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How to avoid obligatory registration as VAT payer in Ukraine

  • Author: Alexander Lashin
  • Practice areas: Taxation
  • Date of publication: 26/09/14

A value added tax (VAT) is one of the most effective new taxes, it is one of the most profitable parts of the state and it was introduced in Ukraine according to the experience of foreign countries of the Western Europe.

This article is dedicated to the procedure of calculation term which is consisted of 12 months. During this period of time a tax payer must not overtop a limit amount of money (300 000UAH) and then there won’t appear an obligation to register as a VAT tax payer.

As there is a voluntary and mandatory registration, entrepreneurs very often can’t decide how to calculate 12 months – since the moment of a new tax period or since a specific month.

If you want to get an answer, first of all, you should examine three matters: who is a VAT tax payer according to the law, what definition “supply of goods and services during VAT calculation” means and who is obliged and can be a VAT tax payer.

Who is a VAT tax payer according to the law?

The answer for this question is regulated by the Article 180 of the Tax Code of Ukraine. The VAT tax payers can be:

  • Person who conducts and does business and was registered as a VAT tax payer voluntary;
  • Person who was registered as a VAT tax payer or person who is obliged to register (if the limit was overtopped);
  • Person who does import of goods at the territory of our country (except import of cultural values which were produced more than 50 years ago).

Also the Article 180 of the Tax Code of Ukraine defines the list of other persons who are obliged to pay VAT in a case of some circumstances.

What definition “supply of goods and services during VAT calculation” means?

According to the Article 14.1.191 and 14.1.185 of the Tax Code of Ukraine we need to admit that supply of goods is any transferring of rights to hold the balance of goods by an owner, including their sale, transfer, granting and supply according to a court’s decision.

Supply of goods can be any operations which are not a supply or other operation which causes transferring of rights for objects of intellectual property or other intangible assets and also it is a result of providing services which are used in the process of conducting some actions (transportation, consultations).

Who is obliged and can be a VAT tax payer?

You can become a VAT payer voluntary and also if your profit is more that required limit.

If a scope of provided supply services for other VAT payers is equal or more than 50% during the last 12 months then an entrepreneur can be registered as a VAT payer voluntary. This rule has been determined since adopting the new Tax Code of Ukraine in 2010.

So these persons must be in accordance with abovementioned requirements.

Main attention should be paid to the mandatory registration of a VAT payer because infringement of the laws can lead to the sanctions.

It is mandatory to register as a VAT payer for an entrepreneur which profit is more than 300 000 UAH during the last 12 months (without calculation of a VAT)

Altogether this term can’t be equate to the calendar year from the 1st of January and to the 31st of December.

A person must calculate 12 months-term in reverse order for calculation 300 000UAH. A calculated period is less than 12 months for entrepreneurs who do business less than 12 months.

If tax payers have already calculate VAT in a period of the last 12 month, then scope of tax operations is calculated without VAT. Evidences of this must be provided. The sum of profit, got from supply of goods and (or) services, must be decreased by a VAT payer for a sum of VAT.

Calculation of the last 12 months is also used for payers of the Unified Tax if they switch over to the general taxation system.

If entrepreneur’s profit is more than 300 00 UAH during the last 12 months then from the 11th day of the next month when there was overtop he must be registered as a VAT payer.

You need to keep attention that there is no regulated procedure of calculation 12 months according to the laws. But the courts’ practice shows that you have to do it since the first day of the first month and finish it on the last day of 12th month (the Order of the Higher Administrative Court dated the 2nd of September 2013 no. K/9991/65057/11, the Order of Odessa Higher Appeal court dated the 24th of October 2013 no. 821/1062/13-a). The State Fiscal Service of Ukraine supports this position while examination and drafting an act.

We pay your attention that if profit is overtopped for the last 12 months then there will be calculated fine in a size of 25% of a sum of obligations.

According to this you should always calculate profit for the last 12 months. Also if this profit is in minus then sum of losses must be decreased according to a sum of profit.

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