When to register as a VAT payer?

Value added tax (VAT) is one of the key taxes in the Ukrainian taxation system. For businesses, the issue of VAT registration arises at different stages of their operations: some are registered by obligation, some are registered voluntarily, and some are subject to fines or lose contractors due to untimely response.

In this article, we will consider: When registration is mandatory, whether it is beneficial to register voluntarily, what are the risks, as well as how to register correctly without errors.

Mandatory registration as a VAT payer

According to Article 181 of the Tax Code of Ukraine, the business entity is obliged to register as a VAT payer, if:

• the amount of taxable transactions exceeds UAH 1 million (excluding VAT) during the last 12 months;

• the company operates under both the general and simplified taxation systems (except for single tax payers of the first to third groups without VAT).

‼️ It does not matter in which month the excess occurred. As soon as the maximum amount is reached, the company has 10 calendar days to submit an application for registration.

Voluntary registration

A business has the right to register as a VAT payer and voluntarilywithout waiting for the UAH 1 million threshold to be reached. This is most often done in the following cases:

• Your counterparties are exclusively VAT payersand it is more profitable for them to work with you if they have a tax credit.

• Export of services or goods - transactions with a zero VAT rate, with a possible tax credit refund.

• Procurement of large volumes of goods/services with VATwhich can then be put on credit.

For whom is voluntary registration disadvantageous?

• Businesses that work with the public or non-VAT payers.

• Individual entrepreneurs on the simplified taxation system who have no VAT expenses.

• Businesses with low margins that will not be able to effectively compensate for the cost of administering the tax.

Who cannot be a VAT payer?

VAT payers cannot be:

• single tax payers of the first group;

• individuals who do not carry out business activities;

• non-profit organizations, if their activities do not involve taxable transactions.

Deadlines for submitting an application

If the registration mandatory:

• You need to submit an application no later than 10 calendar days after reaching the threshold of UAH 1 million.

If. voluntary:

• You can submit an application at any time, but not later than 20 calendar days before the beginning of the tax periodfrom which you want to be a VAT payer.

How is registration done?

1. Preparation of an application in the form No. 1-VAT (for legal entities or individual entrepreneurs).

2. Submitting an application through the taxpayer's electronic office or in person to the State Tax Service.

3. Obtaining an extract from the register of VAT payers.

📌 The date of registration is considered to be first day of the monthfollowing the submission of the application (unless otherwise specified in the application).

Consequences of late registration

If an entrepreneur or company did not register on timebut exceeded UAH 1 million in turnover, the tax authorities still considers them a VAT payer from the date when the threshold is exceeded.

Consequences:

• Obligation to charge VAT on the entire amount of transactionsmade after the threshold - at their own expense.

• Penalties for violation of registration - from UAH 3400 to 8500 and more.

• The risk of recognizing transactions as fictitious for counterparties.

What to consider before registering?

Before registering as a VAT payer, we recommend that you do so:

• Analyze the type of customers (whether they will receive a tax credit).

• Evaluate the cost structure (whether there is input VAT to be compensated).

• Consider the administrative burden - maintaining registers, reporting, registration of tax invoices.

• Estimate the impact on the price of your goods/services.

Conclusion.

Registering as a VAT payer is not only a tax step, but also a strategic decision for business. Mandatory registration requires close monitoring of income, while voluntary registration requires a clear calculation of benefits and risks.

To avoid mistakes and fines, you should:

• keep records of income taking into account the VAT threshold;

• prepare documents in advance;

• consult a lawyer or accountant.

Law firm Axel Legal helps entrepreneurs:

• analyze the feasibility of VAT registration;

• accompanies the submission of documents;

• helps with tax planning and risk avoidance.

With us, you get a calm registration and a confident tax strategy.