Conventional abbreviations:
List № 224 is List of products (including medicines, medical devices and/or medical equipment) necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus, import operations of which to the customs territory of Ukraine and/or supply of which to the customs territory of Ukraine are exempted from the value added taxation and which are exempted from payment of import duty
Resolution № 224 is Resolution of the Cabinet of Ministers of Ukraine as of 20.03.2020 "On approval of the list of products (including medicines, medical products and/or medical equipment) necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus, import operations of which to the customs territory of Ukraine and/or supply of which to the customs territory of Ukraine are exempted from the value added taxation and which are exempted from payment of import duty" with changes and amendments
Resolution № 1260 is Resolution of the Cabinet of Ministers of Ukraine as of 09.11.2022 "On amendments to the list of products (including medicines, medical products and/or medical equipment) necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus, import operations of which to the customs territory of Ukraine and/or supply of which to the customs territory of Ukraine are exempted from the value added taxation and which are exempted from payment of import duty"
Resolution № 1288 is Resolution of the Cabinet of Ministers of Ukraine as of 16.11.2022 "On amendments to certain Resolutions of the Cabinet of Ministers of Ukraine"
Resolution № 1340 is Resolution of the Cabinet of Ministers of Ukraine as of 29.11.2022 "On amendments to the list of products (including medicines, medical devices and/or medical equipment) necessary for the implementation of measures aimed at preventing occurrence and spread of localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus, import operations of which to the customs territory of Ukraine and/or supply of which to the customs territory of Ukraine are exempted from the value added taxation and which are exempted from payment of import duty"
Question 1. Under what conditions does the VAT exemption regime apply in a period from November 11 to 16, 2022?
The VAT exemption regime established by Paragraph 71 Sub-section 2 Section XX of the Code for supply operations to the customs territory of Ukraine of products included in the Sub-section "Other" of Section "Medical products, medical equipment and other goods necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus of the List № 224 is applied in the following order:
- from 11.11.2022 to 16.11.2022 (inclusively) import operations to the customs territory of Ukraine and/or supply to the customs territory of Ukraine of products included in the Sub-section "Other" of Section "Medical products, medical equipment and other goods that are necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus of the List № 224, were subject to the VAT exemption subject to compliance with requirements established in relevant reference to such Sub-section and in Note 3 to Schedule № 224;
- from 17.11.2022 for application of the VAT exemption regime established by Paragraph 71 of Sub-section 2 Section XX of the Code to import operations to the customs territory of Ukraine and/or supply to the customs territory of Ukraine of products included in the Sub-section "Other" of Section "Medical products, medical equipment and other goods necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus" of the List № 224, certain conditions established by Resolution № 1260 were cancelled.
In addition, from 02.12.2022 the Sub-section "Other" of Section "Medical products, medical equipment and other goods necessary for the implementation of measures aimed at preventing occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the acute respiratory disease COVID-19 caused by the SARS-CoV-2 coronavirus" of the List № 224 was amended with new product items according to Resolution № 1340.
Question 2. Does the application of tax benefit depend on the origin of products included according to Resolutions № 1260 and № 1340 to the List № 224?
No, it doesn't depend. Whether products included in the List № 224 according to Resolutions № 1260 and № 1340 were previously imported to the customs territory of Ukraine or purchased there – their supply is carried out with application of the VAT exemption regime established by Paragraph 71 Sub-section 2 Section XX of the Code.
Question 3. Does the tax benefit apply to supply operations of products included according to Resolution № 1260 to the List № 224, if such products were produced/purchased in Ukraine or imported to the customs territory of Ukraine before November 11, 2022?
The VAT exemption regime, established by Paragraph 71 Sub-section 2 Section XX of the Code for supply operations to the customs territory of Ukraine of goods included in the List № 224 according Resolutions № 1260 and № 1340 applies starting from the date on which grounds for applying the specified benefit, regardless of a period when such products were produced/purchased in the customs territory of Ukraine or imported to the customs territory of Ukraine, in particular, before the date of entry into force of Resolutions № 1260 and № 1288, or after such date.
Question 4. Does the tax benefit apply to supply operations of products, included by Resolutions № 1260 and № 1340 to the List № 224, if the buyer of such products is an individual?
Regime of the VAT exemption, established by Paragraph 71 Sub-section 2 Section XX of the Code, for supply operations to the customs territory of Ukraine of products included in the List № 224, including according to Resolutions № 1260 and № 1340, applies regardless for whom – individual or legal entity such products are supplied.
Question 5. What are the conditions and consequences of applying exemption regime from taxation to supply operations of products included in the List № 224, if payment for products, their import to the customs territory of Ukraine and shipment to the buyer took place in different tax periods?
Exemption regime from the VAT taxation, defined by Paragraph 71 Sub-section 2 Section XX of the Code, applies to supply operations of products included in the List № 224 according to Resolutions № 1260 and № 1340, date of implementation of which ("first event" is determined according to Paragraph 187.1 Article 187 Section V of the Code) falls on a period in which there are grounds for applying such the VAT exemption regime.
Namely, if:
full advance payment ("first event") occurs before there are grounds for applying the VAT exemption regime, then supply operation is subject to the VAT in generally established manner. For amount of such full advance payment on the date of receipt of funds, the supplier must issue tax invoice including the VAT. On the date of occurrence of the "second event" (shipment of products), tax consequences in terms of the VAT taxation do not arise for the payer;
partial advance payment ("first event") occurs before there are grounds for applying the VAT exemption regime, then supply operation is subject to the VAT in generally established manner. For amount of such partial advance payment, on the date of receipt of funds, the supplier must issue tax invoice including the VAT. In the corresponding column of this tax invoice, the quantity part of products for which partial advance payment has been received must be indicated. Actual shipment of products during a period of validity of the exemption regime from the VAT taxation within the limits of received partial advance payment ("second event") does not cause tax consequences for the payer in terms of the VAT. On the date of shipment of products, tax invoice without the VAT is compiled for the unpaid part of shipped products in the excess of received partial advance payment;
"first event" occurs during a period when there are grounds for applying the VAT exemption regime, then no VAT is charged on such operation and cost of such products is determined without the VAT.
Question 6. If the Buyer paid an advance for products included according to Resolution № 1260 in the List № 224 before November 11, should the Supplier reduce amount of the VAT liabilities and the Buyer – amount of the tax credit?
Supplier’s the VAT tax obligations:
If the prepayment ("first event") for products took place before there were grounds (before the relevant changes were made to the List № 224) for application of the VAT exemption regime established by Paragraph 71 Sub-section 2 Section XX of the Code, then the Supplier's operation of supplying such products to the Buyer is subject to the VAT in generally established manner.
On the date of receipt of the prepayment for products from the Buyer, the Supplier had to calculate the VAT liability and compile the VAT invoice for the Buyer and register it in the Unified Register of Tax Invoices within the time limits established by the Code.
There are no grounds for adjusting amounts of the VAT liabilities of the Supplier.
Buyer's the VAT tax credit
The VAT amounts included by the Buyer in tax credit on the basis of tax invoice (registered in the Unified Register of Tax Invoices), which was compiled by the Supplier on the date of receipt of prepayment for products from the Buyer, are not subject to adjustment.
Question 7. Are the VAT liabilities accrued if part of the cost of equipment is paid before November 11, 2022 and its actual supply and payment of the balance of its cost is carried out during the tax credit period?
On the date of receipt of partial prepayment for products from the Buyer ("first event"), the Supplier had to calculate the VAT liability and compile tax invoice for the Buyer with the VAT and register it in the Unified Register of Tax Invoices within the time limits established by the Code.
On the date of actual shipment of products in the excess of received partial prepayment for the unpaid part of shipped products, the VAT obligations are not determined and tax invoice is compiled without the VAT.
Question 8. What is procedure for adjusting tax credit, if import to the customs territory of Ukraine or the purchase of products included in the List № 224 took place before the date of beginning of benefit’s application and supply – during a period of validity of benefit?
If products included in the List № 224 according to Resolutions № 1260 and № 1340 were imported to the customs territory of Ukraine by the taxpayer or purchased in the customs territory of Ukraine and upon their import or acquisition, the VAT was charged according to the Code, then the taxpayer for import /purchase of such products has a right to attribute the VAT amounts paid during such import/purchase to the tax credit (in the presence of a duly compiled customs declaration/ relevant tax invoice registered in the Unified Register of Tax Invoices).
At the same time, if products included in the List № 224 according to Resolutions № 1260 and № 1340, which were purchased in the customs territory of Ukraine or imported to the customs territory of Ukraine by the VAT payer and are supplied without the VAT in connection with application of the VAT exemption regime to operations of their supply, the tax credit amounts generated according to Article 198 Section V of the Code are not subject to adjustment, the VAT liabilities according to Paragraph 198.5 Article 198 and/or Article 199 Section V of the Code are not accrued for such products.
Question 9. What benefit code is indicated in tax invoice compiled for the supply of products included in the List № 224 according to Resolutions № 1260 and № 1340?
Benefit code is indicated according to the Directories of tax benefits, which are approved by the State Tax Service as of the date of compiling tax invoice (Paragraph 16 of Order № 1307).
As of October 1, 2022, the Directories № 111/1 of tax benefits, which are losses of budget revenues, and the Directories № 111/2 of other tax benefits are valid.
Directories are posted on web portal of the State Tax Service https://tax.gov.ua in the "Directories" section (sub-section "Directories of tax benefits") at the link https://tax.gov.ua/dovidniki--reestri--perelik/dovidniki-/54005.html. https://tax.gov.ua/dovidniki--reestri--perelik/dovidniki-/54005.html
According to the Directories №, operations exempted from taxation according to Paragraph 71 Sub-section 2 Section XX of the Code are assigned with code 14060544.
Therefore, in tax invoice compiled for the supply operation of products included in the List № 224 according to Resolutions № 1260 and № 1340, in column 9 of the tabular part of tax invoice, the benefit code 14060544 is indicated.
Additionally, the State Tax Service informs:
The draft Law of Ukraine "On amendments to the Tax Code of Ukraine on facilitating restoration of the energy infrastructure of Ukraine" (registration № 8196), approved by the Verkhovna Rada of Ukraine, suggests to introduce the VAT exemption regime for operations involving import to the customs territory of Ukraine of certain types of equipment necessary for ensuring restoration of the energy infrastructure of Ukraine, in particular, power generators.