Often there are situations when the company after a certain period of use of the purchased goods found violations in its work. To solve the problem, it turned to the service department for repair under warranty. However, the question arises when accounting for such a service, in particular, whether it will be subject to value added tax (hereinafter – VAT)?
The taxpayer’s transactions for the provision of warranty repair services are subject to VAT. The tax base of such transactions is determined on the basis of the cost of services paid by the manufacturer of goods in respect of which warranty repairs were carried out.
In accordance with subitem “a”, “b” and “c” item 185.1 Art. 185 of the Tax Code of Ukraine (hereinafter – the Tax Code) the object of VAT is, in particular, transactions of taxpayers for the supply of goods/services, the place of supply of which is located in the customs territory of Ukraine, and the import of goods into the customs territory of Ukraine. The procedure for warranty repair (maintenance) or warranty replacement of technically complex household goods was approved by Resolution of the Cabinet of Ministers of Ukraine No. 506 of April 11, 2002 (hereinafter – Procedure No. 506).
Item 26 of Procedure No. 506 stipulates that warranty repair is the performance of work related to the elimination of defects of the goods to ensure its intended use during the warranty period. Elimination of defects is carried out by replacement or repair of a component product or a separate component, and also performance of regulating works according to requirements of regulatory documents.
Thus, in case the taxpayer receives the goods for warranty repair and, accordingly, further return (transfer) to its owner (consumer) after such warranty repair, there is no transaction for the supply of goods, and therefore, the object of VAT does not arise.
At the same time, the taxpayer’s transactions for the provision of warranty repair services are subject to VAT.
