The Verkhovna Rada, the Ukrainian parliament, has passed Bill No. 4184 to amend the Tax Code in terms of introducing value added tax (VAT) on digital services provided by such tech giants as Google, Microsoft, Netflix, and others in Ukraine.
Read also Ukraine may slap VAT on e-services of Google, Facebook, Netflix – lawmaker Some 286 lawmakers backed the draft law in the first reading with the required minimum being 226 votes, an UNIAN correspondent reported on February 17.
As the explanatory note says, the provision of electronic services by nonresident companies for individuals who do not have a business entity's status does not let effectively implement VAT taxation rules. This leads to a shortfall in budget revenue and creates a non-competitive environment for resident payers. Thus, the basic principles of equality and neutrality of taxation are violated.
Moreover, quite a few countries have already obliged nonresidents to pay value added tax when providing electronic services. This refers to such tech giants as Apple, Google, Microsoft, Netflix, Wargaming Group, Bloomberg, Alibaba, and Booking.com.
"In turn, establishing the special VAT rules for electronic services is becoming a common practice in such countries as EU member states, Australia, Belarus, Kazakhstan, Russia, and others," the document said.
Bill No. 4184 on amendments to the Tax Code of Ukraine regarding the abolition of taxation of income received by nonresidents in the form of payments for the production and/or distribution of advertising, and the improvement of the taxation procedure for value-added tax transactions for the supply of electronic services by nonresidents to individuals was registered in parliament on October 2, 2020.