LETTER OF THE MINISTRY OF THE INCOME AND CHARGES OF UKRAINE

of September 13, 2013 No. 11011/6/99-99-19-03-02-15

About the taxation of transactions on acquisition at the nonresident of services of broadcast of information

The ministry of the income and charges of Ukraine considered the letter <...> on the tax matters the income tax and the value added tax of separate economic activities and within competence reports.

According to provisions of the Law of Ukraine of December 21, 1993 No. 3759-XII "About television and broadcasting" broadcasting time - period during which according to the license for broadcasting the teleradio organization performs broadcast (relaying) of any audiovisual information.

As it is specified in <...> the letter, owner of broadcasting time on television channel which acquires society for placement of radio materials (including advertizing) is the nonresident company, broadcasts in the territory of Ukraine.

According to requirements of subitem 14.1.203 of Item 14.1 of article 14 of the Tax Code of Ukraine (further - the Code) any transactions of economic, civil nature on performance of works, provision of services, provision of the right to use or the order of goods, including intangible assets and other objects of property, are not goods, in case of compensation condition of their cost, and also transactions on non-paid provision of results of works (services) is sale of results of works (services).

Thus, the resident acquires at the nonresident company of service in broadcast of own radio products (including advertizing of the third parties).

The procedure for recognition of the income is stipulated in Clause 137 Codes according to which Item 137.1 the income from provision of services and performance of works is recognized by date of creation of the act or other document processed according to requirements of the current legislation confirming performance of works or rendering services.

Structure of expenses and procedure for their recognition in case of calculation of the taxation object the income tax of the companies it is stipulated in Clause 138 Codes. According to Item 138.1 of this Article the expenses considered in case of calculation of the taxation object consist of expenses of operating activiies and other costs. To expenses of operating activiies cost of the realized goods, the performed works, the rendered services joins, in particular.

In turn, according to Item 138.4 of article 138 of the Code the expenses creating cost of the realized goods of the performed works, the provided services, except not distribution the fixed general production expenses included in structure of cost of sales in the period of their origin are recognized expenses of that accounting period in which the income from realization of such goods, the performed works, the rendered services is acknowledged.

Considering stated, in the period, in which the income from provision to the third parties of services in the organization of placement of radio materials is acknowledged (including advertizing), such persons, the taxpayer has the right to the expense accounting, the rendered services creating cost, including cost of the acquired broadcasting time used directly in such transactions.

Together the Code provides features of the taxation of the income of nonresidents.

So, according to Item 160.7 of article 160 of the Code the residents performing payments to nonresidents for production and/or distribution of advertizing in case of such payment pay tax at the rate 20 percent of the amount of such payments on own account.

Article 1 of the Law of Ukraine of July 3, 1996  "About advertizing" which determines the principles of advertizing activities in Ukraine, governs the relations arising in production process, distribution and consumption of advertizing it is provided No. 270/96-BP that advertizing is the information on person or goods widespread in any form and in any manner and intended to create or support awareness of consumers of advertizing and their interest concerning such person or goods.

Considering that placement of promotional materials is performed by the nonresident company, broadcasts in the territory of Ukraine, the payments for advertizing distribution performed by society to the nonresident company are assessed in case of such payments by society at own expense for rate of 20 percent.

According to the general rule of determination of the taxation object of the VAT, stipulated in Item 185.1 articles 185 of the Code , object of VAT liability are transactions of taxpayers on delivery of goods / services which place of delivery is located on customs area of Ukraine, according to article 186 of the Code .

By subitem 14.1.185 of Item 14.1 of article 14 of the Code it is determined that provision of services - any transaction which is not delivery of goods or other transaction on transfer of the right to objects of intellectual property right and other intangible assets or provision of other property rights concerning such objects of intellectual property right, and also provision of services consumed in the course of making of certain action or implementation of certain activities.

According to Item 180.2 of article 180 of the Code person responsible for charge and the tax discharge in the budget by delivery of services by nonresidents, including their permanent missions which are not registered as taxpayers if the place of delivery of services is located on customs area of Ukraine, is the receiver of services.

Date of emergence of the tax liabilities on transactions on delivery of services by nonresidents which place of provision is the customs area of Ukraine is date of write-off of funds from the bank account of the taxpayer in fee or date is drawn up the document certifying the fact of delivery of services by the nonresident depending on what of events occurred earlier (Item 187.8 of article 187 of the Code ).

For transactions on delivery of services by the nonresident on customs area of Ukraine date of emergence of the right to reference of tax amounts in the tax credit is the payment date (charges) of tax on the tax liabilities which were included by the receiver of such services in the tax declaration in the VAT of previous period (Item 198.2 of article 198 of the Code ).

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