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How is VAT calculated and collected on goods imported under local grants?
Article 165.1.2 of the Tax Code provides that the import of goods financed by grants received from abroad under a grant agreement (decision), as well as the supply of goods, performance of works, and provision of services to grant recipients, are subject to 0% VAT. If the grant is received from a local organization rather than from abroad, will the import of goods financed by that grant be subject to 0% VAT or 18% VAT? If the 18% rate applies, can the VAT paid on import be credited in the relevant reporting period?
According to the State Tax Service under the Ministry of Economy, pursuant 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 works, and provision of services to grant recipients, is subject to 0% VAT. To qualify, grant agreements must be registered with the relevant authorities in accordance with the law and officially recognized as grants (based on the notification confirming the registration of the agreement). In such cases, the related supplies of goods, works, and services are taxed at the 0% VAT rate.
However, since Article 165.1.2 applies only to grants received from abroad, goods imported using grants obtained from local sources are subject to VAT under the general rules, and 18% VAT is charged at the time of import.
At the same time, VAT paid by VAT-registered taxpayers to the customs authorities on imported goods may be credited on the basis of import documents in accordance with Article 175 of the Tax Code.
Legal basis: Articles 165.1.2 and 175 of the Tax Code.
Article 165.1.2 of the Tax Code provides that the import of goods financed by grants received from abroad under a grant agreement (decision), as well as the supply of goods, performance of works, and provision of services to grant recipients, are subject to 0% VAT. If the grant is received from a local organization rather than from abroad, will the import of goods financed by that grant be subject to 0% VAT or 18% VAT? If the 18% rate applies, can the VAT paid on import be credited in the relevant reporting period?
According to the State Tax Service under the Ministry of Economy, pursuant 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 works, and provision of services to grant recipients, is subject to 0% VAT. To qualify, grant agreements must be registered with the relevant authorities in accordance with the law and officially recognized as grants (based on the notification confirming the registration of the agreement). In such cases, the related supplies of goods, works, and services are taxed at the 0% VAT rate.
However, since Article 165.1.2 applies only to grants received from abroad, goods imported using grants obtained from local sources are subject to VAT under the general rules, and 18% VAT is charged at the time of import.
At the same time, VAT paid by VAT-registered taxpayers to the customs authorities on imported goods may be credited on the basis of import documents in accordance with Article 175 of the Tax Code.
Legal basis: Articles 165.1.2 and 175 of the Tax Code.