Housing restoration projects financed from the Fund for Liquidating the Consequences of Armed Aggression are under threat of being stopped due to retroactive VAT charges on concluded contracts, the press service of the Confederation of Builders of Ukraine (KBU) reported, Interfax-Ukraine reports.
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Contractors that entered into contracts for new construction, overhaul and reconstruction projects financed from the Liquidation Fund began to face problems associated with taxation due to attempts at new interpretations of certain norms of legislation by the State Tax Service of Ukraine.
At the same time, the confederation recalled that clause 197.15 of Art. 197 of the Tax Code of Ukraine determines that operations for the supply of construction and installation works for the construction of affordable housing and housing constructed with public funds are exempt from VAT taxation. Moreover, this clause was introduced into the Tax Code during the global financial crisis of 2008 and was applied exclusively in the implementation of special government targeted programs, as evidenced by various tax consultations for 2012-2023.
In May 2024, the State Tax Service sent a letter with its own new interpretation of the legislation. It actually states that the State Audit Service, during inspections, must “remove” VAT on previously concluded contracts financed from the Liquidation Fund. Based on this, contractors will be required to refund VAT, and the issue of damage caused by managers of customers throughout the country will also be considered. This situation has created risks that projects financed from the Reconstruction Fund may come to a complete halt in the near future.
Only in the Kyiv region, the Service for Rehabilitation and Infrastructure Development as of June 2024 is the customer for the restoration of 48 objects for the estimated total estimate cost 3.936 billion UAH. Among them are 34 projects of major repairs and reconstruction of apartment buildings, seven of new construction, six projects of public buildings (administrative, educational).
The Department of Regional Development of the Kyiv Regional Military Administration is the customer for 56 restoration projects at the expense of funds from the Liquidation Fund. Work on the restoration of 18 apartment buildings is financed within the framework of the UNITED24 program with funds from philanthropists, but formally these are also public funds, since they were transferred to the state budget. At the same time, more than 14 thousand people are expected to complete the announced projects.
- Taxes Real Estate