On 31 January 2018, KPMG tax consultants conducted the workshop for IT specialists dedicated to tax risks and CPT and VAT related issues.
Oksana Panchenko, Senior Consultant, Tax & Legal, and Volodymyr Chyzhykov, Senior Manager, Transfer Pricing, also highlighted the advantages of tax diagnostics and presented a case of TP tax audit of an IT company for discussion with the attendees.
Traditionally, Volodymyr provided three advices to IT business representatives intended to mitigation of risks arising during TP audits. “It is critical, first of all, to prepare quality documentation rather than a summary; secondly, to elaborate benchmark study strategy; and, finally, to thoroughly identify each comparable entity”.
Most of the time, Oksana Panchenko and the attendees discussed details of VAT taxation of certain IT services, the expert also clarified special aspects of IT companies’ cooperation with self-employed individuals.
In accordance with amendments to p. 26-1, subsection 2, Section XX of the Tax Code of Ukraine (TCU), on 1 January 2018, new VAT exemption regulations related to software supplies became effective. Based on these regulations, during the period from 1 January 2013 to 1 January 2023, VAT exemption is applied to software supply transactions included in the extended list that is effective starting from 1 January 2018 and software related transactions with payment that is not considered royalty as specified in paragraphs 2 – 7, subpara 14.1.225 of the TCU.
During the workshop, the experts highlighted VAT and CPT related amendments to the TCU effective from 1 January 2018, and explained how these amendments may effect taxation of IT company transactions.