Business appealed to the State Customs Service regarding double taxation in the formation of customs value of goods

The Federation of Employers of Ukraine (FEU) addressed the State Customs Service of Ukraine with a request to inform about its position on the legal certainty regarding the need to include freight forwarding costs in the customs value in full in case of failure to separate the costs of such services before and after crossing the customs border of Ukraine.

The appeal was triggered by complaints from foreign economic operators regarding unjustified, in their opinion, adjustment of the customs value of goods by customs officials based on the letter of the State Customs Service dated 15.03.2016 No. 5591/6/99-99-19-03-02-15.

At the same time, the FEU expressed its disagreement with such actions of the customs, as it leads to double VAT taxation of these services: during the provision of forwarding services and during customs clearance of goods.

The legal grounds for this position were also provided in accordance with parts ten and eleven of Article 58 of the Customs Code, subparagraph "b" of paragraph 185.1 of Article 185 and subparagraph "g" of Article 186 of the TCU and parts one and two of Article 929 of the Civil Code, Article 316 of the Commercial Code, Law No. 1955-ІУ "On Freight Forwarding Activities" dated July 1, 2004.

These arguments of the FEU are summarized below:

- the costs of transportation of goods after importation are not included in the customs value of goods, provided that they are deducted from the price actually paid for the goods being valued, which are documented and calculable;

- transportation and forwarding services are a separate object of VAT taxation. Remuneration for services related to the organization and provision of transportation (freight forwarding services) is ordered by a resident of Ukraine and invoiced to him/her with the charge of VAT at the rate of 20% (regardless of whether such services are provided by a resident or non-resident) as for services with the place of delivery in the customs territory of Ukraine. The respective VAT is fully transferred to the State Budget of Ukraine and recognized as tax liabilities;

- the reference in the letter of the State Customs Service dated 15.03.2016 No. 5591/6/99-99-19-03-02-15 to the Methodological Recommendations on the formation of the cost of transportation (works, services) in transport, approved by the Order of the Ministry of Transport of Ukraine dated 05.02.2001 No. 65 (hereinafter - the "Methodological Recommendations") is unreasonable and unlawful, since, firstly, the Methodological Recommendations are not a regulatory act and are of a recommendatory nature, and, secondly, they relate exclusively to accounting issues at transport enterprises and in no way regulate the issue of determining the customs value of goods.

We are awaiting the response of the State Customs Service and will report on it.