The State Tax Administration in the Lviv Region considered the letter of the Union "European Union of Ukrainian Transport Companies" of 30.06.2006 № 25/DPA and has informed the following.

 According to article 1 of the Law of Ukraine of 01.07.2004 № І955-ІV «About transport-forwarding activity» a transport-forwarding service is the service that is directly connected with organization and providing of transportation of export, import, transit or any other cargo due to a contract on transport forwarding. Participants of transport-forwarding activity, and namely, clients, transport companies, forwarders, transport agents, ports, railway stations, associations and specialized enterprises of the railway, aviation, automobile, river and sea transport, customs brokers and other persons who perform works (provide services) on transportation of cargoes. Relationships in the sphere of transport-forwarding activity are regulated by the Civil Code of Ukraine, the Economic Code of Ukraine, by laws of Ukraine "About transport", "About foreign economic activity", "About transit of cargoes", by this Law, by other laws, transport codes and charters, аs well as other normative legal acts issued in accordance with them. Types of transport-forwarding services are defined in article 8 of the Law «About transport-forwarding activity».

 It is stated in article 7 of the Law of Ukraine of 10.11.1994 № 232/94- ВР «About transport» that tariffs for transport services shall be fixed in correspondence with the legislation of Ukraine. The level of tariffs for transport means shall be determined in correspondence with normative expenses per unit of transport work, the level of profitability and the tax payment level. Accounts with consumers of general transport services shall be held on the basis of current tariffs in the procedure established by codes (charters) of definite transport means types and other acts of the legislation of Ukraine. Compensation of losses caused by free-of-charge transportation of privileged categories of citizens shall be regulated by normative acts of the Cabinet of Ministers of Ukraine. 

Taking into account all the above stated, the current legislation presupposes differentiation between the notions of transport-forwarding services and transport services, and correspondingly, taxation of such services.

 The Law of Ukraine of 25.03.2005 N 2505-IV "About introduction of changes to the Law of Ukraine "About the state budget of Ukraine for year 2005" and some other legal acts of Ukraine" there have been introduced numerous amendments to the Law of Ukraine "About the values added tax",  as for example, the norm regulating the procedure of applying the zero rate of the VAT has been excluded for the cases of providing works (services), as well as the notions of  “the place of goods delivery” and “the place of service provision” have been added.

 Taking into account the above mentioned amendments the object to be taxed by the VAT at provision of services shall be defined on the basis of the place of these service delivery.

 According to subpoint 3.1.1 of point 3.1 of article 3 of the Law of Ukraine of 03.04.1997 № 168/97-ВР «About the value added tax» (with amendments and additions), the object to be taxed by the value added taxed is represented by the operations of taxpayers on "delivery" of goods and services, the location of which is at the customs territory of Ukraine.

 According to subpoint "а" of point 6.5 of article 6 of the Law «About the value added tax» with an exclusion of subpoints "в", "д", "е" of this point, the place of services is the place where a person providing the service is registered as a taxpayer, and in case if this service is provided by a non-resident, this will be the location of its representative office; and if there is no such place of location, this will be the location of the resident being an agent (representative) acting on behalf of such a non-resident; and if there is no such agent (representative) this will be the actual place of location of a buyer (consignee), who, in this case, acts as a tax agent of such a non-resident.

 Taking into consideration the above stated, if the place of service delivery is outside the customs territory of Ukraine, then operations on providing services by a non-resident to a resident, confirmed by initial basic documents (an agreement, a report on works performed), who has no representative at the customs territory of Ukraine, shall not be included to the objects who are to be taxed.

 Regards the taxation of transport services: according to subpoint 6.2.4 of point 6.2 of article б of the above mentioned Law, operations on provision of transport services by railroad, automobile, sea and river transport means, on transportation of passengers, goods, cargoes, (freights) and cargoes outside the state border of Ukraine, аnd namely: from the point outside the state border of Ukraine to the point of locality of the outer customs control of Ukraine;  from the point of locality of the outer  customs control of Ukraine to the point outside the state border of Ukraine;  between the points outside the state border of Ukraine, as well as by aviation transport means: from the point outside the state border of Ukraine to the point of performing of the customs procedures on admission of passengers, goods, cargoes (freights) through the customs border to the customs territory of Ukraine (including the inner customs); from the point of performing of the customs procedures on on admission of passengers, goods, cargoes (freights) through the customs border outside the state border of Ukraine (including the inner customs) to the point outside the state border of Ukraine; between the points outside the state border  of Ukraine.

 In case if the transport services, defined in the first part of this subpoint, are provided in the form of broker’s, agent’s, commission operations with transport tickets, commutation documents, drawing up of contracts оr invoices on transportation of passengers or cargoes by a forwarder’s proxy, operations on such services shall be taxed at the rate of 20 per cent.