How to register as a VAT payer

When choosing a taxation system, entrepreneurs calculate in advance the amount of direct taxes: income tax, personal income tax, single tax, and indirect taxes: VAT, excise tax. Direct taxes are fairly easy to determine, as their amount and rates are known in advance and can be calculated quickly and easily. Indirect taxes are a different matter, and they are the most frequently asked question from entrepreneurs:

"Do I need to register as a VAT payer?"

Unfortunately, no one can answer this question but yourself.

To understand whether you need to register, you need to calculate your margin and find out whether your suppliers are VAT payers.

• If the calculations show that the VAT tax credit paid as part of the cost of goods and services does not cover the liabilities arising from the sale of goods and services, this will result in additional expenses for you. You will have to cover the difference from your own pocket.
• If your main suppliers are not VAT payers and your margin is small, you should never voluntarily register as a VAT payer, otherwise you risk incurring losses.
• If the situation is the other way around and your suppliers are VAT payers and they cover your liabilities, you have high turnover and make a good profit, then registration as a VAT payer will be advisable.

If you've decided to register as a VAT payer but don't know where to start, we've provided you with a guide with answers to the most common questions.

To obtain the status of a VAT payer, you first need to submit an Application form No. 1-PVD approved by Annex 1 to Regulation No. 1130 (hereinafter referred to as the Application).

The next steps depend on whether you decide to register as a VAT payer voluntarily or mandatories. Therefore, we will consider each of these options separately.

Mandatory registration as a VAT payer

The following persons are obliged to register as VAT payers (clause 14.1.139 of the TCU):

• those who have reached the 1 millionth volume of taxable transactions, including as a result of transactions carried out under the simplified taxation system (exception: persons on the single tax of groups 1-3);
• those who carry out transactions for the supply of confiscated and other property specified in sub-clause 6 of clause 180.1 of the TCU (regardless of the volume of transactions).

An application for mandatory registration as a VAT payer must be submitted by a business entity no later than the 10th day of the calendar month, the month following the month in which the volume of taxable transactions specified in clause 181.1 of the TCU is first reached (clause 183.2 of the TCU; Regulation No. 1130, clause 3.5, sub-clause 2 "b").

For example, if you reached the volume limit on May 20, the Application must be submitted no later than June 10.

If you are one of the business entities listed in sub-clause 6 of clause 180.1 of the Tax Code, then you are obliged to submit an Application no later than 20 calendar days in advance before the beginning of the tax period in which you intend to carry out such transactions (clause 183.3 of the TCU; Regulation No. 1130, clause 3.5, sub-clause 2(b)).

The status of a VAT payer becomes effective from the date of entry in the Register of VAT payers. This usually takes three days after submission of the Application (clause 183.9 of the Tax Code).

Voluntary registration as a VAT payer

Those who are not subject to mandatory registration but want to be VAT payers can register as VAT payers at their own request (clause 14.1.139 of the TCU; clause 182.1 of the TCU).

Those who decide to voluntarily register as a VAT payer must submit an application no later than 20 calendar days in advance before the beginning of the tax period in which they intend to carry out their activities (clause 183.3 of the TCU; Regulation No. 1130, clause 3.5, sub-clause 2(b)).

If, after voluntarily submitting an application, you have obligations or transactions that require you to become a VAT payer before you receive the status of a VAT payer, you will have to re-submit the application, but as a VAT "obliged" (clause 3.7 of Regulation No. 1130).

The status of a VAT payer, in case of voluntary registration, begins to operate from the date specified in the application. This will be the first day of the month. It is prohibited to register as a VAT payer from the middle of the month. If you forgot to specify the date from which you want to obtain the status of a VAT payer, then it will be considered from the first day of the month following the day when 20 calendar days after submitting the Application expire (clause 183.9 of the Tax Code).

If you have been refused voluntary registration as a VAT payer due to inaccurate or incomplete data, you can correct the inaccuracies in the Application and resubmit it with the same desired registration date. But you must do this no later than, more than three calendar days before the beginning of the tax period from which you want to obtain the status of a fee-payer (clause 3.9 of Regulation No. 1130).

Those who register as a VAT payer voluntarily have an additional advantage: they do not have to fill in some of the columns that are mandatory for VAT - the "obligatory" ones.

Application form No. 1-PDV

Let's take a look at how to fill in some of the application fields that most often raise questions.