Draft Law of Ukraine

"On Amendment of the Law of Ukraine "On Value Added Tax"

The draft suggests establishing that obligatory registration as a payer of value added tax shall be performed by a person, whose general amount of compensation for the cost of deliveries of goods (services) – subject to taxation – calculated to such person or into repayment of their liabilities to third persons reaches the marginal amount of UAH 300,000 (discounting value added tax) for any period during the last twelve calendar months. According to the current wording of the Law of Ukraine "On Value Added Tax", the volume of taxable transactions on sale of goods (works, services), when a person shall obligatory register as a taxpayer, totals UAH 61,200.

The draft suggests taxing with value added tax transactions on sale of medications, products for medical purposes, as well as on sale (subscription) and delivery of periodicals of printed mass media and sale of books, except for those published in the national language. Apart from that, the draft suggests exempting from taxation only transactions on supplying medications and products for medical purposes accepted for application in Ukraine according to the list determined by the Cabinet of Ministers of Ukraine.

The draft sets forth that from January 1, 2004, until January 1, 2005, the rate of value added tax shall total 20%, from January 1, 2005, until January 1, 2006, - 17%, from January 1, 2006, - 15%.

The draft points out that the negative amount of value added tax, which should be compensated from the budget, is included into repayment of tax liabilities (tax debt) on this tax in preceding tax periods or tax liabilities, determined in tax bills of exchange (if available). In the residual amount the negative amount of the tax is included into tax credit of the subsequent tax period. In case, when upon results of such subsequent tax period, the amount has a negative balance, such amount of tax is included into repayment of tax liabilities determined in tax bills of exchange, while the residual amount of such negative balance (its part) is divided according to the following scheme:

• is subject to compensation from the budget;
• is included into tax credit of the subsequent tax period.

Payers, that will be determined as conscientious payers of value added tax, will receive budget compensation without examinations by tax bodies related to conformity of amounts of compensation.

It has to be mentioned, that the present draft law almost fully replicates norms of draft law N 4000-1 "On Amendment of Some Laws of Ukraine Related to Taxation Due to Approval of the Law of Ukraine "On the State Budget of Ukraine for 2004" of October 21, 2003, which was passed by the Verkhovna Rada of Ukraine in the first reading.