Returning improved leased property: VAT implications when object is returned.

• If expenses for improving the leased property are incurred with the lessor’s consent and not compensated by the lessee, the value of the improvement is considered a free service provided and is subject to VAT upon return of the leased property.
• The tax base for supply of goods/services is determined based on their contractual value, excluding certain taxes and fees.
• The tax base cannot be lower than the purchase price of goods/services, self-manufactured goods/services, or non-current assets.
• Certain exceptions apply for regulated prices, gas supplied for residential needs, and electricity.
• If expenses for improving the leased property are not compensated by the lessee, they are subject to VAT at the standard rate based on the purchase price of goods/services used for the improvement.
• If separate agreements are made between the lessor and lessee for compensation of improvement expenses, the amounts paid under such agreements are considered a separate service and subject to VAT at the standard rate.

Source: news.dtkt.ua

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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