The Law of Ukraine “On the Value Added Tax” (VAT Law) is the principal law governing VAT in Ukraine. In accordance with VAT Law, any legal entity will be required to pay VAT, if it:
- Supplied goods (or provided works or services) subject to VAT;
- Imports goods into the customs territory of Ukraine; or
- Recipient of works (services) is a non-resident entity and such works (services) are provided for consumption within the customs territory of Ukraine.
The VAT Law provides that standard rate of VAT is 20% of the contractual value of the relevant goods (works or services), which value includes any excise tax, import duty, and other tax or payment required by the applicable Ukrainian legislation. The export of goods, ancillary services and provision of works (services) outside the customs territory of Ukraine are zero-rated. Zero-rate also applies to the supply of international transport services and toll manufacturing services (operations which are released from VAT taxation). VAT returns and payments must generally be made monthly. Businesses with an annual turnover of less than UAH 300,000 may account VAT quarterly.
Ukrainian VAT Law provides that an entity is liable to register as Ukrainian VAT payer in the following cases (the list is not exhaustive):
• If the volume of supplies within the customs territory of Ukraine exceeds approx. USD 30.000 (Taxpayer with sales below this threshold may also register voluntarily);
• If the person imports goods to the customs territory of Ukraine.
A person qualifying as a taxable person is required to register with the tax authority at the place of business and to obtain a VAT registration certificate within ten business days. VAT registration takes effect from the date specified on the registration certificate.
A VAT-registered person may apply for a refund if they have been in a VAT credit position for two consecutive months. The refund is limited to the amount of input tax paid for the previous month. After registration, it would be entitled for VAT credit upon the purchase of goods and services (including importation thereof) which are used in the VAT taxable transactions within its commercial activities. VAT credit is available if a VAT invoice is duly executed. VAT credit is not available if the goods (services) are for VAT exempt transactions or transactions falling outside the scope of VAT. For right compensation of the tax from the budget the person who imported the goods on customs territory of Ukraine should give to customs bodies simultaneously with the tax bill the inquiry or the certificate of verification of tax body in a place of their registration as payers about the right to compensation from the budget.
Import VAT. Importation in the customs territory of Ukraine will be subject to VAT at 20% under purchase, contribution to charter fund, lease, and other transactions. The importer will have to pay 20% VAT before the customs clearance. The tax base is a contract value of the imported products, but not less than the customs value including transportation, insurance, broker, agency or commission, loading-unloading and other costs, as well as customs duty, excise. The imposition of VAT by Customs is not affected by whether the importer is VAT-registered. Date of tax obligations at import of the goods is date of registration of the import customs declaration with the VAT sum payable. Within three bank days after registration of the cargo customs declaration the State customs service of Ukraine remits these proceeds to the State budget of Ukraine. The sums of the tax are paid in national currency of Ukraine only.
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