Is it necessary to accrue the VAT liabilities on non-current assets for which tax credit was formed before transition to the simplified taxation system at 2% income rate and after an end of the martial law, state of emergency, will such assets be used in

Information and Reference Department, published 06 May 2022 at 10:57 Chapter: News

Sub-paragraph 9.9 Paragraph 9 Sub-section 8 Section XX “Transitional Provisions” of the Tax Code of Ukraine as of 02.12.2010 № 2755-VI with changes and amendments stipulates that for products / services, non-current assets purchased / manufactured from the VAT before usage of taxation peculiarities, established by Paragraph 9 Sub-section 8 Section XX "Transitional Provisions" of the TCU, which are used (supplied, sold) by the single tax payer of Group III in a period of usage of taxation peculiarities, established by Paragraph 9 Sub-section 8 Section XX "Transitional Provisions" of the TCU, in non-taxable operations, the VAT payer is obliged not later than the last day of reporting period when the restoration of his / her the VAT payer’s registration, to accrue tax liabilities according to Paragraph 198.5 Article 198 of the TCU.

Taxation base calculating tax liabilities, according to the Fourth clause of Sub-paragraph 9.9 Paragraph 9 Sub-section 8 Section XX "Transitional Provisions" of the TCU, for non-current assets is determined based on the book (residual) value at the beginning of reporting (tax) period during which such operations are carried out (in the absence of accounting for non-current assets – based on normal price) and products / services – based on their purchase cost.

Accordingly, payer is obliged to ensure the compilation not later than the last day of the first reporting period after an end of the martial law, state of emergency and register consolidated tax invoice for such products / services, non-current assets in the Unified Register of Tax Invoices.

As follows, if non-current assets, amount of tax on which was included in tax credit on the date of payer’s transition to the simplified taxation system at 2% income rate, used during a period of stay on the simplified taxation system and continue to be used after resumption of its registration as the VAT payer, is not required to accrue the VAT liabilities on such non-current assets.

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