LETTER OF THE STATE TAX SERVICE OF UKRAINE

of March 27, 2012 No. 5434/6/23-50.0114

GNSU considered the letter of society concerning the right of the payer to include in structure of the tax credit the VAT amount paid when importing gratuitously of products received from the nonresident which will be gratuitously widespread further on customs area of Ukraine and reports the following.

According to item 198.3 of Art. 198 of the Tax code of Ukraine (dalshekodeks) the tax credit of the accounting period is determined proceeding from the contractual (contractual) cost of goods/services, but it is not higher than the level of regular prices determined according to Art. 39 of the Code and consists of the amounts of the taxes accrued (paid) by the taxpayer at the rate established by item 193.1 of Art. 193 of the Code during such accounting period in connection with acquisition or production of goods (including in case of their import) and services for the purpose of their further use in taxable transactions within economic activity of the taxpayer.

In case of commodity importation on customs area of Ukraine the customs declaration which is drawn up according to requirements of the legislation which confirms the tax discharge (item 201.12 of Art. 201 of the Code) is considered the document certifying the right to reference of tax amounts to the tax credit.

According to item 198.2 of Art. 198 of the Code for transactions on import to customs area of Ukraine of goods date of emergence of the right to reference of tax amounts to the tax credit is the payment date (charges) of tax on the tax liabilities according to item 187.8 of Art. 187 of the Code.

According to item 190.1 of Art. 190 of the Code taxation basis in case of commodity importation on customs area of Ukraine is contractual (contractual) cost, but it is at least customs value of these goods determined according to the Customs code of Ukraine taking into account duty and the excise tax which are subject to payment, except for the VAT which join in the price of goods/services according to the law.

Thus, the VAT paid when importing gratuitously of the received goods, calculated according to requirements of the tax and customs legislation is included the tax credit of the taxpayer on condition of use of the imported goods in taxable transactions within economic activity of the taxpayer.

At the same time according to subitem 14.1.36 of item 14.1 of Art. 14 of the Code economic activity - activities of person which are connected with production (production) and/or sales of goods, performance of works, provision of services directed to income acquisition and are conducted by such person independently and/or through the separate divisions, and also through any other person who acts for benefit of the first person, in particular, under commission agreements, orders and to agency agreements.

According to subitem 139.1.1 of item 139.1 of Art. 139 of the Code expenses on distribution of gifts (except the expenses connected with carrying out advertizing activities which are regulated by regulations of subitem 140.1.5 of item 140.1 of Art. 140 of the Code) are the expenses which are not connected with carrying out economic activity.

As expenses on purchase of goods which extend as gifts to the third parties are the expenses which are not connected with carrying out economic activity, the VAT amount paid (added) in connection with acquisition of such goods is not included the tax credit.

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