian and foreign-sourced profits, including the interest on loans and the profit on lease rentals. Currently, CPT is charged at the rate of 21% reducing to 16% starting from 1 January 2014.
For non-residents extending loans to Ukrainian companies (other than through a permanent establishment) the Withholding Tax (‘WHT’) may apply. Generally, the rate of WHT is 15%. However, particular WHT rates may vary, depending on jurisdiction and may be disapplied by applicable double taxation treaties (‘DTT’).
Lease (Tax on payments other than income)
Generally, Ukrainian lessors (i.e. residents and permanent establishments of non-residents in Ukraine) are subject to 21% CPT reducing to 16% starting from 1 January 2014.
Non-resident lessors may be subject to 15% WHT for lease payments and 6% WHT for aircraft freight payments unless reduced or disapplied by applicable DTT.
As noted above, generally, the non-resident’s Ukrainian sourced income, including rental payments under a lease agreement and interest under a loan agreement, is subject to 15 % WHT. At the same time, non-residents may enjoy a tax exemption or a reduced WHT rate under relevant DTT.
Generally, no import taxes for an aircraft supply except for VAT described above. However, the Import Customs Duty may pertain to the supply of certain aircraft parts, which rate depends on a type thereof.
Vehicle First Registration Tax
The Vehicle First Registration Tax shall be paid at the first registration of the aircraft in Ukraine. The rate is UAH 1.09 (approx. USD 0.14) for each kilogram of the maximum take-off weight. Special multiplier pertains to the rate depending on the operational period of the aircraft):
- for a new aircrafts, i.e., having no previous registrations, including foreign – 1;
- for an aircraft operated up to 8 years – 2;
- for an aircraft operated for above 8 years – 3.
FOR FURTHER INFORMATION: Please contact us and we would be pleased to assist.
DISCLAIMER: The above information should not be relied upon by the reader for legal advice as it is intended merely to serve as preliminary guide to the laws and regulations governing the taxation of aviation and aircraft in the Ukraine. The information intends to provide summary-level information about certain tax issues affecting general aviation and aircraft finance. Since these materials are general in nature, readers are encouraged to obtain legal and tax advice from their own professional legal and tax counsel based on specific facts and circumstances regarding their acquisition and/or use of aviation and aircraft.