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Transfer of a bill of exchange to a creditor for debt repayment: will VAT be charged?

  • When a company transfers a bill of exchange to a creditor to repay a debt, no VAT is charged on the nominal value of the bill.
  • According to the Law of Ukraine on the Circulation of Bills of Exchange, transferable and simple bills of exchange can only be issued for the payment of actual goods, services, or work, excluding financial bank bills and financial treasury bills.
  • VAT is applicable to transactions of goods and services provided within the customs territory of Ukraine.
  • If a taxpayer provides goods or services that are subject to VAT according to the law, and secures the buyer’s debt with a simple or transferable bill of exchange or other debt instruments issued by the buyer or a third party, the taxable base is the contractual value determined in accordance with the established procedure, without considering discounts or other reductions from the nominal value of such a bill of exchange.
  • VAT is not charged on the nominal value of a bill of exchange, including discounts or interest.


Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.


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