The taxation of value-added tax (hereinafter – VAT) of services provided by non-residents has certain peculiarities and always raises a number of questions that require answers of specialists. Mostly, if it is mediation services. How to determine the place of delivery of mediation services?
Any services in the field of foreign economic activity are subject to VAT taxation only when their place of supply in accordance with Art. 186 of the Tax Code of Ukraine (hereinafter – TCU) is located in the customs territory of Ukraine. In particular, the place of supply of services specified in para. 186.3 of TCU is considered to be the one in which their payee is registered as a business entity or, in the absence of such place, the place of permanent or preferential residence.
The payee of the imported services (and services provided by a non-resident is nothing other than the import of these services) is a resident, and therefore it is considered that such services are provided in the territory of Ukraine, and therefore are subject to VAT.
Mediation services are mentioned in sub-para. “є” of para. 186.3 of TCU. However, this norm is described with certain limitations. It refers to the provision of intermediary services on behalf of and at the expense of another person (for example, under a contract of delegation) or on behalf of his/herself, but at the expense of another person (for example, under a commission agreement), however, provided that providing the buyer with the services listed in this sub-para.
If we treat this norm formally, then it can be applied only in the case of mediation in intermediary services. The sub-para “є” of para. 186.3 of TCU is incorrectly written, but it is unlikely that the legislator wanted to narrow the circle of legal relationships in intermediary transactions. The clarifications of tax authorities confirm this, in particular, those which are in category 101.07 ZIR. In their consultations, the requirements of sub-para. “є” of para. 186.3 of TCU, they apply to intermediary services for all services specified in para. 186.3 of TCU, namely:
a) provision of proprietary rights of intellectual property, the creation and use of objects of intellectual property rights, including licensing contracts, and the provision (transfer) of the right to reduce greenhouse gas emissions (carbon units);
b) advertising services;
c) consulting, engineering, engineering, legal (including attorneys), accounting, auditing, actuarial, as well as services in the development, supply and testing of software, data processing and providing advice on informatization, provision of information and other services in informatization sphere, including using computer systems;
d) provision of personnel;
e) leasing of movable property, except for vehicles and bank safes;
f) telecommunication services;
g) radio broadcasting and television broadcasting services;
h) mediation transactions with the services listed in this item;
i) freight forwarding services.
Therefore, if a resident receives from a non-resident intermediary services related to the provision of the above services, then they are subject to VAT, since their place of delivery is the place where the service recipient is a resident registered as an entity.
If there is no corresponding service in the indicated list, then the place of delivery of the mediation services is the place of registration of the supplier (para. 186.4 of TCU). Given that the supplier is a non-resident, it is considered that such services are provided outside the customs territory of Ukraine and, accordingly, are not subject to VAT.
Despite the fact that tax authorities have no universal approach to taxation of such transactions, they warn in their consultations that it is necessary to analyze the documents in each particular case of tax relations and apply to the controlling authority at the place of registration (category 101.07 ZIR).
