Vitalii Savchuk, Senior Associate of Legal Alliance Company
On December 7th, 2017 the Verkhovna Rada of Ukraine adopted draft law No. 6776- д of November 14th, 2017 on introducing amendments to the Tax Code of Ukraine on ensuring the balance of budget revenues in 2018.
The bill, in particular, provides for the introduction of amendments to Article 193(1)(c)(2) of the Tax Code of Ukraine, namely, the VAT privileges have been extended.
Thus, a 7% VAT rate will be applicable to the supply of goods on the customs territory of Ukraine and import to the customs territory of Ukraine of all medical products registered with the State Register of Medical Equipment and Medical Devices or meeting the requirements of the relevant technical regulations, as confirmed by the document on compliance, and allowed for delivery on the market and / or use in Ukraine.
Prior to the changes, the VAT rate of 7% was applied exclusively to operations for the delivery of medical products in the customs territory of Ukraine and import into the customs territory of Ukraine based on the list approved by the Cabinet of Ministers of Ukraine. The VAT rate of 20% is applied to the operations for the delivery of medical products in the customs territory of Ukraine and the import of medical products into the customs territory of Ukraine outside such a list. In addition, the rate of 7% VAT for supply in the customs territory of Ukraine and the import into the customs territory of Ukraine of medicines, medical devices and / or medical equipment authorized for use in clinical trials, the permission for which is provided by the Ministry of Health of Ukraine.
How it works
On January 1st, 2018, these changes entered into force. Since this date, the operators of the market when calculating the obligations for VAT and tax credit are not required to be guided by the list approved by the Cabinet of Ministers in resolution No. 410 of September 3rd, 2014. Instead, taxpayers are entitled to apply a VAT rate of 7%, focusing on more broad criteria, mentioned above.
Regarding the different modes of supply, the following should be noted:
1. Import. When importing goods into the customs territory of Ukraine, the date of occurrence of tax obligations is the date of submission of the customs declaration for customs clearance. VAT amounts of 7% when importing goods to the customs territory of Ukraine are payable to the state budget before the day or on the day of submission of the customs return. The date of payment of this amount will be the date of the occurrence of the right to assign it to a tax credit.
2. Distribution in the territory of Ukraine. The base for the taxation of VAT on the supply of goods is determined on the basis of their contractual value. However, this base cannot be lower than the price of purchasing such goods.
The operators may experience a volume of goods imported or purchased in Ukraine before January 1st, 2018 (tax on which was paid, and the loan was formed based on a 20% VAT rate), but not sold before the entry into force of tax changes. In this case, subsequent tax liabilities for any deliveries (sales) of such goods should be calculated based on the rate of 7%. As for the previously formed tax credit of 20%, we see no reason for any correction. Thus, as for a part of the goods, the operator may have a tax credit exceeding the corresponding obligations when selling the goods. This loan can be used by the payer in further transactions.
When introducing VAT on medicinal products and medical devices in 2014, operators faced the opposite situation: the goods imported and purchased earlier without the formation of a tax credit had to be sold with based on credit in the amount of 7% of the contract value. In addition, in 2014 the market had almost no time to respond to changes and adapt to them calmly.
What to pay attention to
As of January 9th, 2018, the text of the Tax Code of Ukraine posted on the website of the Verkhovna Rada of Ukraine still contains the previous version of Article 193. The tax authority may in its own way interpret the effective date of the new rules.
We believe that these changes should be applied only from January 1st, 2018, since:
1. The Constitution of Ukraine in Article 94(5) provides that the law should enter into force 10 days after its official promulgation, unless otherwise provided by the law itself, but not earlier than the day of its publication.
2. The amending law (No. 2245-VIII "On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine on Ensuring the Balance of Budget Revenues in 2018") provides for entry into force on January 1st, 2018.
3. The law was published in “The Voice of Ukraine" on December 30th, 2017.
4. “The Voice of Ukraine” in accordance with Article 1(3) of Decree of the President of Ukraine No. 503/97 of June 10th, 1997 "On the Procedure for the Official Promulgation of Regulations and their Entry into Force" is one of the official publications for the promulgation of laws.
5. The law is posted on the website of the Verkhovna Rada as entered into force on January, 2018.
The event focused on the transformation of Ukraine's intellectual property sector on its path toward European integration.
Improving access to safe and affordable medicines for the Ukrainian population is one of the Government of Ukraine's top priorities. SAFEMed Activity (2017-2025) has supported this effort by appIying health system strengthening best practices.
The Ministry of Health website has posted a notice about the release of a revised draft order of the Ministry of Health ‘On Approval of Amendments to Certain Re
On 25 September, a webinar was held on the topic: ‘180 days of new drug price regulation. Results, prospects and practical advice.’ The event was organized by LA Law Firm in partnership with Proxima Research International.
