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of September 20, 2011 No. 246/7/15-3417-01

About VAT liability of services in case of transit of freights

The State Tax Administration of Ukraine considered the letter concerning procedure for the taxation the value added tax of the services connected with the transit translation of freights and reports.

According to Item 197.8 of article 197 of the Tax Code of Ukraine of 02.12.2010 No. 2755-VI (further - the Code) are exempted from the taxation by the transaction value added tax on delivery of services in transportation (movement) of passengers and freights en route through customs area of Ukraine, and also delivery of the services connected with such transportation (movement).

At the same time according to article 1 of the Law of Ukraine of 20.10.99 No. 1172-XIV "About transit of freights" (further - the Law No. 1172-XIV) transit of freights is transportation by vehicles of transit of transit cargoes under customs control through the territory of Ukraine between two Items or within one check point through frontier of Ukraine, and transit services (works) are the business activity of participants of transit which is directly connected with transit of freights which is performed within agreements (contracts) of transportation, freight forwarding, the order, agency agreements and so forth.

According to article 7 of the Law No. 1172-XIV transit services (works) intend for consumption and use outside customs area of Ukraine and are provided (are carried out) based on corresponding two - or multi-lateral agreements (contracts) between participants of transit.

In turn, participants of transit according to article 1 of the Law No. 1172-XIV are freight owners and subjects of business activity (carriers, ports, stations, freight forwarders, marine agents, customs applicants and others) who in accordance with the established procedure render (carry out) transit services (works).

That is for the purpose of application of Item 197.8 of article 197 of the Code in case of provision of services, connected with transit transportation of goods, one of agreement parties based on which such services are rendered there shall be freight owner (the receiver of transit services).

Services which are provided by third parties and based on separate agreements to the company which renders the services connected with transit transportation of goods are not exempted from the taxation by the value added tax based on Item 197.8 of article 197 of the Code.


Vice-chairman S. Lekar


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