VAT Tax in Ukraine
Value Added Tax (VAT), also known as goods and services tax (GST) in some countries, is main indirect tax levied on supply of goods and services on the territory of Ukraine and on import and export of goods and services. VAT is payable by supplier of goods and services who is VAT-payer by allocating of the respective amount on special account, open with the State Treasury of Ukraine.
This article provides a comprehensive guide to Value Added Tax in Ukraine, rules of taxation and reporting.
The standard VAT rate is 20%. The amount of VAT is added to price of the respective goods and services. Not all supply of goods and services are subject to VAT, whereas others are subject to lower VAT rate:
- 7% rate applies for supply and import of pharmaceutical products and medical equipment.
- 0% rate applies to export of goods and services.
- Certain transactions are exempt from VAT.
Note that only those supplies, which are taxed under 0%, 7 % and 20 %, are considered VATable transactions.
The VAT base of supplied goods and services in their contract value (net of VAT and excise tax on retail trade), which may not be lower than:
- for self-produced goods/services – normal price
- for other than self produced goods/services – the acquisition costs
- for fixed assets – net book value for the beginning of reporting period
Goods and services that are subject to VAT
Under Ukrainian Tax Code, the following are VATable transactions:
- supply of goods on the territory of Ukraine
- supply of services on the territory of Ukraine
- import of goods to Ukraine
- export of goods from Ukraine
- trans-border transportation of passengers and baggage by railway, by road, by sea, by river or by air.
Therefore it is important to define when goods and services are considered as such, that are supplied on the territory of Ukraine.
Place of Supply of Goods
The place of supply of goods is factual location of the goods at the moment of supply. The exceptions are
- goods, which are being transported (in this case, place of supply is location of goods at the beginning of transportation)
- goods, which are being assembled or installed by the supplier (in this case place of supply is place where such assembly or installment are performed).
Place of Supply of Services
As a rule, the place of rendering services is defined as place of registration of services supplier. There are number of exceptions from this rule, namely the place of rendering services is:
- place of state registration in the Companies Register (if any) or permanent residence of the recipient of the services for the following services (as a result, provision of these services to non-resident is not taxed by VAT):
- creation of intellectual property items and sale of intellectual property rights
- advertisement services
- consulting, engineering, legal, accountant, audit services
- software development and testing services
- provision of personnel
- lease of movable property, other than bank’s safe and transport vehicle
- telecommunication services, radio and television broadcasting services
- intermediary (agency) services in respect to the above-listed services
- Factual place of rendering services, related with movable property (appraisal of property, transportation services, warehousing etc)
- If services are related to immovable property – place of location of immovable property (services of real-estate agencies, constructions services and others)
- factual place of rendering services in cultural, entertainment area, sports, arrangement of exhibitions, educational seminars and other similar events
Who Collects VAT?
Party responsible for collection of VAT on behalf of the government
In general, the party that provides a VAT-applicable good or service (often called as VAT taxpayer) is responsible for charging the VAT tax to it’s customer on behalf of the government and then in-turn file VAT tax return and make the payment to tax authority on a periodic basis for all the VAT tax collected during that period. Note that VAT is payable only by registered VAT taxpayers. Exceptions are import of goods by residents and not-residents, and rendering of services by a non-residents on the territory of Ukraine, when VAT is payable disregard of registration as VAT-payer.
In accordance with the Ukrainian law, the following persons can be VAT taxpayers:
- legal entities (both residents and not-residents)
- private entrepreneurs
- permanent establishments
- individuals (may not be registered as VAT-payers but pay VAT in case of import of goods for more than certain amount as described below)
- Joint Ventures
- investors under production share agreements
- entities performing sale of confiscated properties
Registration as VAT Taxpayer
Registration as VAT-payer is made by tax authorities upon application of the tax-payer. For legal entities and private entrepreneurs such registration as VAT-payer can be also made at the time of registration of their business structure.
There is mandatory and voluntary registration as VAT taxpayer.
Registration as VAT-payer is mandatory if total supply of goods and services, for which VAT is applicable, exceeds UAH 1 million (net of VAT) for the preceding 12 months. This rule does not apply for tax-payers of 1st-3rd groups on Simplified Tax Regime.
Mandatory registration has to be made not later than 10th day of the month, following the month when legal entity or private entrepreneur has exceeded such supply of goods and services for UAH 1 million per the previous 12 month.
Any of tax-payers, mentioned above (other than private individual) may register as VAT-payer on its own decision (even if VATable transactions do not exceed the above-mention threshold).
VAT Without Registration
If legal entity non-resident imports goods to Ukraine, then VAT is withdrawn at customs clearing.
If non-resident supplies services on the territory of Ukraine, then VAT is accounted by the resident-recipient of such services. In this case no registration as VAT-payer is required. If such resident-recipient of services is registered VAT-payer, such amount of VAT can be recognized as input VAT in the same reporting period as non-resident output VAT was recognized.
If legal entity-resident or private entrepreneur-resident of Ukraine imports goods to Ukraine but is not registered as VAT-payer, then VAT is withdrawn at customs clearing.
Private individuals pay VAT in case of import of goods for amounts exceeding the below-mentioned thresholds, are obliged to pay VAT and custom duty, however registration is not required in this case and VAT and customs duties are payable at customs clearing. Namely, in cases of import by means of expedited shipping – for more than 150 EUR; in cases of import of goods in accompanied baggage through airport customs – for more than 1000 EUR and in cases of import of goods in accompanied baggage through other customs than at the airport – for more than 500 EUR or if weight is more than 50 kilo.
VAT Exempt Supplies
Supplies where VAT does not apply:
- issue/sale of securities and other corporate rights if paid by cash (not that if such securities are paid by property the transaction is VATable)
- transfer and return of property under operating lease agreements
- granting property for securing of obligation (pledge) and subsequent release of such property from pledge
- payment and cash services, currency exchange
- placement and return of deposit/loan
- payment of salary, pension and other social payments
- payment of dividends or royalty
- reorganization of legal entities
- import/export of goods with customs value less than EUR 150
- import of goods in accompanied baggage through airport customs with customs value less than 1000 EUR
- import of goods in accompanied baggage through other customs than at the airport with customs value less than 500 EUR and weight less than 50 kilo
- others as prescribed by Tax Code
Supplies that are exempt from VAT:
- import of goods of personal use by individuals – as defined by Customs Code of Ukraine
- certain educational services (including primary, secondary and high school, vocational technical college)
- healthcare services by licensed institutions
- supply of Ukrainian periodicals, student books and dictionaries
- certain types of public transportation services
- supply of residential real-estate (other than first supply)
- sale of land plots (with exceptions)
- goods and services for own use by foreign diplomatic and consulate institutions
- supply of goods as international technical assistance under international treaties
- sale of pledged property by bank within enforcement proceeding
- temporary until 2023 VAT exempt is supply of software products
- temporary until 2019 VAT exempt is import and first supply of pharmaceutical products and medical equipment within public purchasing
- temporary until 1st of January,2019 VAT exempt is supply and distribution of Ukraine-made movies, supply of works and services of production and distribution of national and foreign movies which are in Ukrainian language or synchronized in Ukrainian
- others as prescribed by Tax Code
The registered VAT tax-payer, which consumed goods and services under VATable transactions is entitled to recognize input VAT (VAT, paid to the seller as part of consumption price). A purchaser may recognize input VAT only based on electronic VAT invoice, which must be properly registered by the seller in the Unified Register of VAT invoices. Input VAT may be recognized in cases of:
- purchasing or manufacturing goods (including in case of import) or services
- purchase (construction or creation) of fixed assets, including their import (including as contribution to share capital of legal entity of balance of joint venture)
- receiving services from non-resident on the territory of Ukraine
- import of fixed assets under operating or financial lease agreements
Such input VAT is recognized irrespective of the fact if such goods/services or fixed assets are used in the reporting period for VATable transactions. However in cases when in future such goods/services or fixed assets start to be used not in VATable transactions (for own consumption of tax-payer or under supplies, where VAT does not apply or other not VATable transactions as described above), such VAT payer is obliged to accrue VAT obligation respectively.
VAT Administration and Reporting
The VAT tax period (a period for filing reporting and paying tax) is a calendar month or a calendar quarter.
In most cases filing is made on monthly basis. The reporting has to be files by 20th day of the month, following the reporting. The VAT due has to be paid within 30 days, following the reporting month.
As an exception, VAT-payers on Simplified TAX regime are allowed to apply for quarterly reporting. In this case reporting is filed not later than 40 days after the reporting quarter and VAT is payable not later than on 50th day after the reporting quarter.
Ukraine has introduced electronic VAT administration and reporting. At present all the VAT reporting is filed in electronic form. VAT invoices are subject to registration with the electronic Unified Register of VAT invoices, maintained by tax authorities.
Each VAT tax-payer has a special account with the State Treasury of Ukraine, which ensures payment of VAT by the tax-payer. VAT is payable from this account out of the funds deposited on such account by the tax-payer.
The tax-payer has to define VAT, payable to the Government, by deducting from output VAT (withdrawn by tax-payer at supply of goods/services) the amount of input VAT (paid by tax-payer as part of the price while purchasing goods / services).
Value Added Tax is indirect tax, levied on supply of goods and services on the territory of Ukraine as well as on import and export of goods and services. Under Ukrainian law, there is mandatory and voluntary registration as VAT-payer. Note that in other cases than import of goods and rendering services by non-resident as described below, VAT is payable only by registered VAT -payers.
Main VAT rate is 20% (from taxation base); the amount of VAT is added to price of the respective goods and services. As an exception, certain transactions are taxed at 7 % or 0% or exempt from taxation by VAT.
VAT is payable by supplier of goods and services who is VAT-payer by allocating of the respective amount on special account, opened with the State Treasury of Ukraine. VAT obligation is defined by deducting from output VAT (withdrawn by tax-payer at supply of goods/services) the amount of input VAT (paid by tax-payer as part of the price while purchasing goods / services).
If consumer of such goods and services is VAT-payer and using these goods and services for VATable transactions, the input VAT remits the output VAT when defining VAT obligation. In cases when consumer of such goods and services is not VAT-payer or if buyer intends to consume the goods / services himself, the VAT, paid as part of the consumption price, is not refundable.
VAT-payers file reporting on monthly basis, however for tax-payers on Simplified Tax regime quarterly reporting is available.
Ukrainian law stipulates special VAT taxation regime for agricultural activity, tour operator activity, activity of touristic agency and activity in the area of arts.