Facebook ad top-up with VAT

In 2022, Ukraine’s tax code changed, and now advertising on platforms such as Facebook, Instagram, Google, and TikTok is subject to Value Added Tax (VAT). This is due to foreign companies’ advertising services falling under the category of electronic services provided by non-residents with VAT.

According to the new requirements, advertisers in Ukraine are obliged to account for and pay tax on advertising in Facebook and other social media platforms. It is important to understand how to correctly manage accounting, issue a tax invoice, and reflect expenses in the declaration to avoid penalties from the tax authorities.

According to Ukraine’s tax code, services provided by non-residents, including targeted advertising on social media, are classified as “electronic services.” This means that when paying for such services, the advertiser is required to account for Value Added Tax (VAT) at a rate of 20%.

Key Points: 

➤ Who pays? VAT for advertising on Facebook and other social networks must be paid by advertisers – legal entities and sole proprietors. Payments are made via electronic transactions, so it is crucial to account for tax obligations during these transactions.
➤ When does the obligation arise? VAT must be accounted for when payment for advertising services from a foreign company is made. If the advertiser uses a corporate payment card, VAT should be included in the reporting.
➤ What is the rate? The standard tax rate is 20% and applies to all expenses related to advertising services from non-residents.
➤ How is taxation applied? The payment amount for Facebook advertising forms the tax base, which includes both the advertising cost and 20% VAT. This obligation must be recorded in accounting and reflected in tax reporting.
➤ Can the tax burden be reduced? Some advertisers may try to bypass the tax or remove VAT from payments. However, it is not possible to completely eliminate it. Legal ways to optimize include proper documentation and expense accounting.

Properly accounting for VAT on Facebook advertising helps avoid tax risks and penalties. Mistakes in accounting can lead to additional costs and issues with the tax authorities, so it’s important to understand the rules of accounting in advance.

The tax base includes the total amount of advertising expenses, increased by 20% VAT. It’s crucial to account for this tax when planning your advertising campaign budget.

The advertiser must issue a tax invoice and include it in the accounting records. This is a mandatory document that confirms the payment of VAT and is required for tax reporting.

The amount of VAT must be indicated in the tax declaration to avoid penalties from the tax authorities. It is also recommended to maintain separate accounting for advertising expenses to simplify control.

Some companies mistakenly believe that when paying for advertising, the repatriation tax is withheld. However, such payments are not subject to this tax, as they are considered advertising expenses and not income for the non-resident.

When making international payments, it’s important to consider:

The absence of necessary documents can lead to tax disputes and additional financial costs.

To avoid issues with tax reporting and reduce the financial burden, it is essential to properly prepare documents and meet VAT payment deadlines. Follow these recommendations:

➤ Proper documentation of payments. All advertising payments should be accompanied by invoices, contracts, and supporting documents. This will help prevent issues with tax authorities and confirm expenses.
➤ Timely VAT payment. Missing payment deadlines can result in penalties and additional financial sanctions. It is crucial to monitor due dates and correctly record amounts in accounting records.
➤ Tax burden optimization. Using corporate payment cards or specialized services can simplify the process of accounting for advertising expenses.

Additionally, it is recommended to consult with specialists in advance to select the most advantageous accounting scheme and avoid unnecessary expenses.

Many advertisers look for ways to bypass the tax, but it’s important to understand that VAT cannot be completely disabled. However, you can reduce the tax burden by using corporate payment cards and optimizing accounting processes.

Internet advertising is now subject to taxation in Ukraine. To avoid issues with tax authorities, it is essential to consider taxation specifics, submit tax reports on time, and properly prepare payment documents. If you need VAT-inclusive Facebook top-ups, contact specialized services that offer support and favorable payment terms.