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Features of taxation of operations with customer-owned raw materials from non-resident

To date, a fairly large number of taxpayers are carrying out their activities in the field of processing of customer-owned raw materials.

The processing of customer-owned raw materials on the territory of Ukraine can be conditionally divided into two groups: the first – processing of raw materials received from a resident, the second – raw materials received from a non-resident, imported into the customs territory of Ukraine with subsequent export of the finished products (re-export). If it is quite clear with the first group, then regarding the processing of the raw materials imported by a non-resident and the procedure for the export of the finished products, certain questions arise.

The specialists of Finance Business Service were considering the procedure for the processing of the customer-owned raw materials of the non-resident on the customs territory of Ukraine, as well as the features of the customs and currency regulation of this business transaction.

Schematically, the processing of the customer-owned raw materials looks as follows:

Most economic relations begin with the conclusion of an agreement. According to its legal nature, the agreement for the processing of the customer-owned raw materials is nothing else than a turn-key contract, which is regulated by the chapter 61 of the Civil Code of Ukraine.

However, when a non-resident acts as one party of the contract, and the raw materials and further manufactured goods from it move across the state border of Ukraine, such an agreement acquires the status of the foreign economic.

What do you need to know in this case? When concluding a foreign economic agreement (contract), the requirements specified in the Law of Ukraine “On Foreign Economic Activity” and the Order of the Ministry of Economy and the European integration of Ukraine No.201 of 06.09.2001, registered in the Ministry of Justice of Ukraine of 21.09.2001 under No.833 /6024.

The above normative acts set certain requirements for the content of the agreement. In particular, the contract must contain: the title, the number of the agreement (contract), the date and place of its drafting, the preamble, the subject of the agreement (contract), the quantity and quality of the goods (the volumes of performance of work, rendering services), the basic conditions for the supply of raw materials / materials and finished products (the acceptance and transfer of works or services), material consumption rates and deadlines for the return of material residues and major waste, a report on the use of the materials, the type, the name, the quantity and value of the finished product, the price and the total cost of the agreement (contract), conditions of payments, conditions of acceptance and transfer of the goods (works, services), data on packaging and labeling, information on force majeure circumstances that may prevent the parties from fulfilling the terms of the agreement, information about sanctions and complaints, the terms for settling disputes in the court, the data on location (place of residence), postal and payment requisites of the parties.

After the conclusion of the agreement for the processing of the raw materials with a non-resident, the issue of its importing to the customs territory of Ukraine arises, as well as its registration (placing it under the appropriate customs regime), processing, transferring and exporting the finished products.

All the stages have certain nuances and appropriate regulatory regulation. So, the raw materials imported as customer-owned raw materials should be placed under the customs regime of “processing in the customs territory of Ukraine”.

The placement under the customs regime of “processing on the customs territory of Ukraine” provides for the application of zero customs payments on importing raw materials and exporting the finished products.

The exemption from full payment of customs payments is conditional. This means that the taxpayer (processor) must fulfill certain conditions for such release. Namely, to provide certain documents and information: foreign economic agreements, technological schemes for processing, contracts for processing goods with other enterprises, if individual operations (or a full cycle) for the processing of goods will be carried out by such other enterprises. In addition to the required documents, at will, the taxpayer can provide the conclusions of the state bodies, expert institutions, organizations, state standards and standards of the enterprise, technical conditions, descriptions or drawings of samples, according to which the processing will be carried out, etc.

As for the control over the process of processing of the customer-owned raw materials, it is necessary to take into account the existence of the certain deadlines and the procedure for issuing the relevant documents.

Thus, the processing period cannot exceed 365 days, and calculations must be made within 120 days from the date of signing the act of work performed. At the same time, the use of the Ukrainian goods for which import duties are imposed is not allowed during the processing. We should pay attention separately to the use of the raw materials which requires a compulsorily report to be compiled according to the results of processing. It is not superfluous to pay attention to waste processing. They are divided into those ones that have and do not have economic value.

In this connection, the controlling authority is provided with the information on the return of the waste to the customer, their destruction or receipt as the payment for the work performed.

The re-export of the products made of the customer-owned raw materials can be carried out not through that revenue body and the fees through which the raw materials were imported. But, at the same, time, the declaration with the indication of the Ukrainian goods having been used in processing (as well as their quantity and value) must be submitted without fail. The Ukrainian goods used in the processing can be declared in the export mode.

As for the taxation in the course of economic operations for the processing of customer-owned raw materials provided of a non-resident on the territory of Ukraine, it looks as follows:

  • VAT on imported raw materials and exported finished goods – 0%;
  • customs payments for the import / export of goods – 0% (subject to the conditions of the “processing in the customs territory” regime);
  • VAT on processing services – 0% (when calculating in cash and exporting finished goods outside the customs territory) – subpar. 195.1.3. cl. 195.11 of art. 195 of the Tax Code of Ukraine;
  • VAT on goods purchased in the customs territory of Ukraine and fully used for the processing of foreign goods (which can be declared in the customs export regime) – 0% (Article 154 TCU)
  • ;
  • income tax – on general terms.

Thus, as we see, the economic operations for the processing of the customer-owned raw materials have certain advantages. But it is necessary to pay attention to the numerous nuances on their carrying out, connected with registration of the agreement, placing of raw materials under the customs regime, transfer of the finished products, drawing up reports on the remains of the raw materials, as well as transfer of waste, etc. Therefore, the experts of Finance Business Service advise to apply to the professionals for the proper registration of this kind of business operations.