Analysis of the draft law:
Analysis of the Draft Law on VAT Taxation of Electronic Commerce
Greetings! I was asked to do a detailed analysis of the draft law on amendments to the Tax Code of Ukraine regarding the taxation of electronic commerce operations with value-added tax. Let’s consider the main points so that you are aware.
Essence of the Project
This draft law aims to regulate VAT taxation of distance sales of goods, in particular those carried out through electronic interfaces. It defines the concept of “electronic interface enterprise” and “intermediary of an electronic interface enterprise”, establishes rules for taxation of goods imported into the customs territory of Ukraine through such platforms, and determines those responsible for paying VAT.
Structure and Main Provisions
The draft law introduces amendments to various articles of the Tax Code of Ukraine, namely:
- Article 14: The definition of the terms “electronic interface enterprise” and “intermediary of an electronic interface enterprise” is supplemented. It is established that the supply of goods worth up to 150 euros purchased through an electronic interface is not subject to taxation.
- Article 391: The rules for applying exchange rates to determine tax liabilities for the distance sale of goods are clarified.
- Article 44: Obliges electronic interface enterprises – non-residents to keep records of distance sales of goods.
- Article 180: Defines an electronic interface enterprise as responsible for calculating and paying VAT. If it is a non-resident, its intermediary in Ukraine is also liable.
- Article 185: The supply of goods (except excisable goods) worth up to 150 euros, imported in accordance with the rules of distance selling, is not subject to VAT.
- Article 186: The place of supply of goods imported in accordance with the rules of distance selling is the place of their location at the time of completion of transportation to the recipient – an individual.
- Article 191: The tax base for goods imported in international postal and express shipments, purchased in accordance with the rules of distance selling, is specified. The date of occurrence of tax liabilities is the date of receipt of funds by the electronic interface enterprise.
- Article 196: Excludes clauses relating to the taxation of operations involving the transfer of goods in international postal and express shipments.
- Article 197: VAT benefits are introduced for operations involving the import of goods (except excisable goods) purchased in accordance with the rules of distance selling, for the recipient – an individual. Goods worth up to 45 euros, which are sent by individuals to each other, are also exempt from taxation.
- Article 198: Persons engaged in the distance sale of goods do not form a tax credit for VAT on these operations.
- Article 201: Persons engaged in the distance sale of goods do not issue tax invoices for these operations.
- Article 203: Establishes the specifics of VAT payer registration for non-residents who exclusively supply goods imported in accordance with the rules of distance selling.
Most Important Provisions
Here are some provisions to watch out for:
- For Legislators: The need to adapt tax legislation to modern conditions of electronic commerce development and to ensure budget revenues from this sector.
- For Experts: The importance of clearly defining terms and taxation procedures to avoid double interpretation and ensure fair taxation.
- For Business: New rules for accounting and payment of VAT for e-commerce enterprises, especially for non-residents operating in the Ukrainian market.
- For Citizens: Changes in the rules for taxation of goods purchased online and the establishment of value limits for duty-free importation.
I hope this analysis was helpful! If you have any further questions, please contact us.
Analysis of the explanatory note:
Analysis of the Draft Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding Taxation of Electronic Commerce Operations with Value Added Tax”
Good day! I am pleased to present to you a detailed analysis of this important draft law.
1. Essence of the Draft Law
The draft law aims to modernize the VAT taxation system in electronic commerce. It provides for changes related to the distance sale of goods to individuals, as well as the adaptation of Ukrainian legislation to the norms of the European Union.
2. Reasons and Necessity of Adoption
According to the authors of the explanatory note, the draft law is necessary for several key reasons:
- Harmonization with EU Directives: The draft law aims to bring Ukrainian tax legislation into line with the EU Council Directives, in particular on the common VAT system and exemptions from taxes on the import of small consignments of non-commercial goods.
- Avoiding Distortion of Competition: The authors seek to avoid unequal competition between suppliers inside and outside Ukraine, and to reduce budget losses due to uncontrolled imports of goods.
- Implementation of Special Rules: It is proposed to introduce special taxation rules for distance sales of goods worth up to 150 euros, which are imported into the customs territory of Ukraine.
3. Main Consequences of the Draft Law
This draft law will have a significant impact on various groups of stakeholders:
- For Legislators and Experts:
- The need to analyze and implement new VAT taxation rules in electronic commerce.
- The possibility of bringing national legislation into line with European standards.
- For Business (especially e-commerce):
- New obligations arise for e-commerce enterprises, including maintaining records of distance sales of goods.
- Designating the electronic interface as responsible for calculating and paying VAT, which may require adaptation of business processes.
- The possibility of VAT payment by the sender, which may simplify procedures for buyers.
- For Citizens:
- Exemption from VAT on goods worth up to 45 euros sent by individuals for personal use (under certain conditions).
- New taxation rules for goods worth up to 150 euros purchased through electronic platforms, which may affect the final cost of purchases.
Important Consequences:
- Additional Budget Revenues: Expected to attract about UAH 10 billion per year to the state budget.
- Harmonization with the EU: The project is an important step towards European integration, as it aligns Ukrainian legislation with European norms.
- Administrative Changes: Amendments to the Customs Code of Ukraine to administer the new taxation rules.
I hope this analysis was helpful. Thank you for your attention!
Analysis of other documents:
Analysis of documents on the draft Law of Ukraine on VAT taxation of electronic commerce
1. Position of the authors of the draft Law
From the provided documents, it is clear that the Cabinet of Ministers of Ukraine, represented by Prime Minister Yuliia Svyrydenko and Minister of Finance Serhii Marchenko, actively supports the draft Law “On Amendments to the Tax Code of Ukraine Regarding Taxation of Electronic Commerce Operations with Value Added Tax”. The government not only initiated the development of the draft law, but also submitted it to the Verkhovna Rada for consideration, appointing the Minister of Finance as the representative of this draft law in parliament.
2. Main provisions of documents for stakeholders
This package of documents reveals important aspects of the proposed amendments to the Tax Code of Ukraine, which concern VAT taxation of electronic commerce operations. Here are the key points that may be of interest to different groups:
- For legislators: The documents contain a draft Resolution of the Verkhovna Rada on the adoption of the draft law as a basis, which is the first step in the legislative process. It is important to note that the Committee on Finance, Taxation and Customs Policy should finalize the draft law taking into account the proposals of the subjects of the right of legislative initiative.
- For experts: The explanatory note, the comparative table and the list of acts that need to be revised provide detailed information on the essence of the changes, their rationale and possible consequences. Particularly important is the analysis of changes to Article 191.1 of the Tax Code, which defines the tax base and the moment of occurrence of tax liabilities for the import of goods purchased remotely.
- For business: The changes concern the rules for VAT taxation on the import of goods purchased via the Internet. In particular, it is proposed that the tax base for goods purchased in accordance with the rules of distance selling is the total invoice value. Also, for e-commerce enterprises that are non-residents, the tax base will be determined in foreign currency. An important point is the determination of the date of occurrence of tax liabilities – the date of receipt of funds by the electronic interface enterprise.
- For citizens: The changes may affect the prices of goods purchased in foreign online stores, as VAT will be charged on the total invoice value of the goods. Also, the changes concern the rules for customs declaration when receiving international postal and express shipments.
It should be noted that in order to implement the provisions of the draft law, it will be necessary to make changes to bylaws, in particular to the order of the Ministry of Finance of Ukraine regarding the processing of international postal and express shipments.
