LETTER OF THE MINISTRY OF THE INCOME AND CHARGES OF UKRAINE

of June 18, 2013 No. 8646/7/99-99-19-04-02-17

VAT and payment of above-standard electric power consumption

The ministry of the income and charges of Ukraine considered the letter <...> concerning the taxation the value added tax of the double amount of payment for excess of contractual sizes of power consumption also reports.

By the paragraph the sixth article 26 of the Law of Ukraine of 16.10.97 No. 575/97-BP "About power industry" it is determined that consumers (except the population, professional educational institutions and the higher educational institutions I-IV of levels of accreditation of the state and municipal patterns of ownership) in case of consumption of electrical energy over contractual size pay for settlement period to power suppliers the double cost of difference of actually consumed and contractual size.

That is if during the corresponding settlement period the consumer uses bigger quantity of the electric power, than it is provided by regulations of its consumption (contractual size), the payment for excessively consumed electric power changes (is doubled).

According to subitem 14.1.191 of Item 14.1 of Article 14 of the Section I of the Tax code of Ukraine (further - the Code) for the purpose of application of the term "delivery of goods" the electrical energy is considered goods.

The taxation object on value added are transactions on delivery of goods (services) on customs area of Ukraine (Item 185.1 of Article 185 of the Section V of the Code ).

According to rules, stipulated in Item 188.1 Articles 188 of the Section V of the Code, taxation basis of such transactions is their contractual (contractual) cost, but not below the regular prices determined according to article 39 of this Code , taking into account nation-wide taxes and fees (except the value added tax and the excise tax on alcohol ethyl, used by producers - subjects of managing for production of medicines, including components of blood and the medicines made of them (except medicines in the form of balms and elixirs), and also collection on compulsory national pension insurance on the cost of services of cellular mobile communication).

Contractual (contractual) cost any amounts of means, cost of the tangible and intangible assets transferred to the taxpayer directly by the buyer or through any third party in connection with compensation of cost of goods / services are included.

Therefore, the amounts of the means which arrived to the taxpayer in the form of the double amount of payment for excess of contractual sizes of electric power consumption join such payer in taxation basis on value added.

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