Vitalii Savchuk, Senior Associate at Legal Alliance Company
Apteka Weekly
On January 1st, 2018 Law of Ukraine “On Amending the Tax Code of Ukraine and Some Legislative Acts of Ukraine Regarding Ensuring Balanced Budget Income in 2018” No. 2245-VIII as of December 7th, 2017 (hereinafter – the Law) entered into force.
Based on the Law, amendment have been made to Article 193(1)(c)(2) of the Tax Code of Ukraine (hereinafter – the Code), namely more VAT privileges have been granted.
7% VAT is also applicable to supply transactions on the customs territory of Ukraine and importation to the customs territory of Ukraine of all medical products included in the State Register of Medical Equipment and medical product complying with all technical regulations, which is confirmed by a compliance certificate, and allowed for the market and / or use and application in Ukraine.
The State Fiscal Service in the letter as of February 5th, 2018 expressed its understanding of the mentioned changes. Regarding taxation of medical products, the State Fiscal Service states that transactions of supply on the customs territory of Ukraine and / or importation to the customs territory of Ukraine of medical products are subject to 7% VAT, provided that such medical products:
а)allowed for the market and / or use and application in Ukraine;
б) included in the State Register of Medical Equipment and Medical Products (hereinafter – the Register) or comply with the relevant technical regulations, which is confirmed by a compliance certificate.
The letter contains a link to the Register placed on the website of the State Service of Ukraine on Medicines and Drugs Control at portal.diklz.gov.ua/PublicSite/PUB/VMList.aspx
Regardless of the formally correct understanding by the tax authority of the Code, the mentioned position poses a potential risk to a taxpayer related to the Register status.
The regulatory act which governs maintenance of the Register and empowers the State Drug Service with the relevant authorities is Order of the Ministry of Health of Ukraine “On Approval of the order for Storing the State Register of Medical Equipment and Medical Products” No. 533 as of July 16th, 2012. However, on February 2nd, 2018 the Order lost its validity based on Order of the Ministry of Health No. 1690 as of December 22nd, 2017, and there is no regulatory act to replace it.
It means that now the Register (temporarily) is not legally governed. In this case there is a risk that 7% VAT payments from transactions with the medical products included in the Register but which do not comply with technical regulations in future will be subjected to 20% tax by the State Fiscal Service.
However, there are attempts to settle the case. Association “Operators of Medical Products Market” holds consultations with regulatory bodies in order to govern the Register maintenance. Before the relevant regulatory act enters into force, taxpayers should themselves estimate the existing risk at VAT payment.
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