0% or no VAT – which rate should be indicated on the invoice in Ukraine?
Маючи справу з ПДВ в Україні, багато підприємців стикаються з дилемою: яку ставку вказати на рахунку-фактурі – “0%” чи “без ПДВ”? Це питання може виникати, оскільки обидві ці опції мають свої особливості, правила застосування та наслідки для платника ПДВ.
Відмінності між 0% ПДВ та без ПДВ
Перш ніж розбиратися, яку ставку краще вказати на рахунку-фактурі, важливо зрозуміти відмінності між цими двома поняттями.
0% ПДВ – це специфічна ставка податку на додану вартість, яка застосовується до певних операцій. Це не означає, що ПДВ відсутній, але його ставка становить 0%. Тобто, платник ПДВ повинен вказати цю операцію у податковому розрахунку, але сума ПДВ до сплати буде рівна нулю.
Операції “без ПДВ” – це операції, які звільнені від оподаткування ПДВ. Такі операції не підлягають відображенню в податковому розрахунку платника ПДВ.
When dealing with VAT in Ukraine, many entrepreneurs face a dilemma: which rate should be indicated on the invoice – “0%” or “no VAT”? This question may arise because both of these options have their own specific features, rules of application and consequences for the VAT payer.
Differences between 0% VAT and no VAT
Before figuring out which rate is better to indicate on the invoice, it is important to understand the differences between these two concepts.
0% VAT is a specific rate of value added tax that applies to certain transactions. This does not mean that there is no VAT, but the rate is 0%. This means that the VAT payer must include this transaction in the tax calculation, but the amount of VAT payable will be zero.
VAT-free transactions are transactions that are exempt from VAT. Such transactions are not subject to reflection in the tax calculation of the VAT payer.
When to apply 0% VAT in Ukraine?
The 0% VAT rate is most often applied to export transactions. This means that goods or services are exported beyond the customs border of Ukraine. The application of 0% VAT helps to maintain the competitiveness of Ukrainian goods in foreign markets.
Situations when goods and services are “VAT-free”
There are a number of transactions that are exempt from VAT:
- Supply of medical goods and services.
- Educational services.
- Banking and insurance services.
- Supply of certain books and periodicals.
How to determine which rate to use?
There are several factors to consider when determining the correct rate on an invoice:
- The nature of the transaction: If it is an export, you will most likely need to indicate 0% VAT. If it’s one of the above-mentioned VAT-exempt transactions, indicate “without VAT”.
- Status of the buyer: For a number of transactions, it is important whether the buyer is a VAT payer or not.
- Documentary evidence: In the case of 0% VAT, you need to have documents confirming the export of goods from Ukraine.
What is the difference in recording 0% and no VAT in Ukraine?
When analysing the Tax Code of Ukraine, we can see the differences in the entries for 0% VAT and “no VAT”. What is the difference between 0% and no VAT? According to Art. 195 of the TCU, transactions taxed at 0% include, among other things, services and goods for various transport services exported abroad. On the other hand, certain transactions, such as insurance services, salaries, dividends, royalties, as well as goods imported into the customs territory with certain restrictions, are not subject to VAT under Article 196 of the TCU. This difference confirms the importance of understanding the specifics of each of these rates for proper accounting and avoidance of tax risks.
What are the consequences of an incorrect entry?
The existing preferential VAT rates can be very useful for business, but their application requires a balanced approach. If we look at the medical equipment industry, there are certainly some benefits, but they are accompanied by strict product requirements. Each product must be certified, comply with technical regulations and be allowed to be sold in Ukraine. Violation of these requirements may result in the standard VAT rate of 20% being applied to the goods. Thus, it is important not only to actively use tax benefits, but also to carefully monitor the compliance of products with all regulations to avoid possible tax risks.
What are the possible consequences of specifying the wrong rate?
Incorrectly indicating the VAT rate can lead to tax risks. The State Tax Service may impose fines or penalties for incorrectly indicating the rate on an invoice. Therefore, it is always recommended to consult a professional accountant or lawyer when choosing the correct VAT rate.
Determining the correct rate on an invoice is an important aspect of doing business in Ukraine. I hope this information will help you to understand the peculiarities of applying the 0% VAT rate and the “no VAT” rate and choose the right option for your business.