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Ukraine Parliament Approves Law for VAT on Electronic Services Supplied by Non-Residents

The Ukraine parliament has announced the approval of draft Law 4184 on 3 June 2021, which provides new rules for the collection of VAT at the standard rate of 20% on electronic services provided by non-residents. This includes that a non-resident who does not have a permanent establishment in Ukraine and supplies electronic services to individuals, including individual entrepreneurs not registered for VAT (B2C supplies) in Ukraine will be subject to VAT on their supplies and required to register.

The requirements apply where revenue from B2C electronic services provided in Ukraine exceeds the equivalent of UAH 1 million in the previous calendar year as per the official exchange rate of the National Bank of Ukraine. Voluntary registration is also provided for where the revenue threshold is not met but is expected to be met.

Supplies of electronic services as defined in the law include, but are not limited to:

  • delivery of electronic copies or granting access to images, texts, and information, including subscriptions to electronic newspapers, magazines, and books, as well providing access to and/or downloads of photos, images, and videos;
  • providing access to databases, including the use of search engines and directory services on the Internet;
  • supply of electronic copies and/or granting access to audiovisual works, games, including the supply of services for participation in such games, and services for access to television programs (channels) or their packages, except for access to television programs simultaneously with their broadcast;
  • providing access to information, commercial, and entertainment electronic resources and other similar resources, including information or video sharing platforms;
  • supply of distance learning services on the internet, the conduct and provision of which does not require human participation (or with minimal participation)
  • providing cloud services using cloud computing technologies, including computing resources, storage resources, or electronic communications systems;
  • delivery of software and software updates, as well as remote maintenance of software and electronic equipment; and
  • providing advertising services on the internet, mobile applications, and other electronic resources.

The law also includes provisions for issuing notices to non-resident providers of their need to register, as well as simplified return requirements and other related matters. Non-resident electronic service providers subject to the VAT requirements are required to submit returns electronically within 40 days after the end of each quarterly tax period, whether or not taxable supplies were made during the relevant period.

As approved, the VAT requirements apply from 1 January 2022. It is also provided that if revenue from the supply of electronic services exceeds the UAH 1 million threshold in 2021, the non-resident provider is required to register by 31 March 2022.

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