Updated: Jun 28, 2019
By a general rule, when a foreigner brings property to Ukraine then he/she has to pay customs duties and VAT.
But there are cases when people are exempted from paying all these levies. For example, when a foreigner moves to Ukraine for permanent residence.
However, there is another case that not only exempts from paying these levies, but also can be used for minimization of expenses and even for making some income. This case is when you invest property to your Ukrainian company.
Are you not going to have a company in Ukraine? Maybe you will change your mind after reading this article.
Let’s consider some example. Say you have your lovely car back home and would like to use it in Ukraine. Simply brining your car to Ukraine will make you customs clear it in Ukraine and to pay 20% VAT on top of that. But if you incorporate a company in Ukraine and allocate your car to the company’s charter capital as your investment, then you do not need to customs clear it and will get your VAT refunded.
There is a nuance, however. If you sell the car within 3 years after the investment, you will have to pay the customs duties yet you still will have your VAT refunded. Anyway, when you sell your car in Ukraine after 3 years, you probably will have profit out of this deal anyway.
Below let’s review what laws provide for these exemptions:
Re exemption from customs duties.
Article 18 of the Law of Ukraine On Foreign Investment Regime says: “taxation of property brought to Ukraine as contribution of a foreign investor to the charter capital of companies with foreign investments (except of property not used in commercial activity) is carried out according to the Customs Code of Ukraine.”.
Clause 2 article 287 of the Customs Code of Ukraine respectively says: “goods (except of property not used in commercial activity) imported to Ukraine for at least 3 years by foreign investors in accordance with the Law of Ukraine On Foreign Investment Regime as a contribution of a foreign investor to the charter capital of companies with foreign investments are exempted from customs duties.”.
So, if you own a company in Ukraine, then you can take your home car, yacht or any other property that formally can be used for business and allocate it to your Ukrainian company. In this case you do not pay customs duties.
Legalhack: This option is commonly used by yacht owners in Ukraine and owners of other expensive vehicles.
Re refund of VAT.
When you import (bring something) to Ukraine you pay 20% VAT (except of some cases). However, if you import property as a contribution to the charter capital of a company, then all paid VAT will be refunded to you.
In particular, article 198 of the Tax Code of Ukraine says: “The tax credit is all taxes paid due to importation to Ukraine of property as a contribution to a charter capital.”
According to a number of provisions of the Tax Code the sum of tax credit can be refunded upon request.
Contact Legal Ideas law firm to get advice on your personal case.