Distant Trade in Ukraine of the Companies – Non-residents: Features of Tax Regulation
Experts declare that the market of distance selling is rapidly growing: being able to get to the customer in the most inaccessible point, the distance selling is taking off in Ukraine. A number of significant advantages over traditional trading allows the distance selling to increase the volumes. Companies specializing in distance selling use all possible channels, the Internet, television and mobile communication capabilities to communicate information about their commodity or service to the consumer.
For example, in some European countries the turnover of distant trade has reached 7% of the national GDP! Of course, in Ukraine, the numbers are much more modest, but according to experts if the current pace of growth of this industry will be maintained over the next five years, the share of distance selling could be more than 3% of GDP. However, these are small numbers in comparison with Germany or neighboring Poland, for example, that means that the Ukrainian distant selling market is of great potential. At the same time Ukrainian market is not only interesting for local companies but also for companies – non-residents who wish to sell their products to Ukrainian consumers. In this article, we will consider this option of remote trading company – non-resident, as well as some tax aspects of such a business.
There are several basic options for company’s business of distant selling (for a non-resident of Ukraine):
• through a registered in the territory of Ukraine legal entity;
• through a registered in the territory of Ukraine representative office;
• through the use of mediation services of Ukrainian enterprises;
• without registering business in Ukraine.
Initially, the variant the registration of a legal or representative office entity on the territory of Ukraine may seem to be the most sensible, but this option has the greatest number of risks and disadvantages:
• a significant tax burden on economic entities of Ukraine (value-added tax of 20% on imports + customs duty as consistent with the Customs Tariff of Ukraine + income taxes + other taxes);
• fiscal approach of the tax authorities, aiming at implementation of the state budget which means unnecessary tax demands of fiscal authorities;
• complexity of the protection of rights in litigation with the fiscal service ( in 9 out of 10 cases the courts to the fiscal service);
• frequent tax audits;
• some complexity with registration, especially for representation office.
Activities with using the mediation services of Ukrainian enterprises also has its drawbacks, in particular, the activities of such companies are imposed to relatively high taxes which leads to an increase in commissions in favor of such enterprises and, consequently, to a decrease in the profit of the distance trade company.
Therefore, the option of the company – non-resident in the territory of Ukraine without legal registration in Ukraine with its benefits is worth considering. You should understand that prerequisite work of this embodiment is the import of goods to Ukraine only through international postal items which, in its turn, transfers the obligation to pay all taxes in the country of registration of the company – non-resident. Also there is no obligation to pay the value added tax and customs duties on importation of goods by international mail under the following conditions:
• the value of goods is up to 300 Euro;
• goods come from one sender to one recipient not more than 1 time per day;
• the commodity nomenclature and quantity of goods should not look like a “wholesale quantity”;
• if goods cost more than 300 euros, it is necessary to pay 20% VAT and import duties of 10% (calculation is based on the sum exceeding 300 euros).
Activities without registration in the territory of Ukraine of a legal body or representative, for example, using consignment schemes, provides for the formation of the tax credit for export VAT as a result of export of goods from the country of registration. At the same time the basic conditions of customs clearance are:
• the main task is substantiation that the imported goods are international postal items;
• clearance of international mail marked “consignment” is carried out on the form of the Single Administrative Document (the enactment Cabinet of Ministers of Ukraine №450 from 21.05.2012 years);
• in one of the customs declaration on the form of a single administrative document, up to 999 products can be declared.
Thus, it is clear that the distance selling is a link, the existence of which is very beneficial for both producers and consumers. And if you take into account the popularity of trade catalogs throughout the world, it is easy to make sure that even a deep crisis is not able to destabilize this market segment significantly. Undoubtedly, the distant selling in Ukraine will develop at an accelerated pace, the study of foreign experience of this area will take place. Therefore, it would be prudent for many companies of distant trade – non-residents to consider the Ukrainian market as one of the high-potential.
Author: Kydalov Igor