Ukrainian companies export both goods and services. Let’s consider how these transactions are subject to VAT. In case the services are provided to a non-resident there is no need to make a customs declaration. VAT obligations for resident who is a VAT payer rise in compliance with the first event rule:
- on the date the advance payment made by a non-resident is received;
or
- on the date a document that certifies provision of services is prepared (i.187.1 (a) TCU).
At the same time the advance receipt is confirmed by a bank statement, while provision of services – by a certificate of services rendered (works performed).
VAT basis is also determined on general terms under i.188.1 TCU, in particular: based on agreed (contract) value, but not less than the cost of such services purchase, and in case of self-produced services delivery – not less than common cost. Of course, when services are rendered to a non-resident at no cost then the tax obligation must be accrued at a purchase or common cost.
As payment for services is made in foreign currency it is converted into national currency at the NBU exchange rate on the date the VAT obligations rise.
Compared to goods export transactions which are VAT free, TCU doesn’t provide for a single rate for taxation of services provision to non-residents.
VAT rates on services provided to a non-resident:
- 0% – in the cases listed in subitem 195.1.3 TC;
- 20% – if the place of services delivery is located in Ukraine;
- VAT-free – if, under art. 186 TCU, the place of services delivery is outside the territory of Ukraine.
Zero-rate is applied only to particular types of services specified in subitem 195.1.3 TCU, in particular:
- international transportation of passengers, baggage and commodities by rail, road, sea, river or air. Besides, Zero-rate VAT is applied only to transportations carried out under single international shipping document;
- services that provides works with movable property previously imported to the territory of Ukraine for performance of work on that property and for its further transportation outside the territory of Ukraine by the payer who performs that work or by the receiver who is non-resident. A common example is services for processing of raw materials;
- maintenance services for aircrafts that make international flights. Such services include, in particular, groundlanding services and services provided for the passengers at the airports, landing and takeoff, maintenance services provided by the staff, etc.
Other transactions relating to the services provided for the non-residents are either subject to 20-rate VAT or not subject to taxation at all. They became a subject to taxation when in accordance with article 186 TCU the are delivered on the customs territory of Ukraine (i.185.1 (b)TCU). Moreover, the fact that services are delivered outside the customs territory of Ukraine for export is not always a decisive one.
Subitem 186.2–186.4 TCU provide categories of services, place of delivery of which is determined by the place of supplier or recipient registration. So, the place of delivery differs for different types of services. And it is substantial to properly determine this place, as it affects the VAT taxation of services.
Pay your attention when applying items 186.2 and 186.3 TCU. as other rules of TCU may make adjustments. For instance, services for raw material processing may be subject to subitem 195.1.3 (b) TCU which provide for zero-rate VAT. But in case these services are related to movable property then you should apply subitem 186.2.1 (d) TCU.
