Should the VAT payer accrue VAT liabilities and draw up tax invoice receiving services in the customs territory of Ukraine from a non-resident individual?

Paragraph 180.2 Article 180 of the Tax Code of Ukraine as of 02.12.2010 № 2755-VI with changes and amendments (hereinafter – TCU) stipulates that individual responsible for charging and paying 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 for the cases established by Article 208 note 1 of the TCU.

According to requirements of Paragraph 208.2 Article 208 of the TCU, the recipient of services supplied by non-residents, given that the place of supply is located in the customs territory of Ukraine, accrues tax at the basic tax rate or at 7% rate for services, defined in Clauses 4 – 6 of Sub-paragraph "c" of Paragraph 193.1 Article 193 of the TCU, on taxation basis determined according to Paragraph 190.2 Article 190 of the TCU.

In this case, the recipient of services – taxpayer, in manner prescribed by Article 201 of the TCU, draws up tax invoice indicating amount of tax accrued by him / her, which is a ground for assignment of tax amounts to tax credit in the prescribed manner and is subject to mandatory registration in the Unified Register of Tax Invoices.

Paragraph 187.8 Article 187 of the TCU stipulates that the date of occurrence of tax liabilities for supply of services by non-residents to business entities with place of supply located in the customs territory of Ukraine is the date of debiting funds from the taxpayer's bank account to pay for services or the date of issuance of document certifying supply of services by non-resident, depending on which of the cases occurred earlier.

Date of assignment of tax amounts to tax credit for supply of services by non-resident in the customs territory of Ukraine is the date of drawing up tax invoice for such operations by the payer, subject to registration of such tax invoice in the Unified Register of Tax Invoices (Paragraph 198.2 Article 198 of the TCU).

Sub-clause "c" of Sub-paragraph 14.1.122 Paragraph 14.1 Article 14 of the TCU stipulates that non-residents include individuals who are not residents of Ukraine.

Based on the above specified, the VAT payer receiving services from non-resident individual in the customs territory of Ukraine must accrue the VAT liabilities, draw up tax invoice and register it in the Unified Register of Tax Invoices.

More information is in the “Knowledge Base” of public information and reference resource