Regarding the application of 7% VAT rate by taxpayers during legal regime of the martial law, state of emergency in the supply of fuel and other petroleum products

 For a period of legal regime of the martial law / state of emergency, according to Paragraph 82 Sub-section 2 Section XX of the Tax Code of Ukraine, operations on the import to the customs territory of Ukraine and supply in the customs territory of Ukraine (including produced in the customs territory of Ukraine) of the following goods are taxed at the VAT rate of 7%:

- gasolines of motor, heavy distillates and liquefied gas, classified according to Ukrainian classification of the FEA codes specified in Sub-paragraph 215.3.4 Paragraph 215.3 Article 215 of the TCU for which the excise tax rate in the amount of 0.00 Euros per 1000 liters is set  according to Paragraph 41 Sub-section 5 of this Section;

- crude oil or oil products obtained from bituminous rocks (minerals), classified according Ukrainian classification of the FEA codes 2709 00 10 00 and 2709 00 90 00 (hereinafter – fuel and other petroleum products).

As follows, during legal regime of the martial law / state of emergency during the supply of fuel and other petroleum products the cost of such goods includes the7% VAT rate (regardless of when such fuel and oil products were purchased – before introduction of the 7% VAT rate on such goods or after its introduction).

Formation of tax credit for the purchase of goods and services, as well as for import of goods to the customs territory of Ukraine, for their use in operations subject to 7% rate taxation, in particular, for supply of fuel and other oil products is carried out in the general order, that is, based on the amount of VAT paid (accrued) on the purchase / import of such goods / services. Also, the tax credit formed in previous tax periods for purchase of goods and services, as well as when for import of goods to the customs territory of Ukraine used in operations subject to the VAT at 7% rate, in particular, for the supply of fuel and other petroleum products is not subject to adjustment in connection with application of this VAT rate.

Therefore, based on the above specified, there is a possibility of forming negative value of the value added tax amount, defined as difference between amount of tax liability calculated at 7%  rate and amount of tax credit, which includes cost of fuel at a higher rate (20%). Herewith, such a negative value is not subject to reimbursement from the state budget to the payer’s account but will be included in tax credit and reduce amount of tax liabilities payable to the budget in subsequent reporting periods.

If a taxpayer who during the reporting period carried out operations for the supply of fuel and other petroleum products, specified in Paragraph 82 Sub-section 2 Section XX of the TCU, according to results of such reporting period, the tax amount determined in the VAT declaration, according to Paragraph 200.1 Article 200 TCU, is negative – then such amount of tax cannot be declared (neither in the current reporting period nor in the following reporting periods) for budgetary reimbursement, including at the expense of tax debt repayment of the VAT or other tax (cannot be declared in the VAT declaration in lines 20.1, 20.2, 20.2.1 and 20.2.2) and is subject only to inclusion in tax credit of subsequent reporting periods (reflected only in line 20.3 of the VAT declaration).

Regarding reflection of the VAT amount in a fiscal check

Requirements of Paragraph 2 Article 3 of the Law of Ukraine as of 06.07.1995 № 265/95-VR “On the use of registrars of settlement operations in trade, public catering and services” stipulate that business entities that supply (sell) fuel to the end users must continue to retail fuel with formation and issuance of relevant settlement documents with mandatory reflection of relevant VAT rate applicable to such supply (sale) operations.

Form and content of settlement documents is determined by Regulation on the form and content of settlement documents / electronic settlement documents, approved by Order of the Ministry of Finance as of 21.01.2016 № 13 with changes and amendments (hereinafter – Regulation).

Regulation stipulates that the VAT rate is one of obligatory requisites of settlement documents, in the absence of which document will not be accepted as a settlement document.

As follow, all business entities involved in the retail sale of fuel are required to reprogram their registrars of settlement operations, changing the VAT rate from 20 to 7% in order to comply with applicable law, reflect relevant tax obligations and levies and issuance of relevant settlement documents to consumers.

Regarding exemption from the excise tax on fuel sales

Law of Ukraine as of 15.03.2022 № 2120-IX (date of entry into force is 17.03.2022) amended Sub-section 2 Section XX "Transitional Provisions" of the Tax Code of Ukraine (hereinafter – Code) with Paragraph 82, according to which, temporarily for a period of the martial law / state of emergency, operations on supply in the customs territory of Ukraine and import to the customs territory of Ukraine of gasoline of motor, heavy distillates and liquefied gas, classified according to Ukrainian classification of the FEA codes, defined by Sub-paragraph 215.3.4 Paragraph 215.3 Article 215 of the Code, which according to Paragraph 41 Sub-section 5 Section XX "Transitional Provisions", for which there is set the excise tax rate of 0.00 Euros per 1000 liters, as well as crude oil or petroleum products obtained from bituminous rocks (minerals), classified under Ukrainian classification of the FEA codes 2709 00 10 00 and 2709 00 90 00, are taxed at 7% rate.

Payers of excise tax on fuel were producers and importers of such fuel until 17.03.2022. The price of fuel imported to Ukraine on 17.03.2022 by importers and / or sold in the customs territory by its producers and importers up to this date includes amount of paid excise tax. Reimbursement of such excise tax is currently envisaged.

Importing fuel to the customs territory of Ukraine by importers and selling fuel by producers, the excise tax is not accrued and is not paid to the budget starting from 17.03.2022. It should be noted that amount of such excise tax in the fuel price until 17.03.2022 was: 7.08 UAH per 1 liter of gasoline; 4.63 UAH per diesel fuel and 1.72 UAH per liquefied gas.

Glory to Ukraine!