Ukraine adopts a 20% VAT on online services of foreign companies

On June 3, 2021, the Ukrainian parliament,  the Verkhovna Rada adopted a bill imposing VAT on digital services delivered by non-resident companies. That means that foreign companies, such as Facebook, Netflix, Steam, Apple or Amazon will have to pay a 20% tax on their online services used by local residents after the draft law is signed and published.

According to the new rules, electronic services that non-resident companies supply to individuals in Ukraine are subject to VAT (20%).

However, the “tax on foreign advertising” rule is excluded from the code. That means that Ukrainian legal entities and individual entrepreneurs will not have to pay a 20% tax when buying electronic services from foreign companies.

What types of services will be considered electronic?

• Downloading movies, books, magazines;
• access to the databases;
• access to the television channels;
• access to the electronic resources;
• distance learning services;
• cloud services;
• software delivery;
• providing advertising services on the internet.

What types of services will not be considered electronic?

• Car rental services;
• products delivery services;
• passenger transport services;
• distance learning services between teacher and student;
• providing consulting services via email;
• internet access services.

Source: The website of  Verkhovna Rada of Ukraine