LETTER OF THE STATE TAX SERVICE OF UKRAINE

of November 19, 2011 No. 6727/7/15-3417-26

About VAT liability of the amount of penalty for failure to carry out of the agreement

The State Tax Service of Ukraine considered the letter concerning inclusion in taxation basis of the means received as the amount of the delay penalty of payment or delivery of goods (services) and reports.

According to Item 185.1 of Article 185 of the Section V of the Tax code of Ukraine of December 2, 2010 No. 2755-VI (further - the Code) the taxation object are transactions of taxpayers on delivery of goods and services which place of delivery is located on customs area of Ukraine, according to article 186 of the Code.

According to Item 188.1 of Article 188 of the Section V of the Code 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 the 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, and collection on compulsory national pension insurance on services of cellular mobile communication).

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.

That is the means received as the amount of the delay penalty of payment or delivery of goods (services) and so forth need to be regarded as compensation of cost of goods (services) which joins in taxation basis the value added tax.

By Item 201.1 of article 201 of the Code it is determined that the taxpayer shall provide to the buyer (receiver) according to its requirement signed person authorized by the payer and tax delivery note under seal.

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