The State Tax Service commented on changes in the procedure for the taxation of finance lease related to the Law No. 425-IX
The State Tax Service of Ukraine published an information letter No. 1174/7/99-00-07-03-02-07 dated 23.01.2020, which provides explanations for the amendments to the Tax Code of Ukraine (the “Tax Code”) related to the improvement of the procedure of financial restructuring and taxation of finance lease transactions, on its official website.
These are the amendments provided for by the Law of Ukraine “On Amendments to the Tax Code of Ukraine due to improvement of the financial restructuring procedure and taxation of finance lease transactions” No. 425-IX dd. 20.12.2019 (the “Law”), which came into force on 29.12.2019.
The Law provides for the following amendments:
- Extension of temporary VAT exemptions for supplies of goods by the debtor towards debt repayment in the process of financial restructuring January 1, 2023. It also applies to the supply of goods by a guarantor (property guarantor—pledger, mortgagor).
- VAT exemption for banking and other financial institutions’ transactions on supply (sale, alienation by other means) of goods received by them from debtors, guarantors for the supply of goods, which are exempt from taxation under the above norm, until 01.01.2023. The VAT exemption relates to the part of the cost of the goods at which they were purchased to meet the obligations under the loan agreement.
- Clarification of the rules for determination of the VAT base for transactions on supply of goods that were returned by the lessee to the lessor under the finance lease agreement due to its non-execution or improper execution. Prior to the relevant amendments, the provisions of paragraph 189.5 of the Tax Code were applied only to the supply of goods under the finance lease agreements, which were returned due to the failure of the lessee, which is the VAT non-payer, to comply with the terms of such an agreement.