Logistics issues

01/ 03/ 2016

What was the problem?

After the Ukrainian ports became shallow the practice of cargo reloading from large ships into smaller vessels before entering the port waters has appeared. Thus both vessels are involved into the international transportation (between the ports of Ukraine and foreign ports) and are exempt from VAT.

An incorrect interpretation of the articles of Merchant Shipping Code of Ukraine allowed coming to conclusion that there are no grounds for exemption from VAT of abovementioned vessels. That fact actually forced the ship owners and agents to pay VAT fee to avoid the idle of vessels.

What has been done?

The EBA Logistics Committee worked on resolving this issue and provided comments and suggestions to the executive branch. The State Fiscal Service of Ukraine provided clarification on this issue, which resulted for the Ministry of Infrastructure of Ukraine to give an official response that the vessels participating in international transportations, overloaded from large international vessels, are a part of international transportation and are exempt from VAT.


Common approach in calculating VAT on port fees was reached. The EBA would like to thank the State Fiscal Service and the Ministry of Infrastructure for the adoption of fair and balanced decisions.

We are confident that efficient and honest dialogue with government representatives will be ahead!

Legal background:

According to the P.197.9, Art.197 of the Tax Code of Ukraine (hereinafter – TCU), «services provided by international and domestic vessels engaged in international transportations are exempt from tax [VAT] …». However, as a result of an incorrect interpretation of the Articles 131-132 of Merchant Shipping Code of Ukraine SE «Ukrainian Sea Ports Authority» (hereinafter – SE «USPA») distinguishes cabotage and international transportations only on the basis of cargo origin (port of loading).

The State Fiscal Service of Ukraine (hereinafter – SFS) by letter №28324/6/99-99-19-03-02-15 on 31st of December, 2015, determined that vessels with overload in neutral waters from the main vessel to another, crossing the state border, are related to international transportations and shall be exempt from VAT

Ministry of Infrastructure of Ukraine, in turn, also supported this position of the SFS by official letter, which indicated the applicability of the provisions of the VAT exemption (p. 197.9 of Art. 197 of the TCU) to international and domestic vessels engaged into international transportations.

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