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On VAT Taxation during Martial Law
On March 18, the State Tax Service of Ukraine published clarifications on the VAT taxation procedure in certain areas introduced by the Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other Legislative Acts Concerning the Implementation of the Norms Effective for the Period of Martial Law”.
- Defense goods.
– the regime of exemption from VAT taxation of operations on import and supply of certain goods on the customs territory of Ukraine for the implementation of measures to ensure national security and defense throughout Ukraine has been introduced;
– the term “defense products” has been changed to “defense goods”, bringing the terminology (names of goods) in line with the Law of Ukraine “On Defense Procurement”;
– operations on import and supply in the customs territory of Ukraine of special personal protective equipment and bulletproof vests for voluntary formations of territorial communities formed in accordance with the laws of Ukraine are exempted from VAT.
- Introduction of a 7% rate on operations on import and supply of fuel and oil products.
This rate applies to the following products:
– gasoline, heavy distillates and liquefied gas, classified according to UKT ZED codes;
– crude oil or petroleum products obtained from bituminous rocks (minerals), classified according to UKT ZED codes 2709 00 10 00 and 2709 00 90 00.
- Filling in VAT reports during martial law.
During the legal regime of martial law, taxpayers for transactions for the purchase of goods/services for which tax invoices and/or calculations of adjustments to them have not been registered by suppliers in the Unified Register of Tax Invoices (hereinafter – “URTI”), shall include VAT paid (accrued) as part of the value of purchased goods/services in the tax credit for the reporting period, on the basis of the primary (settlement) documents available to the payer, drawn up in accordance with the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”.
Within 6 months after the termination or revocation of the legal regime of martial law, payers are obliged to:
– ensure the registration of all tax invoices and adjustment calculations, the registration of which is postponed for the duration of the legal regime of martial law, in the URTI;
– adjust (bring into compliance) the tax credit declared by the payers during the latter on the basis of the primary (settlement) documents available to the payer;
– form a tax credit for the reporting periods following the period of martial law on the basis of the primary (settlement) documents available to the payer.
- Destruction (loss) of goods during the legal regime of martial law, state of emergency and transfer of goods to state or municipal ownership.
VAT liabilities shall not be accrued, and the tax credit formed upon their purchase shall not be adjusted for the following categories of goods:
– goods destroyed (lost) during the legal regime of martial law, state of emergency;
– goods transferred to state or municipal ownership, including in favor of voluntary formations of territorial communities, as well as those provided for the benefit of other persons in order to ensure the defense of Ukraine during the legal regime of martial law, state of emergency.
- Transfer of goods (services) for the needs of defense of Ukraine, protection of public safety and interests of the state.
In cases of transfer/provision of goods and services to institutions or organizations maintained at the expense of the state budget for the needs of defense of Ukraine, protection of public safety and interests of the state, such transactions shall not be considered transactions for the supply of goods/services and, accordingly, tax liabilities in accordance with paragraph 198.5 of Art. 198 of the TCU (paragraphs four to five of clause 321 of Subsection 2 of Section XX of the TCU) shall not be accrued.
Such institutions and organizations are: Armed Forces of Ukraine, National Guard of Ukraine, Security Service of Ukraine, Foreign Intelligence Service of Ukraine, State Border Guard Service of Ukraine, Ministry of Internal Affairs of Ukraine, State Emergency Service of Ukraine, State Security Service of Ukraine, State Service of Special Communication and Information Protection of Ukraine, voluntary formations of territorial communities, other formations in accordance with the laws of Ukraine, military formations, their associations, military units, subdivisions, institutions or organizations maintained at the expense of the state budget, as well as the central executive body ensuring the formation and implementation of state policy in the field of civil defense, civil defense forces and/or health care facilities of state and/or communal property, and/or structural units for health care of regional, Kyiv and Sevastopol Сity State Administrations.
The provisions of the fourth paragraph of clause 321 of subsection 2 of Section XX of the TCU shall not apply to transactions for the supply of goods/services subject to VAT at a rate of 0% (transactions for the supply of goods for fueling (refueling) or the provision of ground military transport or other special contingent of the Armed Forces of Ukraine and other institutions defined by the Resolution of the Cabinet of Ministers of Ukraine of March 02, 2022 No. 178 “Some Issues of Value Added Tax at a Zero Rate during the Introduction of the Legal Regime of Martial Law in Ukraine”).
- Non-inclusion of goods/services supplied by taxpayers as charitable assistance to the calculation of the maximum amount for the purposes of registration by VAT payers.
According to sub-clause 69.12 of clause 69 of subsection 10 of section XX of the TCU, the operations provided for in sub-clause 197.1.15 of clause 197.1 of Article 197 of the TCU performed during 2022 by public associations and/or charitable organizations shall not be included by such public associations or charitable organizations into the total amount for mandatory registration by the value added tax payer in accordance with Article 181 of the TCU.