Indirect tax snapshot
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Value Added Tax (VAT) is the principal indirect tax in Ukraine. VAT is a state tax and is payable to the state budget of Ukraine.
It is a tax on consumer expenditures, and is collected on business transactions, imports. VAT is charged on the final consumption of certain goods and services in the home market but is levied at every stage of production and distribution. The person who supplies or imports the taxable goods or services into Ukraine is responsible for submitting VAT returns.
Although VAT is eventually paid by the consumer by being included into the price, the liability for charging, collecting and paying it to the tax authorities at each stage of the process is on the business making the supply, ie the sale. Therefore, the actual burden of the tax is on the final consumer.
Taxpayers are Ukrainian companies, foreign companies and entrepreneurs. The taxable item is the taxpayer’s transactions for:
- supply of goods (services), located within the customs territory of Ukraine
- import (export) of goods into (outside) the customs territory of Ukraine
- supply of services for international passenger, luggage and cargo carriage.
Ukraine is regarded to be the place of supply of services in cases where the purchaser of such works and services is VAT registered on the territory of Ukraine. This rule applies to:
- provision of intellectual property rights
- advertising, advisory, engineering, legal (incl. advocate services), accounting, auditing, actuarial services, data processing services and providing information or other information sphere services
- staff provision
- telecommunication services
- radio and television broadcasting
- certain types of intermediary services
- freight forwarding services.
The Ukrainian tax code determines goods, works and services that are 20%, 7%, 0%-rated, not subjected to taxation or exempted from VAT.
The tax reporting period of VAT is one calendar month; in some cases, it is a calendar quarter.
Basically, VAT that was paid to suppliers of goods, work or services will be offset if such goods, work and services were used in the operating activity of the company who pays VAT.
The Tax Code of Ukraine provides that the payable amount of VAT cannot be reduced by the amount of the VAT applied to the purchase of goods/work services that are not used in business activities or are exempt of taxable operations of the taxpayer.
A business registered as a taxpayer will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any import VAT paid). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority.
If the input tax exceeds the output tax, a refund can be claimed. Most goods that are imported into Ukraine from other countries are VAT taxable. The tax should be paid by the importer at the time of the border crossing.
There is a strong correlation between VAT and Customs duty. Customs duty is levied at the place where goods are imported into the country. After duty and VAT are paid by the importer, the goods can be released for use in the home market. VAT is charged on the customs value of the imported goods.
If the total annual amount of taxable transactions of a person exceeds UAH 1,000,000 (excluding VAT) then they must register as a taxpayer by the tax authorities at its location.
A person can be voluntary registered as a taxpayer even if the registration limit has not been exceeded.
If a person that is not registered as a taxpayer, imports taxable goods into the territory of Ukraine, they shall pay the tax at the time of customs clearance of goods without registering as a taxpayer.
Group registration does not apply in Ukraine.
A penalty may be imposed by tax authorities, if a business fails to register within the prescribed time frame.
In accordance with Ukrainian legislation a non-resident can be registered as a taxpayer in Ukraine only if such non-resident registers the permanent establishment. The registration annual limit of UAH 1,000,000 taxable transactions applies to permanent establishments.
Yes. Non-residents which do not have permanent establishment in Ukraine and sell electronic services to Ukrainian individuals and private entrepreneurs, who are not payers of VAT, for total amount exceeding UAH 1 million per year are taxed. Such foreign companies must get registered and pay 20% VAT from revenue generated in Ukraine.
Electronic services include provision of access to electronic services through the electronic interface, providing technical, organizational, informational and other opportunities by means of information technology and systems, establishing contacts and agreements between sellers and buyers and / or provides of such electronic services under intermediary agreements under its own name, but on behalf of the electronic service provider.
The following foreign companies are exempt from the tax:
• those supplying electronic services under intermediary agreements, if the invoices (receipts) provided to customers of electronic services specify the list of such electronic services and their actual supplier;
• those carrying out exclusively processing of payments for electronic services and do not participate in the provision of such electronic services;
• those providing electronic services directly through their permanent establishment in Ukraine.
Yes. After registration, the non-resident must send to the tax authority an official letter confirming the information specified in the registration as a VAT payer, including the identification (registration, service) number (code) of the non-resident and data of the representative of the non-resident, who passed a remote electronic identification.
If you are obliged to charge VAT, you must also report and pay VAT to the state, regardless of the amount of sales. The obligation to report also applies to those who are registered for VAT and have the right to make deductions (right to repayment) despite not needing to charge VAT.
In Ukraine the tax reporting period for VAT is one calendar month and in some cases specified by the tax code – a calendar quarter, taking the following into account:
- if a person is registered as a taxpayer on the day other than the first day of the calendar month, the first reporting period is the period that begins on such registration date and ends on the last day of the first full calendar month
- if the tax registration of a person is cancelled on the day other than the last day of the calendar month, the last reporting period is the period that begins on the first day of the month and ends on the day of such cancellation.
A tax return for the base tax reporting period (a calendar month) shall be filed within 20 calendar days following the last calendar day of the tax reporting month.
The taxpayer shall pay the amount of the VAT liabilities specified in the VAT return within ten calendar days following the relevant deadline.
Taxpayers are required to pay a penalty of 340 UAH for VAT returns failed or late submissions on the case by case basis.
Repeated violations committed by the taxpayer during the year shall incur a penalty of UAH 1,020 for each failure to submit or the late submission.
If the taxpayer does not pay its tax liabilities on time, the penalties are as follows:
• a delay up to 30 calendar days inclusive following the last day of deadline for payment of such liabilities – at the rate of 5% of repaid amount of the tax debt
• a delay of more than 30 calendar days following the last day of deadline for payment of such liabilities – at the rate of 10% of repaid amount of the tax debt.
In addition to VAT declarations businesses must provide customs declarations for imported goods.
Yes. Penalties can be imposed for the understatement of tax, for the budget compensations overstatement and for the untimely registration of the VAT-invoices.
Penalties and interests can be applied in case of errors and omissions made in tax returns, or when the tax is paid late.
Penalties can also be applied when the businesses:
• fail to maintain adequate records
• fail to provide information (including additional declarations) to the tax authorities
• make repeated mistakes.
Criminal proceedings may be brought in the case of intentional evasion of taxes, duties and other payments in the system of taxation imposed in accordance with the law.
No. VAT incurred by overseas businesses cannot be claimed if they are not registered in Ukraine.
Required details to be shown on the VAT invoice are:
• invoice number which is unique and sequential
• invoice date
• seller's and customer's full or short names
• seller's and customer's tax registration numbers
• a description sufficient to identify the goods or services supplied to the customer, their quantity and volume
• supply price exclusive of VAT
• rate of VAT and amount of VAT in numeric value
• total amount, including VAT
• code according to Ukrainian classification of goods and services.
All VAT invoices and adjustments to VAT invoices should be digitally compiled and registered in the Unified Register of VAT Invoices.
There are no standards audit file template or requirement for this case.
However there is VAT digital tax management system, which provides the automatic accounting of:
• tax amount, calculated as the aggregate of received VAT invoices and adjustments to VAT invoices registered in the Unified Register of VAT Invoices
• tax amount, paid upon importing of goods on the customs territory of Ukraine
• amounts of replenishment and balance of funds on accounts in the VAT digital tax management system
• VAT amount, which the payer can use for registering the tax invoices and adjustments to VAT invoices in the Unified Register of VAT Invoices.
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