Compensation from airline, carrier or booking service: is it needed to pay taxes?

Press service of the State Tax Service of Ukraine, published 25 August 2026 at 11:31 Chapter: News

Flight was canceled or delayed, bus didn’t arrive on time, hotel couldn’t provide booked room and booking service paid out due to travel issues. In such situations, a person can receive money from companies that provide services. But is it needed to pay taxes?

First of all, the person needs to find out what exactly you were paid: your money back or separate compensation.

If you were refunded what you paid. This is a refunding of previously paid funds.

Another situation is when, in addition to refunding cost of the ticket or reservation, the company pays certain amount.

For example:

- airline refunded the ticket price and additionally paid for the flight cancellation;

- carrier paid passenger compensation due to a significant delay in the trip;

- hotel or booking service provided the client with separate monetary compensation due to the fact that booked accommodation was not provided;

- company compensated the client for material damage or other losses.

Tax Code of Ukraine provides that taxable income of individual particularly includes amounts of penalties – fines, as well as compensation for material or non-material (moral) damage.

Therefore, if the airline, carrier, hotel, booking service or other company has paid the person a separate monetary compensation, such amount is taxable unless it falls under one of the exceptions expressly provided for by the Tax Code of Ukraine.

For taxable income, the general rates are:

- 18 % – personal income tax;

- 5 % – military levy.

What compensations are not taxable?

Tax Code of Ukraine provides for exceptions. In particular, taxable income does not include:

- amounts determined by the Code that, by the court decision, are allocated to compensate for material damage, as well as damage to life and health;

- compensation for moral damage by the court decision – within limits established by the Code or in amount determined by the law;

- individual payments from the state budget provided for by the Code;

- payments related to the execution of decisions of foreign jurisdictional bodies, including the European Court of Human Rights;

- insurance payments and insurance indemnities – for them the Code establishes a separate taxation procedure.

If the compensation was paid by a foreign company

For regular compensation from the foreign airline, booking service, hotel or carrier, the guideline is simple: if it is not refunding of your previously paid funds, but a separate additional payment, and the Tax Code of Ukraine does not provide for a special exemption for it, then such income must be declared and taxes must be paid.