Exemption from VAT for air transportations within Ukraine only applies to national airlines and does not jeopardize free competition with foreign airlines, EU-Ukraine Association Agreement commits us to create the same conditions for Ukrainians as EU citizens have, including the availability of air travel. This was announced by the Minister of Infrastructure Vladyslav Kryklii on February 20, 2020.
The Infrastructure Minister emphasized that the European integration course is a staunchest priority for the Ministry of Infrastructure.
The Ministry of Infrastructure of Ukraine is working to ensure the development of a network of air transportation’s routes between the regions of the country and is working on shaping a mechanism for reducing the cost of air travel.
The draft law "On amendments to the tax code of Ukraine on promoting the development of the inland transportation market through air transport" aimed to step up the development of air transportation between the regions was developed and registered in the Verkhovna Rada of Ukraine on November 12, 2019.
The proposed legislative initiative is a measure to stimulate the market of domestic transportation by air transport, increase the level of availability of air transport in the domestic market and reduce their cost, create favorable conditions for attracting air carriers for transportation between the regions of the country, which is directly stipulated by the National Transport Strategy of Ukraine for the period up to 2030 approved by the Cabinet of Ministers of Ukraine of May 30, 2018.
The implementation of this draft law will allow to:
1. Increase the profitability of Ukrainian airlines, which will contribute to the additional flow of funds to the state budget.
2. Create competitive conditions for participants in this market.
3. Increase the amount of fees paid for air navigation services and public fees to the State Specialized Fund for the financing of national expenditures on aviation activities and Ukraine's participation in international aviation organizations.
4. Reduce the cost of transportation.
5. Reduce the average ticket price by 13.5%.
In accordance with the EU-Ukraine Association Agreement, Ukraine undertakes obligation to gradually approximate its legislation to European legislation, including the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value-added tax, with the exception of a number of articles which apply exclusively to EU Member States , to which Ukraine does not yet apply.
Thus, it cannot be argued that the Directive prohibits Ukraine from being exempted from taxation on domestic air transportations since there is no direct rule in this Directive.