The Law of Ukraine “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” No. 466-IX of January 16, 2020 (hereinafter – Law No. 466) introduced significant changes to transactions exempt from value added tax (hereinafter – VAT). More detailed information below.
The transaction exempt from VAT are affected the most. Some benefits have been abolished, other – added or curtailed.
More specific
Some rules of Art. 197 of the Tax Code of Ukraine (hereinafter – Tax Code) have been rewritten more properly:
- subitem 197.1.22 of the Tax Code according to which the transactions of services are exempt from VAT (not only transaction of payment for services as before) for basic research, research and development, if such services and/or works are delivered by a person who receives payment for these services/works form an account of a body that provides treasury services to budget funds;
- item 197.18 of the Tax Code according to which the transaction on import of breeding purebred animals, breeding (genetic) resources by codes according to UKT FEA 0101 10 10 00, 0102 10 10 00, 0102 10 30 00, 0103 10 00 00 are exempt from VAT , 0104 10 10 00, 0511 10 00 00, 0511 99 85 10, conducted not by the subjects of the special regime in accordance with Art. 209 of the Tax Code, but by the agricultural producers.
New preferential transactions
The list of preferential transaction has been expanded. Now the following transactions are exempt from VAT:
- import of goods/services in the customs territory of Ukraine, provided for the provision of humanitarian assistance to Ukraine by diplomatic missions, consular posts of foreign states and missions of international organizations in Ukraine in accordance with the Law of Ukraine “On Humanitarian Aid” No. 1192-XIV of October 22, 1999 (item 197.2 of the Tax Code);
- gratuitous transfer to possession and use of vehicles of UKT FEA commodity positions 8702 and 8703 for persons with disabilities and other privileged categories of the population defined by the legislation of Ukraine according to the list approved by the Cabinet of Ministers, and also vehicles of special purpose – temporarily till December 31, 2020 (item 70 section 2, chapter XX of the Tax Code);
- import of goods/services for humanitarian aid provided in Ukraine by diplomatic missions, consular posts of foreign states and missions of international organizations in Ukraine in accordance with the Law of Ukraine “On Humanitarian Aid” (paragraph 71, section 2, chapter XX of the Tax Code). In the period from January 1, 2016 to February 1, 2020, the procedure of VAT exemption established by paragraph 197.2 of the Tax Code must apply to such transactions.
What benefits have been abolished
VAT benefit for export of soybeans (UKT FEA commodity item 1201) and rapeseed (UKT FEA commodity item 1205) was abolished (former item 63, section 2, chapter XX of the Tax Code). Let’s recall: this benefit could be used by all exporters, except for soybean and rapeseed farmers, grown of agricultural lands which were owned by agricultural producers or in their permanent use or used by them on lease (sublease) or emphyteusis.
Now such transactions are subject to VAT in general manner at zero rate.
What benefits have been curtailed
VAT benefit provided by item 64, section 2, chapter XX of the Tax Code has been curtailed to some extent. As before, import and export from Ukraine of vehicles equipped exclusively with electric motors (one or several) specified in subcategories UKT FEA 8703 90 10 10 (including those made in Ukraine) are exempt from VAT till December 31, 2022. But this VAT benefit does not apply to import of products specified in subcategories UKT FEA 850231 00 00, 8541 40 90 00, 8504 40 88 00. We are talking about the supply of electric generators for renewable energy sources (wind).
