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BEB Case Against Former UIA Officials Over Lease Taxation Relies on Flawed Interpretation of International Law

BEB Case Against Former UIA Officials Over Lease Taxation Relies on Flawed Interpretation of International Law
Ukrainian airlines, already burdened by the operational challenges posed by the ongoing conflict, are now confronting increasing legal and fiscal pressures domestically. A notable instance is the criminal investigation targeting former executives of PJSC "Ukraine International Airlines" (UIA), who stand accused of evading taxes related to aircraft leasing agreements. According to Oleg Ishchenko, legal counsel for former UIA president Yevhen Dykhne, the Bureau of Economic Security (BEB) is advancing charges grounded in a legally unsound interpretation of both international law and the Ukrainian Tax Code.
Disputed Taxation on Aircraft Leasing
The BEB’s investigation centers on lease agreements involving Boeing 737 and Embraer aircraft. Between 2017 and 2022, UIA made lease payments exceeding UAH 3.4 billion to a Cypriot company that owns the aircraft. Invoking the 2013 Convention between Ukraine and Cyprus, which aims to prevent double taxation, UIA’s former management applied a 0% repatriation tax rate on these payments.
However, BEB challenges this application, arguing that the preferential tax rate was improperly used. The agency contends that the terms of the lease agreements and the actual utilization of the aircraft do not justify the exemption, asserting that UIA should have remitted a 10% tax to the Ukrainian budget despite taxes already paid in Cyprus. Initially, the investigation involved seven aircraft, but only two remain central to the case, with no clear explanation provided for the narrowing of focus.
Legal and Market Implications
The case fundamentally depends on BEB’s interpretation of international tax law, a position that legal experts have criticized as flawed. Ishchenko emphasizes that, irrespective of other legal complexities, Dykhne should not bear personal responsibility for tax compliance, as UIA’s corporate governance explicitly delegated financial policy and tax obligations to the financial director. He stated, “The head of the company, in this case Dykhne, should not bear any responsibility for paying these taxes, even if they existed,” underscoring the clear division of duties outlined in the company charter.
This reliance on an erroneous legal framework not only weakens the prosecution’s case against the former UIA officials but also risks creating broader market uncertainty. Competitors and industry observers are likely to scrutinize the BEB’s methodology, potentially leading to legal challenges or calls for policy reform in response to what is perceived as regulatory overreach.
Potential Precedent for Future Disputes
The resolution of this case carries significant implications for the authority of the BEB in future international tax disputes. Should the agency’s interpretation prevail, it may encourage further prosecutions based on similarly contested legal grounds. Conversely, a dismissal or acquittal could compel a reassessment of BEB’s approach to international taxation, with consequential effects on Ukraine’s investment climate and its compliance with international agreements.
In essence, the BEB’s case against former UIA officials raises critical questions regarding individual accountability and the interpretation of international law, while also highlighting the potential for substantial repercussions within Ukraine’s aviation sector and regulatory framework.

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