VAT on everything, with a limit on tea and coffee. What does the draft law on parcel taxes propose?

The Verkhovna Rada website has published a draft law that proposes to abolish the duty-free threshold for parcels from abroad. Moreover, parcels with perfumes, tea and coffee, even from relatives, may be subject to the tax. RBK-Ukraine cites the main provisions of draft law No. 12429.

Tax on all parcels? What they want to change

According to the current legislation, Ukraine has a duty-free threshold of 150 euros. This means that parcels and goods sent from abroad, the customs value of which does not exceed this amount, are not taxed.

In other words, if the value of goods (in one parcel) ordered from a foreign online store is less than EUR 150, such a shipment is not taxed. A similar approach applies to parcels from an individual to an individual, for example, from a relative.

Draft Law No. 12429 abolishes the duty-free threshold.

While currently, goods over EUR 150 are subject to 20% VAT + 10% import duty (on the amount exceeding the limit), with the adoption of the law, all online purchases will be subject to taxation.

In particular, goods in international shipments up to EUR 150 will be subject to only 20% VAT. Anything above this limit will be subject to VAT + 10% import duty (as it is now).

Tax-free up to EUR 45, but with limits for tea, coffee, and perfume

The only exception is goods worth up to EUR 45 that an individual abroad sends to another individual in Ukraine. It is proposed to establish that such transactions are not subject to taxation.

However, there are a number of clarifications. First, the goods must be sent without any payment, be intended for personal/family use, and the characteristics and quantity must not indicate a commercial purpose.

Second, the provision on tax-free transactions does not apply if the parcel contains

• excisablegoods (e.g., alcohol or tobacco products)

• perfume in a volume of more than 50 grams or eau de toilette in a volume of more than 0.25 liters

• coffee in excess of 500 grams; coffee extracts and essences in excess of 200 grams

• tea in excess of 100 grams; tea extracts and essences in excess of 40 grams

If the volume of these goods exceeds the limit, even a private parcel worth up to 45 euros will have to pay 20% VAT.

Who will pay VAT and become a subject of "distance selling

Draft Law No. 12429 introduces a new transaction subject to VAT - the remote sale of goods.

A non-resident person who makes such a sale will be liable to pay VAT on distance selling. By analogy with Council Directive 2006/112/EC, it is proposed to equate persons who facilitate sales through online platforms, portals and websites to persons who carry out distance sales of goods.

This definition includes online stores, marketplaces, and platforms for the sale of used goods, such as eBay or OLX. It should be noted that this led to media reports that buyers on OLX may be forced to pay VAT. However, according to the draft law, this refers to the supply of goods from the territory of another country to Ukraine.

Such platforms will have to register as VAT payers, collect tax from buyers and transfer it to the state budget, and store information about parcels and their recipients for 10 years.

In addition, goods up to EUR 150 are exempt from VAT when imported into Ukraine, provided that VAT is paid on distance sales and the customs declaration contains information about the special tax number of the person paying this VAT.

As a rule, the value added tax is included in the price tag. And with the adoption of the law, Ukrainians will surely see a rise in the price of budget category goods on foreign marketplaces.

Author: Danylo Kramarenko