Kyiv GMT
EY
Khreschatyk Street, 19A Kyiv 01001
Ukraine
Indirect tax contacts
Vladimir Kotenko
+380 (44) 490-3006 vladimir.kotenko@ua.ey.com
Anton Melnyk +380 (93) 490 30 00 anton.melnyk@ua.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Podatok na dodanu vartist (PDV)
Date introduced 1 January 1992
Trading bloc membership None
Administered by State Tax Service of Ukraine (http://www.tax.gov.ua)
VAT rates
Standard 20% Reduced 7%, 14% Other Zero-rate (0%) and exempt
VAT number format
Tax identification number (TIN): 12, 10 or 9 digits, depending on type of entity
VAT return periods Monthly Thresholds
Registration
Taxable supplies in excess of UAH 1 million during preceding 12 calendar months
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• Supply of goods if the place of supply is within the customs territory of Ukraine, including the free-of-charge transfer and the transfer of title to pledged property to the creditor, transfer of title to goods under a commodity loan and transfer of a financial lease object to a lessee
• Supply of services if the place of supply is within the customs territory of Ukraine
• Import of goods into Ukraine
• Export of goods from Ukraine
• Supply of services with respect to the international transportation of passengers, luggage and shipment of cargo by railway, automobile, sea and air transport
• Deemed supplies in cases specified by law
The following transactions are outside the scope from VAT (the below list is not exhaustive):
• Most banking services
• Issue and placement of securities
• Insurance and reinsurance services and services of securities traders
• Transfer of property with respect to pledges or operational leases
• Reorganization of legal entities (mergers and acquisitions)
In general, supplies of goods and services, where the place of supply is within the customs ter ritory of Ukraine, are considered taxable by Ukrainian VAT.
Place of supply of goods. The following goods are deemed to be supplied in Ukraine:
• Goods located in Ukraine at the time of their supply, if they are not shipped, transported, assembled or installed
• Goods located in Ukraine at the time when shipment or transportation begins
• Goods assembled or installed in Ukraine, if such assembly or installation is performed by the seller or on its behalf
Place of supply of services. The following are the rules for determining the place of supply of services:
• Services related to movable property (for example, repairs and services auxiliary to transporta tion), services in the areas of culture, art, education, science, sport and entertainment, organiza tion of training courses and seminars and certain other services: the place of their actual supply
• Services related to immovable property: the actual location of the immovable property
• Certain other types of services such as consulting, engineering, legal, accounting, audit, soft ware development, information technology, data processing, telecommunication, advertising, granting of intellectual property rights, provision of personnel, renting, leasing of movable property (except for vehicles and bank safes), broadcasting, production of multimedia content, provision of intermediary services on behalf of and at the expense of another person (or on its own behalf but at the expense of another person), freight forwarding services: the place where the service recipient is incorporated
• Digital (electronic) services: if the customer is a business entity – the place where the service recipient is incorporated, if customer is a private individual – the actual location of such recipient
To define the actual location of the recipient of electronic services (private individual), the fol lowing factors should be considered:
• Country code of the SIM card used by the service recipient
• Location of the telecommunications provider through which the services have been delivered
• IP address of the device used by the service recipient
• Location of the bank where the service recipient has opened an account (through which pay ment for the electronic service was made)
• Information on the place of residence provided by the service recipient
• Other services (default rule): the place where the supplier is established
C. Who is liable
The following types of persons qualify as a “VAT taxpayer” (i.e., a taxable person) under Ukraine’s tax law:
• The person registered as a VAT taxpayer or is subject to a registration as a VAT taxpayer
• The person that imports goods into Ukraine in amounts subject to tax (provided such person is liable for payment of taxes on the import of goods)
• The person who maintains accounting under joint activity (JA) arrangements, as well as inves tor (operator) under product sharing agreements (PSA)
• The person who performs asset management
• The person who disposes of seized, abandoned or unclaimed property as well as property inher ited or transferred to the state (regardless of threshold and tax status of such person)
• The person who is liable to administer tax with respect to services supplied by railway trans portation companies
• Non-established foreign entity who supplies electronic services to Ukrainian private customers (not registered for VAT)
If an importer who is not registered for VAT and imports goods in amounts subject to tax, such importer pays VAT during customs clearance, without VAT registration.
If a nonresident entity, including a permanent establishment of a nonresident that has not regis tered for VAT, supplies services (other than electronic services supplied to private individuals) with a place of supply in Ukraine, Ukrainian service recipient must accrue and pay VAT to the treasury.
A legal entity, individual entrepreneur (except for an entrepreneur who uses the simplified taxa tion system and belongs to certain groups) or representative office of a nonresident must register as a VAT taxpayer if its taxable supplies exceeded UAH1 million (net of VAT) during the preceding 12 calendar months.
A registrant is assigned a tax identification number (TIN), which is 12 digits for legal entities and permanent establishments of nonresidents (except those for which a 9-digit number applies — see below) and 10 digits for private entrepreneurs. A 9-digit TIN is assigned to the following entities:
• Entities paying tax from a joint activity without establishing a legal entity
• Property managers under property-management agreements
• Investors under product-sharing agreements
• Permanent establishments of nonresidents that do not have an identification number in the Unified State Register of Enterprises and Organizations of Ukraine
• Permanent establishments of nonresidents created through:
A building site, construction, assembly or installation project if it lasts more than six months
Employees/other personnel hired by a nonresident for the provision of services (excluding provision of personnel) if these activities last more than six months within any 12-month period
Residents authorized to act exclusively on behalf of a given nonresident
Exemption from registration. VAT law in Ukraine does not contain any provision for exemption from registration for VAT.
Voluntary registration and small businesses. A person that does not reach the registration thresh old may still opt for a voluntary VAT registration. Existing entities willing to register voluntarily file a registration request not later than 10 calendar days prior to the tax period from which these entities would qualify as taxpayers. Such entities may indicate the date from which they would qualify as taxpayers in their application. Newly registered entities may register voluntarily through applying in writing to the state registrar who then passes this application to the tax authorities.
Group registration. Group VAT registration is not available in Ukraine.
Non-established businesses. VAT registration of the non-established foreign businesses (other than nonresidents supplying electronic services to Ukrainian private individuals) is not possible.
Tax representatives. Tax representatives are not required in Ukraine.
Reverse charge. A reverse-charge mechanism applies if a nonresident entity (including a perma nent establishment of the nonresident that is not registered for VAT) supplies services for which the place of supply is within Ukraine.
In these cases, the VAT liability would arise for the service recipient under the reverse-charge procedure. The service recipient would account for the VAT due, at the time the services are sup plied or the execution of the act of acceptance, whichever occurs first. The service recipient registered as a taxpayer may record a VAT credit after registration of the VAT invoice in the Unified Tax Invoice Register.
Domestic reverse charge. There are no domestic reverse charges in Ukraine.
Digital economy. For business-to-business (B2B) transactions, there is no VAT if the payment qualifies as a royalty. VAT is expected to apply if the payment represents a service fee (and the service is deemed to be supplied in Ukraine). In this case the customer should self-assess VAT through the reverse-charge mechanism.
Under the general rule, the place where services are supplied is deemed to be at the place of the service provider’s establishment. In this case, no VAT implications are anticipated in Ukraine, since the nonresident’s business is based outside of Ukraine. However, for certain types of ser vices (e.g., those in the sphere of information technology or data processing, including the use of computer systems, development, supply and testing of software or use of intellectual property objects, including those under license agreements), the place of supply is at the service recipient’s place of establishment (i.e., in Ukraine). VAT would apply in those cases, and the customer would have to self-assess VAT through the reverse-charge mechanism.
A temporary (until 2023) VAT exemption may apply to supply of software (including “online services,” although there is no certainty as to the scope of this term) and transactions with soft ware where payment does not qualify as royalty (e.g., sale to end-users, sale of data media with software). Eligibility for the exemption should be analyzed and contractual language may be important for this analysis.
For business-to-consumer (B2C) transactions (other than digital (electronic) services as described below), the qualification of transactions for VAT purposes should be the same as described above. However, even if VAT should formally apply, there may be no taxpayer in Ukraine since the individual consumer is not regarded as a taxpayer for VAT and cannot reverse charge VAT by itself. Under the law, neither the foreign supplier nor the Ukrainian customer would be legally responsible for administration/payment of VAT in this case.
VAT on electronic services supplied by nonresidents to private Ukrainian customers. Starting from 2022, new VAT rules for the supply of electronic services are due to come into force in Ukraine.
If a nonresident entity, which does not have a permanent establishment in Ukraine, supplies electronic services to private individuals who are not registered for VAT (B2C transactions), such services will be subject to 20% VAT in Ukraine.
The following electronic services (provided via the internet, automatically, using information technology and mainly without human intervention, including by installing a special application or application on smartphones, tablets, TV or other digital devices) are subject to VAT:
• Providing electronic copies, providing access to images, texts and information, including, but not limited to, by subscribing to electronic publications
• Access to databases, including use of search engines and directory services on the internet
• Supply of electronic copies and/or provision of access to audiovisual works, games
• Provision of services for access to television programs (channels) or their packages
• Providing access to information, commercial, entertainment electronic resources and other similar resources, in particular, but not exclusively, hosted on platforms for sharing information or videos
• Provision of distance learning services on the internet, the conducting and providing of which does not require human participation, including by providing access to virtual classrooms, educational resources
• Provision of cloud services in terms of providing computing resources, storage resources or electronic communications systems using cloud computing technologies
• Supply of software and updates to it, including electronic copies, providing access to them, as well as remote maintenance of software and electronic equipment
• Provision of advertising services on the internet, mobile applications and other electronic resources, provision of advertising space, including by placing banner advertising messages on websites, webpages or web portals
The following supplies do not qualify as “electronic services”:
• Supply of goods/services, which are ordered via the internet and actually delivered offline (e.g., accommodation services, car rental, catering services, services passenger transport and other similar services)
• Supply of goods and/or other service (different) from electronic services, which include elec tronic services, if the cost of electronic services is included in the total cost of such goods/ services
• Provision of distance learning services on the internet, if the internet is used exclusively as a means of communication between teacher and student
VAT compliance requirements for nonresident providers of electronic services. Nonresidents sup plying electronic services to Ukrainian private individuals are liable to register for VAT, if the total amount of their taxable sales for the preceding calendar year exceeds UAH 1M.
Deadline for registration is 31 March, following the year when the registration threshold has been exceeded. For example, where the volume of VAT-able sales was exceeded in 2021, a nonresident is liable to register for VAT till the end of March 2022.
Failure to timely register is subject to a penalty of 30 minimum wages (approx. USD7,000 as of 2021).
VAT reporting period for the above nonresidents is a calendar quarter (a special type simplified VAT return to be filed electronically). VAT base and taxable amount are determined in foreign currency (EUR or USD), input tax (if any) is not deductible.
Online marketplaces and platforms. Under the general rule, an intermediary supplying electronic services on its own behalf is liable for VAT.
At the same time, an intermediary (e.g., marketplace) itself would not qualify as a taxpayer where it:
• Supplies electronic services under intermediary agreements, if the invoices provided to customers contain a list of electronic services and their actual provider
• Only processes payments for electronic services, but does not participate in actual provision of electronic services
Registration procedures. Existing entities that are subject to a mandatory registration file a reg istration request by the 10th day of the calendar month following the month in which the threshold (UAH1 million) was exceeded.
A registration application is completed in electronic format, using the statutory template (approved by the Ministry of Finance) and must bear a qualified electronic signature of the applicant.
The tax authority includes the entity in the register of VAT taxpayers within three working days after receipt of the registration request or from the date indicated by the requestor (in the case of voluntary registration). The tax authority issues the VAT registration certificate.
Information about registered VAT taxpayers is available online https://cabinet.tax.gov.ua/registers/pdv.
Deregistration. An entity registered for VAT for the past 12 months may apply for deregistration if the value of its taxable supplies for the past 12 calendar months was below UAH1 million. Deregistration is also available at the request of the taxpayer or the tax authorities in cases such as the following:
• The entity took a decision to liquidate
• The taxpayer has been registered as a single taxpayer, which does not envisage payment of VAT
• The taxpayer has not been filing VAT return for 12 consecutive months and/or has filed VAT returns evidencing absence of taxable supplies/purchases
• A court judged the entity’s statutory documents to be invalid
• A court ruled to liquidate the legal entity due to bankruptcy
• The taxpayer is liquidated under a court decision, or the entity is relieved from VAT under a court decision
• The individual entrepreneur has died
• A joint activity or asset management or production sharing agreement expires
Once deregistered, the entity is not allowed to credit input tax and invoices.
Changes to VAT registration details. Changes to a taxpayer’s VAT registration details must be noti fied for the following changes:
• Reorganization of the legal entity taxpayer
• Change in VAT ID of the taxpayer
• Change in name of the taxpayer
• Discrepancies and errors revealed in the previous registration details
Taxpayers must file an electronic request to update the VAT registration data submitted to the tax authorities within 10 working days after occurrence of the relevant changes (except for a change in name of taxpayers who are registered in the Unified State Register of Legal Entities, Individual Entrepreneurs and Social entities).
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 20%
• Reduced rates: 7%, 14%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods and services unless a specific measure provides for a reduced rate, the zero rate or an exemption applies.
Examples of goods and services taxable at 0%
• Exports of goods (under customs regime of export, reexport (return of goods), duty-free shop and free customs area)
• International transportation of passengers, luggage and shipments of cargo
• Processing and repairs of imported movable property that is subsequently exported from Ukraine
Examples of goods and services taxable at 7%
• Supplies within Ukraine and import into Ukraine of registered medicines and medical devices that are either duly registered or for which compliance with technical regulations is supported by a compliance certificate
• Supplies within Ukraine and import into Ukraine of medicines, medical devices and/or medical equipment for use in clinical trials permitted by the Ministry of Health of Ukraine
• Supplies of certain services related to admission to shows, theatres, concerts, museums, zoos, exhibitions and similar cultural events, as well as hotel accommodation services
Examples of goods and services taxable at 14%
• Domestic supplies and imports of agricultural products classified under the following HS cus toms tariff (sub)headings: 1001, 1003, 1005, 1201, 1205, 1206 00
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Supplies of certain types of software (temporarily, until 1 January 2023)
• Health care and rehabilitation services
• Supplies of baby nutrition
• Educational services
• Charity
• Supply of land plots (except for those located under real estate objects and included in their value under legislation)
• Supplies of housing (except for the first supply)
• Supplies of periodical printed mass media (newspapers and journals), books, etc., of domestic production
• Religious and funeral services
• Supplies to embassies, consulates and representations of international organizations (for their own needs) on a reciprocal basis
• Imports of cultural items produced 50 or more years ago
• Disposals by banks and financial institutions of property pledged by non-VAT taxpayer
• Sales or purchases by banks of liabilities on deposits
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Ukraine.
E. Time of supply
Under the general “first event” rule, a VAT liability arises on the occurrence of the first of the following events:
• The date on which goods or services are dispatched or rendered
• The date on which payment is received with respect to a supply of goods or rendering of services
Special rules apply to certain transactions, including the following:
• For the import of goods, the VAT liability arises on the filing of the customs declaration for customs clearance
• For the import of services (where the place of supply is within Ukraine), the VAT liability arises on payment or execution of the act of acceptance, whichever occurs first
• For long-term agreements, the VAT liability arises on the delivery of the work results
• For taxable supplies of electronic services made by non-established foreign suppliers to Ukrainian private individuals, the VAT liability arises on the date of receipt of payment at the supplier’s bank account or the date of execution of the document certifying the supply of services, whichever occurs first
Deposits and prepayments. There is no special time of supply rules in Ukraine for deposits and prepayments. As such, the general time of supply rules apply (as outlined above). For prepay ments (except for export/import of goods) these normally trigger a VAT event. If the supply does not take place and the seller returns prepayment, the seller and the buyer may adjust the output and input tax, respectively, based on the adjustment note to the VAT invoice properly registered in the Unified Tax Invoice Register.
Continuous supplies of services. There is no special time of supply rules in Ukraine for supplies of continuous or rhythmic (two times and more per month) supplies of goods and services. As such, the general time of supply rules apply (as outlined above). However, the law prescribes that in such cases the supplier may issue aggregate VAT invoices to each buyer registered for VAT or one aggregate VAT invoice for supplies to buyers not registered for VAT, by the last day of the month. A VAT invoice must be registered in the Unified Tax Invoice Register within the statu tory deadlines. Generally, a VAT invoice is to be issued when the VAT liability arises.
Goods sent on approval for sale or return. There is no special time of supply rules in Ukraine for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. A reverse-charge mechanism applies if a nonresident entity (including a permanent establishment of the nonresident that has not registered for VAT) supplies services for which the place of supply is within Ukraine.
In these cases, the VAT liability would arise for the service recipient under the reverse-charge procedure. The service recipient accrues a VAT liability on the payment for the services or the execution of the act of acceptance, whichever occurs first. The service recipient registered as a taxpayer may record a VAT credit after registration of the VAT invoice in the Unified Tax Invoice Register.
Leased assets. The time of supply rules for the supply of leased assets depends on the type of lease (i.e., operational lease or financial lease).
Transfer of assets under the financial lease arrangements is treated as supply of goods for VAT purposes. The lease qualifies as a “financial lease” if at least one of the below conditions is satisfied:
• Leased assets are transferred for a term during which at least 75% of their initial value is depreciated, and the lessee must purchase these assets from the lessor under the contract
• At the time of expiration of the lease arrangement, the residual (balance) value of the leased assets constitutes up to 25% of the initial value of such assets
• The total amount of lease payments equals/exceeds the initial value of the leased assets.
• Leased assets are manufactured under the instructions of the lessee and cannot be used by the third parties, considering the characteristics of such assets
In case of financial leasing, the lessor must accrue VAT liabilities on the value of the assets upon their transfer to the lessee. The lessee is entitled to credit this VAT upon receipt of assets from the lessor.
Transfer and return of assets under operational lease (i.e., all leasing arrangements that do not satisfy the criteria for financial leasing) is not subject to VAT. Leasing fees payable under the operational lease arrangements can be subject to VAT under the general rules for supply of ser vices.
Imported goods. Import of goods is subject to VAT at a 20% rate or 7% rate (which applies to a limited range of goods) unless an exemption is available under current legislation. The tax base includes contractual value or customs value of the goods, whichever is higher, including excise tax and customs duty paid. VAT liabilities arise, and VAT is paid during filing import customs declaration for customs clearance of the goods. It is not possible to delay payment of import VAT. The importer may credit import VAT in the tax return for a tax period in which the import VAT was paid. VAT credit should be supported by an import customs declaration. Customs may allow payment of VAT by installments for a period of up to 24 or 36 months during import of certain equipment for own manufacturing needs under the procedure approved by the government. The time of installments depends on the type of the equipment. The VAT amount payable should be guaranteed to customs through a financial/banking guarantee or pledge of the equipment.
F. Recovery of VAT by taxable persons
In general, VAT credit is available only for VAT registered taxpayers with respect to input tax paid in connection with the acquisition or production of goods, fixed assets or services.
A VAT taxpayer may claim VAT credit with respect to the following transactions:
• Purchases or production of goods and services
• Purchases (building and construction) of fixed assets
• Import of goods and/or fixed assets into Ukraine
• Receipts of services supplied by nonresidents in the customs territory of Ukraine
• Imports of noncurrent assets into the customs territory of Ukraine under lease agreements
A taxpayer must be able to confirm a VAT credit with a VAT invoice registered in the Unified Tax Invoice Register or a customs declaration. A duly registered VAT invoice is sufficient grounds for crediting input tax and no other evidence are required.
The time limit for a taxpayer to reclaim input tax in Ukraine is 1,095 calendar days. Taxpayers are entitled to claim input VAT as a tax credit within 1,095 calendar days starting from the date of receipt of an incoming VAT invoice from the supplier.
A VAT credit is recognized regardless of whether goods or services or fixed assets were used in taxable transactions or whether the taxpayer performed taxable transactions in the reporting period.
Under the “first event” rule for VAT credit, the right to a VAT credit arises on occurrence of the first of the following events (provided other conditions are met):
• The date on which the taxpayer makes the payment for goods or services
• The date on which the taxpayer receives the goods or services
Special rules include the following:
• For the import of goods, the right to VAT credit arises on the payment (accrual) of VAT on the filing of the customs declaration for the customs clearance
• For the import of services, the right to VAT credit arises on the date the VAT invoice is selfissued and registered in the Unified Tax Invoice Register
• For long-term agreements, the right to VAT credit arises on the receipt of the work results (execution of the acts of work acceptance)
Nondeductible input tax. At the end of the tax period, the taxpayer must recognize VAT liability and register a VAT invoice in respect of 1) the goods, services or noncurrent assets that are des ignated for use or start to be used in nontaxable or nonbusiness transactions and 2) noncurrent assets converted into nonproductive assets. However, taxpayer may deduct such VAT for corpo rate profit tax purposes if certain conditions are met.
Input tax credits are not available for supplier invoices that are not registered in the Unified Tax Invoice Register, for imports that are not supported by customs declarations or on purchases that are not related to the business activity.
Examples of items for which input tax is nondeductible
• Business entertainment
• Goods found missing during stock-taking
• Purchases used to make supplies for which the place of supply is outside Ukraine (e.g., advertising services provided to a nonresident customer)
In general, input tax credits are not available from suppliers’ invoices that are not registered in the Unified Tax Invoice Register, for imports that are not supported by customs declarations or on purchases that are not related to the business activity.
Examples of items for which input tax is deductible (if related to a taxable business use)
• Corporate business mobile phones
• Hotel accommodation for employees
• Business purchases for an amount up to UAH200 supported by a cash receipt indicating VAT ID of the supplier and an amount of VAT
Partial exemption. If the taxpayer carries on both taxable and nontaxable transactions, at the end of the tax period the taxpayer must recognize the VAT liability and register a VAT invoice for the amount of VAT on purchases used to make exempt supplies, determined on a pro rata basis.
There is only one method of calculation of partial exemption ratio in Ukraine’s tax code. The pro rata coefficient is based on the percentage of taxable supplies to total supplies in the preceding calendar year. Based on the current year results, the taxpayer must recalculate the pro rata coef ficient according to actual volume of taxable and exempt supplies and adjust VAT credit in the tax return for the last tax period of current year.
Approval from the tax authorities is not required to use the partial exemption standard method in Ukraine. Special methods are not allowed in Ukraine.
Capital goods. Taxpayers may deduct the whole amount of input tax incurred upon purchases of capital goods, provided that a duly registered VAT invoice or a customs declaration is available. If purchased capital goods are used both for taxable and exempt transactions, the taxpayer must then accrue VAT liabilities based on the pro rata coefficient (refer above). If capital goods are used not for business (i.e., income generating purposes) or to make exempt supplies, the tax payer must accrue VAT liabilities based on the balance sheet value.
Refunds. VAT due to the budget is calculated as a positive difference between VAT liability (out put tax collected from the customers with respect to sales of goods and services) and VAT credit.
If a taxpayer has a negative difference, the difference may be used to decrease the tax debt or may be carried forward as a tax credit to the next reporting period or claimed as a tax refund in the amount not exceeding the threshold of VAT invoices’ registration calculated when the VAT return is filed. A refund may be provided by way of remittance of funds to the taxpayer’s bank account or through offset against liabilities/debt on other taxes payable to the State Revenue.
The tax authorities maintain a single register of VAT refund claims. In the register, the refund is available in sequential order depending on the date of the relevant claim (i.e., the earlier the claim is included in the register, the earlier the refund will be provided). The register is publicly avail able via the tax authority website.
Pre-registration costs. Input tax incurred on pre-registration costs in Ukraine is not recoverable.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., a bad debt) cannot be recovered in Ukraine.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Ukraine is not recoverable.
H. Invoicing
VAT invoices. A Ukrainian VAT taxpayer(seller) must provide an electronic VAT invoice registered in the Unified Tax Invoice Register to the buyer. The VAT invoice must be issued on a date when
the tax liability arises for the seller and is registered by the end of the month (for VAT invoices issued from the 1st to the 15th day of the calendar month) and by the 15th day of the following month (for VAT invoices issued from the 16th day of the calendar month). The VAT invoice must contain all the necessary elements and must bear a duly registered electronic signature. A supplier must issue separate VAT invoices for exempt and taxable supplies.
If a VAT invoice is improperly completed or is not registered in the Unified Register, the buyer does not have the right to a VAT credit, but the supplier must report the relevant VAT liability. Improper completion of the VAT invoice (except for mistakes in the HS code of the goods) still allows identification of the transaction, and such VAT invoice should be allowed for registration.
The authorities may block registration of VAT invoices based on the risk assessment system that automatically monitors all VAT invoices. In this case, the authorities request additional explana tions/documentation (to be submitted within 365 calendar days after arising tax liabilities reflected in the tax return) sufficient for unblocking registration of VAT invoices.
Taxpayers must issue electronic excise invoices for all shipments of certain excisable goods (fuel and ethyl alcohol). The excise invoice layout and principles of electronic excise tax administration are similar to VAT rules.
Credit notes. If output/input tax needs to be adjusted (e.g., due to change of compensation, return or goods/advance payment), the seller must issue electronically an adjustment note to the VAT invoice that must be registered in the Unified Tax Invoice Register either by the seller (in case of compensation increase) or by the buyer (in case of compensation decrease). The format of the adjustment note is approved by the Ministry of Finance.
In some cases, the buyer has the right to a VAT credit without the VAT invoice on the basis of the following documents:
• Transport ticket or an invoice for hotel or communication services
• Checks for goods or services for an amount not exceeding UAH200 per day
• Customs cargo declaration for the import of goods
Electronic invoicing. Electronic invoicing is mandatory in Ukraine for all taxpayers. VAT invoices are filed under statutory template in the format (XML-based) published by the tax authorities. A VAT invoice must contain all relevant elements and bear an electronic signature duly registered in the tax authorities. Only qualified electronic signatures of the taxpayer’s authorized persons, as well as an electronic stamp of the company (where available) are accepted for completion of VAT invoices.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Ukraine. As such, full VAT invoices are required.
Self-billing. Self-billing is not allowed in Ukraine.
Proof of exports. Export of goods should be supported by duly executed export customs declara tion certified by customs to evidence that the goods actually left customs territory of Ukraine.
Foreign currency invoices. Invoices cannot be issued in a foreign currency in Ukraine. All invoices must be issued in the domestic currency, which is the Ukrainian hryvnia (UAH).
Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons in Ukraine. As such, full VAT invoices are required (registered in the Unified Tax Invoice Register). However, it is not mandatory to provide a full VAT invoice to private customers (B2C), unless they request it.
Records. Documents that must be kept for VAT purposes include source accounting documents (e.g., invoices, service acceptance acts, supply contracts), accounting ledgers, VAT returns,
customs declarations, issued and received VAT invoices and other documents related to tax accounting. Ukrainian law is silent on whether the records must be kept locally in Ukraine or abroad. However, the records (including hard copies) must be made available to the tax authorities in case of audit.
Record retention period. The statutory retention period in Ukraine is three years (1,095 days) after the deadline for filing a tax return for the relevant reporting period.
Electronic archiving. Electronic keeping and archiving records are allowed for documents that were initially completed electronically (inter alia these documents should bear a relevant elec tronic digital signature). Otherwise, physical storage (i.e., paper) must be used.
I. Returns and payment
Periodic returns. VAT returns are filed on a monthly basis (within 20 calendar days of the follow ing month).
Periodic payments. Tax is payable within 10 days after the filing deadline. VAT liabilities must be paid to the revenue from the special VAT account of the taxpayer (opened in the State Treasury). Taxpayers remit funds to the VAT account from their regular bank accounts. After expiration of payment deadline, the Treasury will collect funds to the revenue, based on the amount of tax due indicated in the returns (provided by tax office).
All settlements must be made in Ukrainian hryvnia (UAH).
Electronic filing. Electronic filing is mandatory in Ukraine for all taxpayers.
A system of electronic VAT administration is based on the interaction of the Unified Tax Invoice Register (UTIR) with the special VAT accounts.
VAT accounts are free for all taxpayers in the State Treasury of Ukraine. Under this system the supplier can register a VAT invoice in UTIR for an amount that exceeds its VAT credit only when the taxpayer pays the corresponding amount of money into its VAT account. The VAT invoice registration threshold is calculated according to a formula. The formula also includes an allowed overdraft calculated as the average monthly amount of VAT that was declared as payment for the past 12 months (overdraft is to be recalculated quarterly). This overdraft is not available to tax payers registered for VAT for less than 12 calendar months (as of 1 January 2016) or registered as taxpayers after that date and becomes available in the quarter following the quarter in which the 12-month VAT registration period has been achieved.
Taxpayers will be able to replenish their VAT accounts or transfer funds remaining after settle ments to their regular bank account (in the latter case, the VAT registration threshold would be reduced but a negative amount is not acceptable). Taxpayer will not be able to transfer money from the VAT accounts at their discretion. Neither funds from customers nor VAT refunds are transferred to the VAT account.
If a VAT taxpayer’s registration is canceled, its VAT account will be closed, and the net balance of the account will be transferred to the state revenue.
The treasury communicates data about the net balance of the VAT account to the Unified Register online. If the total of input tax and VAT account balance is insufficient, the taxpayer will not be able to register the issued VAT invoice with the Unified Register. Consequently, the customer of the VAT taxpayer in question will not be entitled to recognize VAT credit.
At the end of the reporting period, the tax on the added value generated by such supplier should be accumulated in its VAT account. VAT payable to the state revenue at the end of the reporting period will be settled by means of funds in the VAT account.
Payments on account. Payments on account are not required in Ukraine.
Special schemes. Tourist operators. For tourist operators who sell tourist products for use in or outside of Ukraine, 20% VAT is applied on a margin calculated as a difference between the value of the tourist product and expenses incurred in relation to creating such a tourist product. For tourist operators acting as intermediaries for foreign tourist service providers and for Ukrainian tourist agents, 20% VAT is levied on a remuneration payable to such entities. Input tax on ser vices included in the tourist product is not creditable whereas input tax on any tourist services not included in the value of the tourist product is creditable.
Works of art. The supply of works of art (HS headings 9701-9706) by dealers is subject to a marginal profit tax scheme if they were purchased from:
• Entities not registered as taxpayer
• Taxpayers where the supply is exempt or not subject to VAT
• Taxpayers using a marginal profit tax scheme
• Authors of works of art or their legal successors
The taxable base includes the seller’s marginal profit (excluding VAT). The VAT rate is 20%. The dealer (seller) is not required to issue a VAT invoice. The dealer who buys works of art from the above entities is not entitled to credit input tax. Export of works of art is not subject to zero VAT during export (i.e., input tax, if any, is not recoverable). The dealer is required to maintain separate accounting of transactions involving purchase and sale of works of art.
Cash-basis method for certain types of supplies. The following types of suppliers may use the cashbasis method for defining the date of arising VAT liabilities and crediting input VAT:
• Contractors/subcontractors performing construction works
• Entities supplying heat energy, natural gas, as well as other power and utilities services to house holds/apartment building co-owners’ associations
Cash basis method assumes that the taxpayer recognizes VAT obligations at time of receiving the funds from the customer, whereas the buyer is entitled to deduct input VAT at the moment of payment to the seller.
Annual returns. Annual returns are not required in Ukraine.
Supplementary filings. No supplementary filings are required in Ukraine.
Correcting errors in previous returns. Where a taxpayer identifies errors/omissions in their VAT returns for the previous months, they must complete and send an adjustment calculation to the relevant VAT return.
An adjustment calculation is completed under the standard template in electronic form only. Procedure of filing adjustment calculation is the same as for VAT returns.
Correction of underpayments in the previous VAT returns may trigger penalties. See Section J. Penalties below for details.
Digital tax administration. Electronic cash registers. Taxpayers who are liable to use electronic cash registers must transmit real-time transactional data (information from cash receipts) to the tax authorities. Inter alia, this data includes information on the goods and services supplied, as well as amounts of VAT and excise tax.
J. Penalties
Penalties for late registration. Late registration or violation of other tax registration requirements may trigger a fine of UAH340 for self-employed persons and UAH1,020 for legal entities or tax agents. For a repeated violation, the fine increases to UAH680 and UAH2,040, respectively.
If the tax authorities determine that late registration caused tax understatement and reassesses the taxpayer’s tax liability, general fines for tax understatement apply. The fines are imposed at the following percentages of the understated tax liability:
• 10% for non-intentional underpayment
• 25% for intentional underpayment of tax
• 50% for a repeated (within three years) violation
An interest penalty may also apply. In addition, the taxpayer is not eligible for a VAT credit or refund with respect to input tax incurred before VAT registration.
Penalties for late payment and filings. The following are the penalties for failure to file or for the late filing of the VAT declaration:
• UAH340 for each violation
• UAH1,020 for repeated violations within a year
If a failure to properly file the tax return results in the understatement of tax liabilities, addi tional fines apply.
The following penalties are imposed for late payments:
• 5% of unpaid liabilities if the period of delay is up to 30 days
• 10% of unpaid liabilities if the period of delay exceeds 30 days
• 25% of unpaid liabilities if failure to pay tax was intentional
• 50% of unpaid liabilities for repeated (within three years) failure to pay tax, or where period of delay is over 90 days
Under the tax code, an amount of VAT that is not refunded to the tax authorities on time is con sidered to be a debt to the state revenue. An interest penalty at a rate of 120% of the National Bank of Ukraine (NBU) rate applies to this debt amount until it is settled.
Penalties for errors. Penalties are imposed for the overstatement of a VAT refund or the under statement of VAT liabilities if the tax authorities increase the amount of VAT liabilities or decrease the VAT refund. The penalties are imposed at the following percentages of the reassessed tax liability or overstated VAT refund:
• 25% if the violation was made the first time within a three-year period
• 50% if the violation was repeated within a three-year period
It is not clear whether an overstatement of negative VAT (that does not lead to tax understatement or the overstatement of VAT refund) is subject to a fine.
The following are the penalties for the understatement of tax liabilities if the taxpayer corrects the mistake made in the VAT return:
• 3% of the understatement of tax liabilities if it submits an adjustment calculation
• 5% of the understatement of tax liabilities if it corrects the mistake in the tax return for the next reporting period
• 5% of the understatement for the failure to submit an adjustment calculation
The following penalties are applied for failure to timely register VAT invoices in the UTIR:
• 10% of VAT amount if the delay is up to 15 calendar days
• 20% of VAT amount if the delay is from 16 to 30 calendar days
• 30% of VAT amount if the delay is from 31 to 60 calendar days
• 40% of VAT amount if the delay is 61 days to 365 calendar days
• 50% of VAT amount if the delay is over 365 calendar days
• 2% of the volume of supply, but no more than UAH1,020 – for VAT invoices for exempt, zerorated and certain other transactions (where the taxpayer voluntarily registers belated VAT invoices)
• 5% of the volume of supply, but no more than UAH3,400 – for VAT invoices for exempt, zerorated and some other transactions (where the tax authorities detect failure to timely register a VAT invoice upon tax audit)
If tax authorities detect failure to register a VAT invoice, they will issue the tax-notification deci sion and apply a penalty in the amount of 50% of the VAT amount. This penalty will not be applied where a VAT invoice is registered prior to tax audit.
The above penalties (10%-50%) are not applied where the VAT invoice is registered within 10 calendar days after receipt of the tax notification decision.
If the tax authorities block registration of a VAT invoice based on the risk assessment system, the above penalties are not applied for the duration of the blocking period.
A failure to register a VAT invoice after 10 calendar days following the receipt of the tax-notification decision may attract a penalty in the amount of 50% of VAT.
The following fines are applied for mistakes in a VAT invoice detected by the tax authorities during a documentary out-of-schedule tax audit at the buyer’s request. The percentage penalty is based on the VAT amount due, and the timings are based on if the mistake is not corrected within such number of calendar days:
• UAH170 and obligation to correct the mistake
• 10% (15 days)
• 20% (16 to 30 days)
• 30% (31 to 60 days)
• 40% (61 to 90 days)
• 50% (91 to 120 days)
• 60% (121 to 150 days)
• 70% (151 to 180 days)
• 100% (after 181 days)
These penalties are applied for mistakes in a VAT invoice regarding indication of the tariff code of goods or code of services under the State Classifier of Products and Services.
In addition to the above, the interest penalty may apply for tax understatement and late payment. The interest penalty for late payment applies from the first business day on which the tax liabil ity becomes overdue (that is, after expiration of the deadline for settling the tax liability indi cated in the tax return or in the tax-notification decision issued by the tax authorities). Where taxpayers voluntarily correct errors in tax returns, late payment interest applies from the 91st calendar day after expiration of the deadline for payment of tax. The interest penalty for tax understatement applies to the whole period of understatement of the tax liability, even though the taxpayer may have recourse to the administrative or court appeal procedure.
The rate of the interest penalty equals 120% (100% in cases where taxpayers voluntarily correct errors in tax returns) of the yearly NBU discount rate for each day of tax understatement.
In addition to financial sanctions, administrative or criminal liability may apply.
Failure to notify tax authorities in case of the taxpayer’s reorganization would result in revoking VAT registration. Fines for violation of the registration requirements (UAH340–UAH2,040) may also apply.
If the taxpayer fails to retain primary accounting documents requested by the tax authorities upon audit, this will trigger a fine of UAH1,020 (UAH2,040 for repeated violation).
Penalties for fraud. Deliberate tax evasion committed by a taxpayer is recognized as a criminal offense under the Criminal Code of Ukraine. Tax evasion may trigger criminal responsibility, if
the total amount of underpaid tax (including financial sanctions) exceeds 3,000 statutory nontax able minimum income (for 2021 the threshold is UAH3,405,000 [approx. EUR108,381]).
The potential penalties for tax evasion include fines (the amount gradually rises depending on the amount of unpaid tax liability), restriction to occupy certain positions or conduct certain activities for up to three years and, in certain cases, confiscation of property.
Ukrainian Criminal Code does not envisage any special provisions on criminal liability of tax advisors.
Personal liability for company officers. Administrative penalties for violation of tax rules (includ ing late registration/filing, underpayment of tax, errors in VAT returns, etc.) are levied on the company as a whole.
In addition, criminal penalties for tax evasion (refer above) are imposed on the relevant natural persons/employees of the taxpayer (in practice this may include directors and chief accountants).
Statute of limitations. The statute of limitations in Ukraine is 1,095 days. This is starting from the filing deadline (20th calendar day of the month following the reporting months). During this period, the tax authorities can audit taxpayers, as well as assess tax and apply penalties for a failure to comply with the VAT law.
The statute of limitations does not apply (i) where the taxpayer fails to file a VAT return or (ii) the taxpayer is found guilty of tax evasion by the court.