If IT-company in Ukraine does not use the unified tax system (so called “simplified taxation”), than VAT-issue rises.
According to the Tax code of Ukraine all goods, works and services, supplied on the territory of Ukraine shall be subject for VAT (20%).
However, p. 26-1 of subsection 2 section XX of the Tax code of Ukraine grants a relief from the VAT until January 1st, 2023 any supply of the software or any works with the software, if the payment for such supply does not deem as a royalty payment (pp. 14.1225 p. 14.1 Art. 14 of the Tax code of Ukraine).
Hence, if the Ukrainian IT-company develops software and sells it to another company, such deal shall not be subject for VAT.
If the Ukrainian IT-company grants license on its software to another company (i.g. publisher) for further sublicense, it shall be taxed by VAT as a royalty income.
Meanwhile, if the Ukrainian IT-company sells licenses on its software to the end-customers (users), it shall not deem as a royalty income and is excluded from the VAT.
Moreover, worth mentioning that any additional services, which are not related with development or amendment of the software, are not subject for exclusion. Therefore, customers support shall be subject for VAT. The best solution in such situation would be to use Private Entrepreneur with 5% “simplified tax”.
If you have further questions concerning legal aspects of the IT-business in Ukraine or need help of out lawyers, please apply to the law firm Zilver: + 38 050 140 95 60, info@zilver.com.ua.