On June 3, 2021 Verkhovna Rada of Ukraine adopted the Law on Amendments to the Tax Code of Ukraine on the abolishment of taxation of income received by non-residents in the form of payment for production and/or distribution of advertisement and improvement of the procedure of value added taxation of transactions on supply of electronic services to individuals by non-residents (so-called Google tax). The text of the bill is registered under № 4184 as of 02.10.2020.
The law, in particular, excludes from the Tax Code of Ukraine the provisions according to which residents must pay tax at the rate of 20 percent of the amount of payments at their own expense when paying income to non-residents for the production and/or distribution of advertisements.
The law provides that transactions of non-residents on the supply of electronic services to individuals in the customs territory of Ukraine shall be subject to VAT. At the same time, electronic services - services that are provided via the Internet, automatically, using information technology and mainly without human intervention, including by installing special applications on smartphones, tablets, televisions or other digital devices. The services, inter alia, include:
- provision of electronic copies, access to images, texts and information, including, but not limited to, subscription to e-newspapers, magazines, books, provision of access to and/or uploading photographs, graphics, videos;
- provision of access to databases, including the use of search engines and directory services on the Internet;
- provision of cloud services in terms of provision of computing resources, storage resources or electronic communications systems using cloud computing technologies;
- supply of software and updates to it, including electronic copies, provision of access to them, as well as remote maintenance of software and electronic equipment.
The place of supply of electronic services is the location of the recipient of services.
Article 2081 was added to the TCU, which defines the procedure of taxation of electronic services provided by non-residents to individuals, the place of supply of which is located in the customs territory of Ukraine. The date of occurrence of tax liabilities for such transactions is the last day of the reporting (tax) period in which the payment for electronic services was made. In this case, the base reporting period is a quarter. The tax rate is 20%. The tax base of such transactions is determined based on the value of electronic services. The amount of tax is determined in foreign currency (euro or US dollar). Such non-resident suppliers do not form a tax credit and do not issue VAT invoices for the abovementioned transactions.
It follows from the text of the bill that these changes are to be applied to tax periods starting from January 1, 2022.
The text of the adopted Law has not been published yet.