Changes to the Tax Code will (1) remove from a list of transactions, which are not subject to VAT, consulting services and IT services, (2) introduce export duties on certain cereals till January 1, 2012, and (3) revise applicable Fees for the Use of Natural Resources.
On June, 10, 2011, the President of Ukraine signed into law the bill "On Introducing Amendments into the Tax Code of Ukraine and on the Rates of Export Customs Duty on Certain Types of Cereal Crops", which had been adopted by the Verkhovna Rada (the Parliament) on May 19, 2011 (the " Law").
The Law will come into force "on the first day of the month following the month of its publication", which is reasonably expected to be July 1, 2011.
(1) VAT
Section I.1 of the Law repeals subparagraph 196.1.14 of paragraph 196.1 Article 196 of the VAT Chapter of the Tax Code of Ukraine, which used to exclude from VAT the "provision of services listed in subparagraph (b) paragraph 186.3 Article 183 of the [Tax] Code". Subparagraph (b) paragraph 186.3 Article 183 of the Tax Code lists the following services: "consulting, engineering consulting, engineering, legal (including advocacy), accounting, auditing, actuarial and other similar services of a consulting nature, as well as services of developing, supplying and testing of software, data processing and providing IT-related consulting services, supplying information and other services in the IT area, including with the use of computer systems."
Despite repealing this exemption, the Law (re)introduces 20% VAT only on those of the aforementioned services that are supplied on the customs territory of Ukraine. Services considered to be supplied outside Ukraine would continue to be beyond the scope of Ukrainian VAT and, thus, would be non-taxable in Ukraine. In this connection, services "of a consulting nature" and IT services provided by a Ukrainian service provider to foreign customers should generally continue to be exempt from 20% VAT.
Separately, the Law abrogates the VAT exemption of services, which are (1) subject to "port (service) charges" and (2) provided to foreign and domestic vessels conducting international transportation of passengers, luggage and cargo.
(2) Customs Duties
Temporarily – till January 1, 2012 - the Law introduced export duty on (1) barley at the rate of 14% but not less than EUR 23 per metric ton; (2) wheat, including a mix of wheat and rye - at 9% but not less than EUR 17 per metric ton; and (3) maize - at 12% but not less than EUR 20 per metric ton.
(3) Fee for Use of Natural Resources
The Law extended the list of natural resources that are not subject to a Fee for the Use of Natural Resources.
More importantly however, the Law increased the Fees for the Use of Natural Resources for the purposes of mining operations by about 50%.
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