January 04, 2023

Ukrainian VAT exemption for it companies will be canceled

Starting from January 1, 2023, the Ukrainian VAT exemption applicable to the transactions with the prescribed software has been canceled.


The incentive in question was introduced on January 1, 2013, and was aimed at exempting the prescribed transactions from Ukrainian VAT at 20%.


We estimate that the cancelation of the respective tax incentive will affect those Ukrainian taxpayers that supply software within the territory of Ukraine or purchase it from the non-residents of Ukraine.


As for the Ukrainian taxpayers that supply software to the non-residents of Ukraine, the respective transactions shoul still be exempt from Ukrainian VAT. However, one should consider that the Ukrainian tax authorities may try to challenge the taxpayer's right to the VAT exemption given the relevant developments in this sphere.


In this regard, we recommend analysing the relevant contracts on the supply and purchase of software (especially with the non-Ukrainian residents) from the perspective of potential tax implications and the ways of their mitigation.

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