ETERNA LAW Partner Kristina Shapovalova and Associate Vladyslav Holubokov examined the State Tax Service’s current approach to incentive payments, the tax risks for businesses, and practical tools for minimising them.
Kristina Shapovalova pointed out that the Tax Code of Ukraine does not contain a separate definition of incentive payments. At the same time, the State Tax Service’s approach to their taxation is evolving: if a payment is linked solely to the volume of purchases and does not require active action on the part of the distributor, the tax authority may not recognise it as subject to VAT. The decisive criterion remains the existence of reciprocal obligations between the parties.
Vladislav Golubokov focused on practical risks, including the blocking of tax invoices and the additional assessment of VAT liabilities. Particular attention was paid to the duration of audits, which, given COVID-19 and martial law, may cover a period of more than six years.
To strengthen the business’s position, the speakers recommended reviewing contractual mechanisms for incentive payments, properly documenting distributors’ active actions, distinguishing between the supply of goods and marketing services, and conducting an audit of contracts and source documentation.
We would like to thank all participants for the lively discussion and their interest in the topic.
