LETTER OF THE STATE TAX SERVICE OF UKRAINE

of April 24, 2012 No. 7222/6/15-3415-26

GNAU considered the letter of association concerning procedure for the taxation of the VAT of transactions on delivery to nonresidents of the services specified in item 186.3 of Art. 186 of the Tax code of Ukraine of December 2, 2010 to No. 2755-VI (further - the Code), and reports.

According to subitem item 185.1 of Art. 185 of the Code the taxation object of the VAT "would" be transactions of taxpayers on delivery of services which place of delivery is located on customs area of Ukraine, according to Art. 186 of this Code.

According to item 186.3 of Art. 186 of the Code the place in which the receiver of services is registered as the subject of managing or - in case of lack of such place - the place of permanent or its preferential residence is considered the place of delivery of the services specified in this Item.

According to Art. 95 of the Civil code of Ukraine the representation is not legal entity, but has own code on EGRPOU, acts on the basis of the provision approved by the legal entity (as a rule, the supreme body of the legal entity), and can be allocated with certain property for implementation of the functions.

According to Art. 5 of the Law of Ukraine "About foreign economic activity" the Ministry of Economics of Ukraine performs registration of representative offices of foreign business entities which perform foreign economic activity in the territory of Ukraine.

In pursuance of the above-mentioned Law the order of the Ministry of external commercial relations and trade of Ukraine of 18.01.96 No. 30 approves the Instruction about order of registration of representative offices of foreign business entities in Ukraine.

Therefore, the representation of the nonresident is effective only in that measure in which it was authorized by such nonresident.

Therefore, for the purpose of establishment of the taxation/not taxation of the VAT of services, stipulated in Item 186.3 articles 186 of the Code, depending on whether the receiver of service (nonresident) has permanent mission in the territory of Ukraine, it is necessary to consider the contractual and actual relations of business entities.

If receiver of services is directly the nonresident, then the place of delivery of service is outside the territory of Ukraine and such transaction is not the taxation object of the VAT.

If the nonresident receives services through representation (that is direct receiver of services is the representation of the nonresident), then the place of delivery of service is on customs area of Ukraine, and in this case transaction of delivery of services is the taxation object of the VAT.

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