LETTER OF THE MAIN STATE TAX AUTHORITIES OF UKRAINE

of September 6, 1996 No. 10-218/11-5741

About distribution of privileges on the value added tax for the subcontract organizations

The main state tax authorities of Ukraine concerning distribution of privileges on the value added tax for the subcontract organizations which take part in performance of works when constructing facilities production appointment, calculations for which the general contractor are made in national currency while to the general contractor payment by foreign investors is performed in foreign currency, report.

According to Art. 3 of the Decree of the Cabinet of Ministers of Ukraine of 26.12.92 N 14-92 "About the value added tax" the taxation object are turnovers on sales of goods (works, services), except their realization for foreign currency. Considering mentioned, in case of receipt of foreign currency directly into the currency account of the company which carries out construction, the corresponding part of works on construction for which the currency is received is not the taxation object, at the same time the tax amounts on value added paid for raw materials, materials, components and the main production means which are used for implementation of construction when calculating with the budget are not considered, and join in the cost of such works.

In case of attraction for accomplishment of separate work types of the relevant subcontract organizations which payment is made in karbovanets irrespective of carrying out converting of foreign currency (on the settlement account of subcontractors currency means do not arrive), such works are subject to the taxation in accordance with general practice. In case of acquisition of raw materials, materials, etc. with the value added tax and their uses for accomplishment of construction works for which calculations in national currency of Ukraine are made the value added tax paid to suppliers of raw materials and materials is considered when calculating with the budget in accordance with the established procedure which is provided by the Instruction about procedure for calculation and the tax discharge on value added approved by the order of the Main state tax authorities of Ukraine of February 10, 1993 N 3 and registered in the Ministry of Justice of Ukraine on March 31, 1993 of N18.

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