LETTER OF THE STATE TAX SERVICE OF UKRAINE

of November 4, 2011 No. 5243/7/15-3477-26

About VAT liability of transactions on housing construction

The State Tax Service of Ukraine considered the letter concerning procedure for the taxation the value added tax of transactions on construction of housing and reports.

According to subitem 197.1.14 of Item 197.1 of article 197 of the Code are exempted from the transaction taxation on delivery of housing (objects of dwelling stock), except their first delivery.

In this subitem the first delivery of housing (object of dwelling stock) means:

a) the first transfer of the ready new built housing (object of dwelling stock) to property of the buyer or delivery of services (including the cost of the materials acquired at the expense of the contractor) on construction of such housing for customer account;

b) the first sale of the reconstructed or capitally repaired housing (object of dwelling stock) to the buyer who is person another, than the owner of such object at the time of its conclusion from operation (use) in connection with such reconstruction or capital repairs, or delivery of services (including the cost of the materials acquired at the expense of the contractor) on such reconstruction or capital repairs for customer account.

Considering above-mentioned, on the first delivery of housing transaction on transfer of property (execution of documents of title) on the ready new built housing (object of dwelling stock) to the first owner of such housing, irrespective of sources of financing of construction will be considered as transaction: or by own enterprise assets of the builder, or at the expense of members of fund of financing of construction, or for means of bondholders.

Such transaction on the first delivery of housing is subject to the taxation the value added tax in accordance with general practice. At the same time the cost of such housing is determined proceeding from the regular prices.

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