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How is VAT applied to imports financed by a local grant?
How is VAT applied to imports financed by a local grant?
According to Article 165.1.2 of the Tax Code, the import of goods financed by grants received from abroad under a grant agreement (decision), as well as the supply of goods, performance of work, and provision of services to grant recipients, are subject to VAT at a zero percent rate. For this purpose, grant agreements must be registered with the relevant state authorities in accordance with the legislation and officially recognized as grants. Based on the notification confirming the registration of the agreement, a zero VAT rate is applied to transactions carried out using those grant funds.
However, since this exemption is предусмотрed only for grants received from abroad, if the grant is obtained from a local source, the import of goods financed by such funds is subject to VAT under the general procedure, and VAT at the rate of 18% is charged upon importation. At the same time, persons registered as VAT taxpayers may credit the VAT amounts paid to customs authorities during importation on the basis of import documents in accordance with Article 175 of the Tax Code.
According to Article 165.1.2 of the Tax Code, the import of goods financed by grants received from abroad under a grant agreement (decision), as well as the supply of goods, performance of work, and provision of services to grant recipients, are subject to VAT at a zero percent rate. For this purpose, grant agreements must be registered with the relevant state authorities in accordance with the legislation and officially recognized as grants. Based on the notification confirming the registration of the agreement, a zero VAT rate is applied to transactions carried out using those grant funds.
However, since this exemption is предусмотрed only for grants received from abroad, if the grant is obtained from a local source, the import of goods financed by such funds is subject to VAT under the general procedure, and VAT at the rate of 18% is charged upon importation. At the same time, persons registered as VAT taxpayers may credit the VAT amounts paid to customs authorities during importation on the basis of import documents in accordance with Article 175 of the Tax Code.