Interpretations by the Ukraine’s Ministry of Revenue and Duties

Replying to numerous requests of those involved in entrepreneurship, the experts of the Main Department of the Ministry of Revenue and Duties in Kyiv give interpretation of a few provisions set out in the current legislation on transportation and freight forwarding services. In more detail, pursuant to article 1 of Law of Ukraine dd. July 1, 2004 № 1955 - IV On Transportation and Freight Forwarding Services, as amended, which specifies particularities of rendering transportation services and running freight forwarding business in Ukraine, the transportation and freight forwarding services mean a business embracing organizational arrangements and transportation of goods internationally - export, import, transit, etc., what is backed by relevant agreements.

According to the freight forwarding agreement one party to agreement (forwarding agent) is liable to fulfill or make arrangements to ensure providing services at the cost of another party (client) pursuant to the contractual obligations arisen due to transportation of goods (article 9 of Law № 1955).

The payment to the forwarding agent means the funds paid by the client to the forwarding agent for due fulfiment of obligations under the contract of freight forwarding.

This payment to the forwarding agent does not include services charges and work expenses provided by other parties being involved under the freight forwarding contract, as well as fees (obligatory payments) paid, while executing contractual obligations.

The documents that serve as a proof of expenses incurred such as bills, waybills, etc. are issued by an economic entity or a government authority involved that rendering of freight forwarding services will be ensured.

Please note that, subject to the provisions of par. 292.4 of art. 292 of the Tax Code of Ukraine that stipulates rendering of services, performance of work under commission, agency, and freight forwarding agreements, the profit means the amount of remuneration obtained by a forwarding agent.

Paying a due attention to the subject of the agreement, receipts gained by an individual – entrepreneur   paying the uniform income tax, who performs or makes arrangements to ensure transportation and freight forwarding, and acts on behalf of a client and at the cost of the latter, are not regarded to be the possessions of the latter, and accordingly cannot be included into the income received. The profit of such taxpayer is regarded to be the payment received after fulfiment of obligations under the contract of freight forwarding.