The new law introduces significant changes to the VAT system which may affect your business. The key provisions of the new VAT system are summerised below.
DEFINITION OF A TAXPAYER
VAT is payable by:
- entities whose monthly volume of VATable transactions is in excess of 600 non taxable allowances (currently approximately US$ 5,500), for any of operations;
- importers of goods, services or works;
- entities which engage in trade for cash, regardless of the sales volume;
- entities which engage in transport of cargo or passengers via the territory of Ukraine.
Any entity qualifying as a VAT payer is required to have a VAT registration number.
REPORTING PERIOD
The reporting period is defined as a period for which a taxpayer is obliged to calculate and pay VAT. For taxpayers with VATable transactions exceeding 7,200 non taxable allowances (currently approximately US$ 66,500) in the preceding calendar year, the reporting period will be a calendar month.
Taxpayers with VATable transactions below this threshold, may opt for either monthly or quarterly reporting periods. The taxpayer may change the reporting period during a calendar year from quarterly to monthly.
VATable TRANSACTIONS AND VAT RATES
The following transactions are subject to VAT:
- sales of goods, works or services in the territory of Ukraine;
- import of goods, works or services into Ukraine;
- export of goods, works or services from Ukraine.
Domestic sales and imports of goods, works and services are taxed at the rate of 20%. Export of goods, works or services from Ukraine is subject to VAT at 0% rate.
NON VATable TRANSACTIONS
The following transactions are specified as non VATable (the list below details the main items only):
- issurance, sales and exchange of securities;
- depository, clearing and registrar activities in respect of securities;
- transfer of property by a domestic lessor to a lessee and return of property upon expiration of the lease agreement;
- leas payments under financial lease agreements and rental payments for apartments being the principal residence of the lessee;
- insurance and reinsurance services specified by the Law On Insurance;
- provision of financial loans and bank guarantees;
- payment of dividends;
- receipt of funds under loan, deposit, insurance or proxy agreements;
- broker and dealer services in respect of transactions with securities held at recognised commodity and stock exchanges;
- contribution of fixed assets to the company's charter fund, in return for corporate rights;
- purchase of a taxpayer's property by other taxpayers in the course of company acquisition.
VAT BILL
Taxpayers are required to issue a VAT bill in the prescribed format at the customer's request. VAT bills can only be issued by registered VAT payers.
VAT LIABILITY
VAT liability is the total amount of VAT collected by a taxpayer within the reporting period. VAT liability arises at either the date of the goods shipment to the customer or at the date of receiving the payment from the customer, whichever occurs first.
VAT CREDIT
A VAT credit is the amount which the taxpayer is entitled to offset against the VAT liability for the reporting period. Rights to VAT credits will arise at either the date of payment to the supplier or at the date of obtaining the VAT bill, whichever occurs first.
VAT paid during the reporting period in respect of the purchase (or construction) of included to the amount of VAT credit for the same reporting period.
PAYMENT OR REFUND OF VAT
The amount of VAT which must be paid to the State or refunded by the State to the taxpayer is defined as the difference between amount of VAT liability and VAT credit for the reporting period.
DATE OF VAT PAYMENT
VAT should be paid to the state by the 20th of the month following the reporting period. The VAT return should also be submitted by this date.
REFUND OF VAT
Debit VAT amounts shown in the VAT return for the relevant reporting period should be refunded to the taxpayer within the month following the reporting period. Refunds should be made either in cash or by issurance of a treasury bill which must be accepted by any Ukrainian bank. The taxpayer may opt to offset the VAT refund against future payments of VAT.
Where debit VAT is not refunded by the State as required by the law, the State should calculate interest on the non-refunded amount on the National Bank of Ukraine's prime rate increased by 20%.
VAT REGISTRATION
VAT registration is obligatory for entities established after 1 July 1997. Existing entities which qualify as VAT payers must be registered by 30 June 1997. For non qualifying entities, voluntary VAT registration is possible. (Law of Ukraine On Value Added Tax dated 3 April 1997).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Vladimir Didenko on +(380) 44 244 5478/9 or enter a text search 'Coopers & Lybrand' and 'Business Monitor'.
