It has already become a tradition at the beginning of the year to introduce various innovations in the field of taxation. Some of the novelties became effective in late spring last year. This is the Law of Ukraine “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” (hereinafter – Law No. 466). Many tax novelties were proposed by lawmakers at the end of the year. Today we will consider what will be the value added tax (hereinafter – VAT) like in 2021.
What will change for farmers
A major innovation in the collection of VAT in early 2021 will be the introduction of a separate reduced VAT rate of 14% by draft law No. 3656 of June 15, 2020 (hereinafter – Draft No. 3656).
Draft No. 3656 was adopted by the parliament. However, it is proposed to be canceled. If it enters into force and is published, the rate of 14% will take effect on February 1, 2021.
The VAT rate of 14% will be applied by all business entities in case of supply in the customs territory of Ukraine and import into the customs territory of Ukraine (ie in case of import) of agricultural products classified by the following commodity items according to UKT FEA: 0102, 0103, 0104 10, 0401 (in the part of whole milk), 1001, 1002,1003, 1004, 1005, 1201, 1204 00, 1205, 1206 00, 1207, 1212 91, except for the import of goods specified in item 197.18 of the Tax Code of Ukraine (hereinafter – the Tax Code) (paragraph ‘d’ of item 193.1 of the Tax Code).
The rate of 14% will be included in the price of delivery of goods.
Other types of agricultural products will be supplied both on the territory of Ukraine and imported at the general rate – 20%
All agricultural products will be exported at the usual export rate of 0%.
The new VAT rate causes a change in the form of the tax invoice and VAT return.
What will change for the spheres of cinema, culture and hotel business
At the end of 2020, the list of transactions with a rate of 7% has been expanded. VAT at the rate of 7% should be charged not only when selling drugs, but also in the case of:
- supply of services for showing (conducting) theatrical, opera, ballet, music, concert, choreographic, puppet, circus, sound, light and other performances, productions, performances of professional art groups, artistic groups, actors and performers, cinematographic premiers, cultural and artistic events;
- provision of services for the display of original musical works, demonstration of exhibition projects, excursions for groups and individual visitors to museums, zoos and reserves, visits to their territories and facilities by visitors;
- provision of services for distribution, screening, public announcement and public screening of films adapted to Ukrainian-language versions for the visually impaired and the hearing impaired;
- provision of temporary accommodation services provided by hotels and similar temporary accommodation facilities (class 55.10 group 55 of KVED DK 009: 2010).
The rate of 7% will also apply to transactions on supply of these services by non-residents (import) to a resident on the territory of Ukraine.
Benefits for the film industry
Many VAT benefits are provided to the film industry, namely;
1) from January 1, 2021, the import of goods that are part of the national cinematographic heritage is exempt from VAT (item 197.25 of the Tax Code);
2) film production operations are exempt from VAT for two years (item 12, section 2, chapter XX of the Tax Code);
3) for the period from January 1, 2023 to January 1, 2025, transactions on supply of services for demonstration, distribution and screening by demonstrators and distributors of national films and foreign films, which are dubbed, sounded in the state language on the territory of Ukraine, are exempt from VAT, provided that such national and foreign films are adapted into Ukrainian-language versions for the visually impaired and the hearing impaired.
