Parliament adopts draft Tax Code's section on value-added tax

Parliament has adopted amendments to the draft Tax Code's fifth section related value-added tax (VAT). With the adoption of the fifth section, the lawmakers passed 211 articles out of 340 articles of the 19-section Tax Code.

The amended document retains as a norm the need for entrepreneurs to register as VAT payers if their annual turnover exceeds UAH 300,000, and foresees a VAT reduction from the current 20% to 17% as of 2014.

The draft Tax Code holds that VAT refunds will be paid automatically if a taxpayer meets a number of requirements and has been inspected. In particular, VAT will be automatically refunded to a company that is not bankrupt, has no tax payment debts, and has at least 20 employees who are paid at least 2.5 times the minimum wage per capita.

The document sets a fine for a delay in VAT refunds at 120% of the discount rate of the National Bank of Ukraine as of the day the fine was imposed, including the day of its repayment. It also bans pegging the payment of refunds from the budget or limitation on the payment to the availability or shortfalls of revenues from that tax in separate regions of Ukraine.

Not subject to VAT reimbursement are taxpayers registered less than 12 months prior to the month included in the application for VAT refunds, as well as those companies whose sum of taxable operations over the past 12 calendar months is lower than the sum applied to refunds.

The document exempts from VAT baby foods and goods for newborns in keeping with the list passed by the Cabinet of Ministers of Ukraine, as well as education, health care and funeral services.

In addition, the draft Tax Code grants the right to a so-called tax credit, in particular, on the purchase or production of goods, including in the case they are imported to Ukraine's customs territory, and services and the obtaining of services provided by a non-resident on Ukraine's customs territory.

At the same time, the right to tax credits does not extend to bought goods/services without a tax invoice or registered in violation of requirements and not confirmed with customs declarations.

As reported, the parliament on November 16, 2010, passed amendments to the five sections out of 19 of the draft Tax Code at second reading.

The draft Tax Code was passed at first reading on October 7, 2010.