The State Tax Service of Ukraine published an information letter on the peculiarities of VAT taxation of electronic services supplied by non-residents to Ukrainian individuals 

It generally repeats many of the provisions of the Tax Code of Ukraine, in particular, the concept and types of electronically supplied services (hereinafter, the “ESS”), the place of ESS supply, details of non-resident’s registration as VAT payer in Ukraine and payment of VAT liabilities, etc. Beyond that, the letter provides several significant answers:

May a non-resident register as a VAT payer in Ukraine before 01 January 2022 and otherwise than through a special web-portal?

No, the Tax Code of Ukraine does not provide for such possibility.

Should a non-resident obtain any evidence confirming that the ESS recipient is a B2B customer?

The main approach used to determine the ESS recipient’s status is a public agreement and / or a customer's questionnaire. In the questionnaire, the recipients should indicate their status: a legal entity, an individual entrepreneur registered as a VAT payer, an individual entrepreneur not registered as a VAT payer or an individual. The questionnaire allows determining the customer's category and the necessity of VAT accrual.

Furthermore, according to the Tax Code of Ukraine, an individual entrepreneur registered as a VAT payer may confirm his/her status by providing a valid VAT number.

Will a non-resident registered as a VAT payer be held liable for incorrect determination of the ESS recipient’s status and non-accrual of VAT liabilities for that reason (e.g. if the provided information was inaccurate or the information was not provided at all)?

A non-resident will be held liable only if his/her/its fault is proved by the tax authorities. The non-resident will be found in violation if it is established that he/she/it was in position to comply with the rules and regulations, but did not take sufficient measures to comply.

If a non-resident has not registered as a VAT payer in due time, will such non-resident be able to pay VAT liabilities for the reporting period, in which he/she/it should have already been registered? What are the possible consequences of such late payment of VAT liabilities?

No, such possibility is not provided for by the Tax Code of Ukraine. Provision of ESS to Ukrainian individuals by a non-resident having no obligatory VAT registration entails imposition of a fine on such non-resident.

The fine amounts to 30 minimum wages (UAH 195k, or approx. EUR 6.4k).
Will a temporary VAT exemption apply to the supplies of software and its updates, including electronic copies, access to such copies, as well as remote maintenance of software and electronic equipment, by non-residents?

Temporary VAT exemption will apply to the supplies of software and it updates, including electronic copies, access to such copies. The tax authorities have not commented on VAT exemption for remote maintenance of software and electronic equipment.

What are the changes in WHT accrual on non-resident’s income from advertising production in Ukraine?

For the purposes of WHT taxation, payments to non-residents for advertising production can be regarded as other income from provision of services. In this case, these payments will not be subject to WHT.

Should you have any questions regarding this Tax Alert, please contact our experts at Tax and Legal Department.

Subscribe to our Telegram channel "Deloitte Ukraine Voices" to stay tuned on the latest firsthand news, articles, podcasts, and other materials. Hear the voices of our experts!