The head office of the DPS in Kyiv informs that if the expenses for the improvement of the leased object are carried out with the consent of the lessor and are not compensated to the lessee, then when the leased object is returned, the cost of the improvement is considered a free service and is subject to VAT at the basic rate. based on the purchase price of goods/services used for such improvement.
If separate agreements have been concluded between the lessor and the lessee on the provision by the lessor to the lessee of compensation for the lessee’s expenses for the improvement of the leased object, then the sums of funds paid (reimbursed, compensated) under such agreements are a separate transaction for the provision of services for the improvement of fixed assets, considered as a separate object of taxation and subject to VAT at the basic rate.
For reference: according to clause 185.1 of Art. 185 of the Tax Code of Ukraine, the object of taxation is the operations of taxpayers, in particular, the supply of services, the place of supply of which is located in the customs territory of Ukraine, in accordance with Art. 186 PKU.
According to paragraphs “in” p.p. 14.1.185 and paragraphs “in” p.p. 14.1.191 clause 14.1 of Art. 14 PKU supply of goods/services includes, in particular, supply of services to another person on a free basis.
Clause 188.1 of Art. 188 of the Code of Civil Procedure defines that the basis of taxation of operations for the supply of goods/services is determined based on their contractual value, taking into account state taxes and fees (except for excise tax, which is calculated in accordance with clauses 213.1.9 and 213.1.14 of clause 213.1 of Article 213 of the Code of Civil Procedure, a fee for mandatory state pension insurance, which covers the cost of cellular mobile communication services, VAT and excise tax on ethyl alcohol, which is used by manufacturers – business entities for the production of medicinal products, including blood components and drugs produced from them (except medicinal products in the form of balms and elixirs).
At the same time, the tax base for the supply of goods/services cannot be lower than the purchase price of such goods/services, the tax base for the supply of self-made goods/services cannot be lower than normal prices, and the tax base for the supply of non-current assets cannot be lower of the balance sheet (residual) value according to accounting data as of the beginning of the reporting (tax) period during which the following operations are carried out (in the absence of accounting for non-current assets – based on the usual price), with the exception of:
goods (services), the prices of which are subject to state regulation;
gas supplied for the needs of the population;
electric energy, the price of which was established on the electric energy market.
Source: gov.ua
