Ukraine introduces 20% tax on digital services provided by international corporations

On 3 June 2021, the Ukrainian parliament voted to apply a 20% VAT on the revenues of non-resident companies from electronic and digital services provided to consumers within Ukraine.

Digital services subject to new tax include any kind of service rendered via an Internet connection, through the web or an app, primarily without a person’s involvement, including streaming services, cloud services, content subscriptions, etc.

The services not subject to the new tax include distance-learning services (if the Internet is used exclusively as a means of communication between a teacher and a student) or booking services carried out through the web or an app while the actual supply is carried out offline.

Non-resident entities that provide such digital services to Ukrainian consumers must register as VAT payers in Ukraine once the revenue received from these services exceed the equivalent of UAH 1million (approximately EUR32,000) in any calendar year.

Once registered, non-residents will have to file simplified VAT returns on a quarterly basis and pay 20% on top of the total value of digital services provided to Ukrainian consumers. This payment is to be carried out in a foreign currency (i.e., USD or EUR).

In order to administer the new tax, the Ukrainian government will develop a special online platform that should allow non-resident entities to register remotely as VAT payers, file VAT returns, pay the respective tax, and communicate with tax authorities.

Once the President of Ukraine promulgates this law, the new tax will become effective on 1 January 2022.

For more information, call your CMS contact or our local CMS experts: Olga Belyakova, Viktoriia Stavchuk, Anna Pogrebna.