The Verkhovna Rada of Ukraine (Ukrainian parliament) has introduced a bill No. 2634, which proposes to improve the taxation of non-residents, namely, to levy a value-added tax (VAT) on electronic services provided to Ukrainians by foreign companies that do not have a physical representation in our country.

The amount of VAT will be 20%.

What is the point

In an explanatory note, the authors of the bill cite the experience of Russia, where a similar taxation system has been in operation since 2017. Non-residents providing electronic services in the Russian Federation (digital content, data storage and processing, domain registration and hosting, etc.) must be registered by the tax authority and pay VAT.

“Among the technological giants, Apple Distribution International, Google Commerce, Microsoft Ireland, Netflix International B.V., Wargaming Group, Bloomberg, Alibaba, Booking.com, and others have been registered by the regulatory body. In total, 1,580 companies have been registered in the tax authorities since the tax was introduced. According to official figures, such companies (B2C) paid 9.4 billion rubles to the budget in 2017, 12 billion rubles – in 2018, and 12 billion rubles – in the first quarter of 2019. (70% of the amount is paid by the largest IT-companies).”

Meanwhile, in Ukraine, only companies that have a physical representation in the country pay taxes. Because of this, according to deputies, the budget does not receive huge amounts of taxes from electronic services that non-residents provide to Ukrainians remotely.

What is proposed in the bill

Such companies are offered to allow registration in tax authority online, as well as to pay taxes in foreign currency without registering tax invoices.

Complete list of offers:

  • to define a list of electronic services;
  • to include non-residents in the list of persons who are registered as payers of value-added tax;
  • to establish the rules for determining the place of providing electronic services (B2C);
  • to establish a form and determine the procedure for sending a tax notice to a non-resident and complaints about such a decision;
  • to define a simplified procedure for registering a VAT payer for non-resident suppliers, which can be carried out remotely in electronic form on a specially developed web portal;
  • to determine the rules for VAT tax accounting for non-residents providing electronic services to individuals whose delivery place is located in the customs territory of Ukraine;
  • exemption from the obligation of non-residents to register tax invoices;
  • to introduce the payment of a tax obligation for a non-resident in foreign currency.