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The provision of warranty repair services is subject to VAT

The Main Department of the State Tax Service in Kyiv draws attention to the fact that the taxpayer’s operations for the provision of warranty repair services are subject to VAT.

The tax base of such transactions is determined based on the cost of such services, which are paid by the manufacturer of goods for which warranty repairs were carried out.

In accordance with subparagraphs “a”, “b” and “c” of paragraph 185.1 of Art. 185 of the Tax Code of Ukraine (hereinafter – TCU) the object of value added tax are, in particular, transactions of taxpayers for the supply of goods / services, the place of supply of which is located in the customs territory of Ukraine, and import of goods into the customs territory of Ukraine.

The procedure for warranty repair (maintenance) or warranty replacement of technically complex household goods was approved by the Resolution of the Cabinet of Ministers of Ukraine of April 11, 2002 № 506 (hereinafter – the Procedure № 506).

Clause 26 of the Procedure № 506 stipulates that warranty repair is the performance of work related to the elimination of defects in the goods to ensure its intended use during the warranty period. Elimination of defects is carried out by replacement or repair of a component product or a separate component, and also performance of regulatory works according to requirements of regulatory documents.

Thus, upon receipt by the taxpayer of goods for warranty repair and, accordingly, further return (transfer) to its owner (consumer) after such warranty repairs, there is no transaction for the supply of goods, and therefore the object of VAT does not arise.

At the same time, the taxpayer’s operations to provide warranty repair services are subject to VAT.

Source: gov.ua

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