LETTER OF THE STATE TAX SERVICE OF UKRAINE

of October 31, 2011 No. 2068/5/15-3416

About VAT liability of tourist activities

The State Tax Service of Ukraine considered the letter concerning availability of nonagreements in the tax legislation regarding the taxation the value added tax of tourist and tour operator activities and reports.

Item 207.5 of Article 207 of the Section V of the Tax code of Ukraine (further - the Code) in edition which was effective before entering of changes into it with the Law of Ukraine of 07.07.2011 No. 3609-VI (further - the Law No. 3609) that is till 06.08.2011, determines the following.

Taxation basis in case of carrying out transaction on delivery of tourist service by the tourist operator or travel agent is the cost of such service (excluding tax) which equals to the amount of remuneration (margin) of such tourist operator (agent), that is difference between the total amount which is paid by their buyer (excluding tax), and actual expenses of the tourist operator on carrying out taxable transactions on delivery of goods/services which cost joins in the cost of such tourist service, and for travel agents - the cost of the tourist voucher (permit) acquired at the tourist operator except travel agents which are effective in this transaction as intermediaries.

That is this Item determined separate procedure for determination of taxation basis for:

- transactions on delivery of tourist service by the tourist operator or travel agent, and in this case the taxation basis determined the cost of such service (excluding tax) which equals to the amount of remuneration (margin) of such tourist operator (agent), that is difference between the total amount which is paid them in the buyer (excluding tax), and actual expenses of the tourist operator on carrying out taxable transactions on delivery of goods/services which cost joins in the cost of such tourist service;

- for travel agents - the taxation basis determined the cost of the tourist voucher (permit) acquired at the tourist operator except travel agents which are effective in this transaction as intermediaries.

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