The tax authorities in Ukraine have clarified the VAT treatment for defense-related procurement contracts. According to their consultation:
If operations related to the supply of defense goods within Ukraine’s customs territory are exempt from VAT taxation (under subsection 4, paragraph 32, subsection 2, section XX of the Tax Code of Ukraine No. 2755-VI from December 2, 2010), then:
- Co-contractors supplying defense goods to main contractors under state defense contracts
- Main contractors supplying defense goods to state customers under defense procurement contracts
Will not be required to calculate VAT tax liabilities according to the rules established in paragraph 198.5 of Article 198 and Article 199 of the Tax Code.
In simpler terms, defense procurement operations that qualify for VAT exemption will not trigger compensatory VAT liabilities that might otherwise apply to exempt transactions.
Source: news.dtkt.ua
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
