LETTER OF STATE TAX ADMINISTRATION OF UKRAINE

of June 16, 2011 No. 7166/5/16-1516

The State Tax Administration of Ukraine on accomplishment of orders of the Cabinet of Ministers of Ukraine considered letters of the utility company concerning application of subitem 197.1.28 of Item 197.1 of Article 197 of the Section V of the Tax code of Ukraine and reports.

The current legislation establishes separate sources of payment of cost of housing and communal services (and including heat energy):

- regulated rate for payment of such services which is paid by the population and which is less than their cost. At the same time payment of cost of the utilities provided to the population can be performed within rate as it is direct the population, and at the expense of the budget subsidies provided to preferential categories of citizens;

- the production grant from the budget which is compensation on covering of the difference which developed between actual expenses on production (acquisition) of housing and communal services (and including heat energy) (cost) and regulated rates for their sale to the population (difference between cost and rate).

By Item 188.1 of Article 188 of the Section V of the Tax code of Ukraine (further - the Code) it is determined that the taxation basis of transactions is determined by delivery of goods/services proceeding from their contractual (contractual) cost, but not below the regular prices determined according to article 39 of this Code taking into account nation-wide taxes and fees (except the value added tax and the excise tax on ethyl alcohol which is used by producers - subjects of managing for production of medicines, including components of blood and the medicines produced from them, except medicines in the form of balms and elixirs).

Contractual (contractual) cost any amounts of means, cost of tangible and intangible assets which are transferred to the taxpayer directly by the buyer or through any third party in connection with compensation of cost of goods/services are included.

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