| Romanovska L.А., Candidate of Law, Director, Chief Research Fellow in the field of jurisprudence at IPE LLC, https://orcid.org/0009-0004-6306-6936 |
Incorrect use of the term “toll raw materials” in the terms of contracts may have negative financial consequences, in particular: to apply the norms of clause 32, subsection 2, section XX of the Tax Code of Ukraine, it is necessary to use the term “supply of goods”, defined by subparagraph 14.1.191, clause 14.1, article 14, section 1 of the Tax Code of Ukraine. If the Contractor’s transaction takes place under the terms of the transfer of toll raw materials, such transactions fall under the definition of “supply of services” within the meaning of subparagraph 14.1.185, clause 14.1, article 14, section 1 of the Tax Code of Ukraine. At the same time, such transactions are not subject to the VAT exemption regime established by subparagraph 4, clause 32, subsection 2, section XX of the Tax Code of Ukraine and, accordingly, such transactions are subject to VAT taxation in the generally established manner.
Contracts concluded under the inherent legal nature of contract agreements, rather than contracts for the transfer of toll raw materials, may be characterized by the following legal features, which are identified in the process of analysing a specific situation: (1) the legal basis for their conclusion is Article 33 of the Law of Ukraine “On Défense Procurement”, which grants the right to the bidder in its tender documentation to notify the state customer of the need for subcontracting; (2) business entities, regardless of their form of ownership, which are involved as executors of state contracts (agreements), are recognized as co-executors/subcontractors for the performance of state contracts (agreements) concluded with state customers (clause 28 of Article 1 of the Law of Ukraine “On Défense Procurement”); (3) the result, which is their subject, is manufactured from components that are the property of a separate business entity, and accordingly the product (goods) manufactured from these components is the property of the business entities (Customer and Contractor) as co-owners of the manufactured product; (4) a contract is concluded for the performance of certain work, the result of which is a tangible or intangible object that is subject to transfer to the customer (Article 837 of the Civil Code of Ukraine).
A business transaction carried out by a business entity under contracts that have obvious, visible signs of the supply of goods and are confirmed by such primary documents as: acts of equipping the product (goods), expense invoices and acts of handover and acceptance of work performed, on the basis of which the right to dispose of the manufactured product (goods) was transferred, cannot have signs of contracts for the transfer of toll raw materials.
