Supply of defense-related products within the customs territory of Ukraine are exempt from the VAT, according to Sub-paragraph 4 Paragraph 32 Sub-section 2 Section XX of the Tax Code of Ukraine, if the following conditions are met:
- Products belong to legally defined defense categories and are classified according to the list in the Tax Code of Ukraine.
- Supply is carried out within framework of the state contract (agreement).
- Supplier is the executor or co-executor of such contract (agreement).
- Buyer is the state customer.
If these conditions are not met, the VAT is accrued according to rules specified by the law.
Also, if the executor or co-executor of the state contract (agreement) purchased products or services with the VAT, but uses them for the VAT-exempt transactions, then no additional tax liabilities arise.
For more information regarding specifics of the VAT exemption for supply of defense products in the customs territory of Ukraine carried out by enterprises that are the executors / co-executors of the state contracts (agreements), please visit the link: https://tax.gov.ua/en/new-about-taxes--news-/871935.html
For reference.
Law of Ukraine № 808-IX as of 17.07.2020 “On defense procurement” with changes and additions.
Legal basis for the VAT taxation is established by Section V and Sub-section 2 Section XX of the Tax Code of Ukraine.
