VAT on services received from non-residents

Procedure for VAT taxation of services received by a VAT payer from a non-resident.
Can a VAT payer claim a budgetary refund for services received from a non-resident not registered as a VAT payer?

The legal framework for VAT is set forth in Section V and Subsection 2 of Section XX of the Tax Code of Ukraine.

Pursuant to subparagraph "b" of paragraph 185.1 of the Code, the object of taxation is transactions of taxpayers for the supply of services, the place of supply of which is located in the customs territory of Ukraine, in accordance with Article 186 of the Code.

The place of supply of services is the place of registration of the supplier, except for the transactions specified in paragraphs 186.2, 186.3 and 186.31 of the Code (paragraph 186.4 of the Code).

Thus, the procedure for VAT taxation of transactions on the supply of services directly depends on the place of supply.

The specifics of VAT taxation of services supplied by non-residents whose place of supply is located in the customs territory of Ukraine are set out in Articles 180 and 208 of the Code.

Pursuant to clause 180.2 of the Code, the person responsible for the calculation and payment of tax to the budget in case of supply of services by non-residents, including their permanent establishments not registered as taxpayers, if the place of supply of services is located in the customs territory of Ukraine, is the recipient of services, except as provided for in Article ²⁰⁸¹ of the Code.

The recipient of services supplied by non-residents whose place of supply is located in the customs territory of Ukraine shall pay tax at the basic tax rate or at the rate of 7 percent for services specified in paragraphs four through six of subparagraph "c" of paragraph 193.1 of the Code on the tax base determined in accordance with paragraph 190.2 of 190 of the Code. In this case, the recipient of the services - a taxpayer in accordance with the procedure set forth in Article 201 of the Code - shall draw up a tax invoice indicating the amount of tax accrued by him/her, which is the basis for attributing the tax amounts to the tax credit in accordance with the established procedure. Such a tax invoice is subject to mandatory registration in the Unified Register of Tax Invoices (clause 208.2 of the Code).

If the recipient of the services is registered as a taxpayer, the amount of accrued tax is included in the tax liabilities of the declaration for the relevant reporting period (clause 208.3 of the Code).

It should be noted that in accordance with clause 8 of the Procedure for filling out a tax invoice, approved by the order of the Ministry of Finance of Ukraine dated 31.12.2015 No. 1307, registered with the Ministry of Justice of Ukraine on 26.01.2016 under No. 137/28267 (hereinafter - Procedure No. 1307), when preparing tax invoices, the peculiarities of filling out which are set out in subparagraphs 10 - 15 of Procedure No. 1307, in the upper left part of such invoices in the column "Not subject to provision to the recipient (buyer) for a reason", a note "X" is made and, in particular, in the case of preparing a tax invoice for the supply of services to a non-resident recipient (buyer), the place of supply of which is located in the customs territory of Ukraine, the type of reason "21" is indicated.

Paragraph 12 of Procedure No. 1307 stipulates, in particular, that in the case of a tax invoice prepared by a recipient (buyer) of services from a non-resident whose place of supply is located in the customs territory of Ukraine, the line "Individual tax number of the supplier (seller)" of such invoice shall contain the conditional TIN "500000000000", and the line "Supplier (seller)" shall contain the name (full name) of the non-resident and the name of the seller (full name). S.) of the non-resident and the country in which the seller (non-resident) is registered shall be separated by commas, and the line "Taxpayer's tax number or series (if any) and passport number" shall not be filled in. The recipient (buyer) shall enter his/her own data in the lines provided for filling in the buyer's data. Section B of the tax invoice is to be filled in without any specifics.

The procedure for determining the amount of tax to be refunded from the State Budget of Ukraine and the timing of payments are set out in Article 200 of the Code.

Sub-clause "b" of clause 200.4 of Article 200 of the Code stipulates, in particular, that the amount of negative value calculated in accordance with clause 200.1 of Article 200 of the Code is subject to budgetary refund at the request of the payer in the amount of tax actually paid by the recipient of goods/services in the previous and reporting tax periods to the suppliers of such goods/services or to the State Budget of Ukraine, in the part not exceeding the amount calculated in accordance with clause 2001.3 of Article 2001 of the Code at the time of receipt of the tax return by the supervisory authority, to the respective account of the taxpayer in a bank/non-bank payment service provider and/or as payment of monetary obligations or repayment of the tax debt of such taxpayer on other payments to the state budget.

Based on the provisions of subparagraph "b" of paragraph 200.4 of the Code, a taxpayer may not declare for budgetary refund the VAT amounts accrued on transactions for the receipt of services from a non-resident not registered as a VAT payer, the place of supply of which is located in the customs territory of Ukraine, as such amounts are not paid either to the service provider or to the State Budget of Ukraine.