REUTERS
If the bill is passed, IT companies' services may rise in price by 20% for Ukrainians.
Head of the Financial, Tax and Customs Policy Committee Danylo Getmantsev has submitted a bill to the Verkhovna Rada, Ukraine's parliament, suggesting that international IT corporations that provide services to Ukrainians be subject to a 20% value added tax (VAT).
Getmantsev says transnational IT companies, such as Google, Facebook and others, have long been operating in Ukraine via the Internet, rendering their services to Ukrainians. Yet, their services are not taxed as they are not officially registered in Ukraine and have no permanent representative offices.
"The provision of electronic services by non-resident companies for individuals who have no status of business entities does not allow for the effective handling of VAT. This leads the national budget's losses and creates a non-competitive environment for resident taxpayers. This violates the basic principles of equality and neutrality of taxation," he said, as reported by the Ukrainian news outlet Hromadske on January 28.
The author of the bill cites the example of Russia, where VAT on IT companies' services were earlier introduced, obligating Google, Apple, Netflix, and other companies to register with Russia's tax authorities.
"According to official figures, such (B2C) companies paid RUB 9.4 billion [about US$150 million] to the budget in 2017, RUB 12 billion [US$191.5 million] in 2018, and RUB 12 billion in the first quarter of 2019 (major IT companies account for 70% of the total amount). Similar tax rules were introduced in the Republic of Belarus in 2018," Getmantsev said, proposing that the same tax rules be used in Ukraine.
Noteworthy, if the bill is passed, IT companies' services may rise in price by 20% for Ukrainians.
The draft law has not yet passed its first reading. It requires enactment by the Ukrainian president after the Verkhovna Rada adopts it in the second reading.