Law of Ukraine “On Amendments to the Tax Code of Ukraine on State Support of Culture, Tourism and Creative Industries” No. 962-IX of November 4, 2020 (hereinafter – Law No. 962) amended the rules of taxation with value added tax (hereinafter – VAT) of certain transactions, namely, the list of transactions subject to VAT at the rate of 7% has been expanded. Who can count on it – below.
Transactions to which a reduced VAT rate applies
Law No. 962 introduced some measures to support the sphere of culture, creative industries, tourism, small and medium business. In particular, a special reduced VAT rate of 7% has been introduced, which will be applied as of January 1, 2021 (before the transaction, the first event of which occurs in January 2021 and later) to transactions for:
1) supply of services for showing (conducting) theatrical, opera, ballet, music, concert, choreographic, puppet, circus, sound, light and other performances, productions, performances of professional art groups, artistic groups, actors and performers, cinematographic premieres, cultural and artistic events;
2) provision of services for display of original musical works, demonstration of exhibition projects, conducting excursions for groups and individual visitors in museums, zoos and reserves, visiting their territories and objects by visitors;
3) provision of services for distribution, showing, public announcement and public showing of films adapted in accordance with the legislation in Ukrainian-language versions for persons with visual impairments and persons with hearing impairments.
Moreover, the recipient of the above services provided by non-residents whose place of supply is located in the customs territory of Ukraine will have to use 7% VAT rate. Such adjustments were made to item 208.2 of the Tax Code of Ukraine (hereinafter – the Tax Code). That is, a resident who will receive film services from a non-resident must pay VAT on the cost of such services at a rate of 7%, not 20% (item 208.2 of the Tax Code);
4) supply of temporary accommodation services provided by hotels and similar temporary accommodation facilities (class 55.10 group 55 KVED DK 009:2010).
Relevant changes were made to paragraph “c” item 193.1 of the Tax Code.
We will remind, that till the specified date the VAT rate of 7% was applied only to transactions on delivery in the customs territory of Ukraine and import into the customs territory of Ukraine of:
- medicines permitted for production and use in Ukraine and entered in the State Register of Medicines;
- medical devices that are included in the State Register of Medical Equipment and Medical Devices or meet the requirements of the relevant technical regulations, which is confirmed by the document of conformity, and are allowed for marketing and/or commissioning and use in Ukraine;
- medicines, medical devices and/or medical equipment approved for use in clinical trials, authorized to be issued by the central executive body, which ensures the formation of state policy in the field of health care.
VAT return
Now in the VAT return all 7% transactions must be indicated together (letter of the State tax Service of Ukraine No. 1142/7/99-00-21-03-02-07 of January 15, 2021):
- the volume of supply and the amount of VAT – in line 1.2 (columns A and B) of the VAT return, as well as in the relevant annexes to it;
- the amount of acquisition and the amount of tax credit – in line 10.2 (columns A and B) of the VAT return, as well as in the relevant annexes to it;
- accrual of ‘compensating” tax liabilities in accordance with item 198.5 of the Tax Code –in line 4.2 (columns A and B) of the VAT return, as well as in the relevant annexes to it;
- volumes of supply and the amount of VAT on transactions for receipt of these services from a non-resident – in line 6 (columns A and B) with simultaneous reflection of the tax credit in line 13 (columns A and B) of the VAT return, as well as in the relevant annexes to it;
- volumes of supplies/purchases and amounts of VAT accrued on transactions of receipt from the non-resident by the VAT payer of these services and other services subject to taxation at the basic rate – in one line of the tax return total amount (those subject to taxation at a reduced rate 7 %, and those subject to taxation at a rate of 20%).
