What is the procedure for taxation of factoring operations?

The head office of the DPS in the Odesa region reports that according to Art. 1077 of the Civil Code of Ukraine (as amended, hereinafter referred to as the CCU) under a factoring agreement, one party (the factor) transfers or undertakes to transfer funds to the disposal of the other party (the client) for a fee (in any manner stipulated by the contract), and the client withdraws or undertakes to cede to the factor his right of monetary claim to a third party (debtor).

The factor can be a bank or other financial institution, which in accordance with the law has the right to carry out factoring operations (Article 1079 of the CCU).

According to paragraph 196.1.5 clause 196.1 of Art. 196 of the Tax Code of Ukraine (as amended) is not subject to VAT taxation, transactions, in particular, the assignment of the right of claim, transfer of debt, trade in debt obligations (requirements) for money or securities, with the exception of transactions for the collection of debt claims and factoring (factoring) operations, except for factoring operations, if the object of the debt is currency values, securities, including compensatory papers (certificates), investment certificates, mortgage certificates with a fixed income, operations on assignment of the right of claim on mortgage-backed credits (loans ), housing checks, land bonds and derivatives.

Therefore, factoring operations are not subject to VAT if the object of the debt is currency values, securities, including compensatory papers (certificates), investment certificates, mortgage certificates with a fixed income, operations on the assignment of the right of claim on mortgage-backed loans (loans), housing checks, land bonds and derivatives.

Other factoring transactions are subject to VAT.

Source: od.tax.gov.ua

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