The switch to the determining VAT liabilities using the cash accounting method, as proposed by Head of the parliamentary committee on finance, tax and customs policy Danylo Hetmantsev, will complicate the administration of this tax and may negatively affect the decision of the European Commission on Ukraine's accession to the EU, the Ministry of Finance has told Interfax-Ukraine.

"The use of the cash accounting method when calculating VAT for the supply of any goods/services is contrary to the provisions of Directive 112 [Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax]. Therefore, its introduction may negatively affect the decision of the European Commission on the accession of our state to the EU," the Finance Ministry said.

In addition, the switch to the cash accounting method will significantly complicate the administration of VAT, which may create a basis for minimizing tax liabilities for this tax, in particular, due to non-monetary exchange of goods or services, the Finance Ministry added.

When proposing to determine tax liabilities for VAT when paying for goods, and not when delivering them, that is, using the cash accounting method, Hetmantsev appeals to the fact that, due to the need to cover their losses from Russia's war against Ukraine, counterparties delay the fulfillment of their obligations.

He invited the Ministry of Finance to express its position on the possibility of temporary application of the cash accounting method in calculating VAT on transactions of any goods and services, or at least an exclusive list of such goods and services.

However, the Ministry of Finance told Interfax-Ukraine that the rule for determining tax liabilities using the cash accounting method in accordance with the Tax Code is applied only in certain cases, for example, when supplying services, the prices for which are regulated by the state. In particular, it is about public services to non-payers of VAT (the population, budgetary institutions). VAT payers determine VAT liabilities under the "first event rule," which is in line with Directive 112.

Since Ukraine is striving to join the EU, its tax system shall comply with the system of economic partners, the Ministry of Finance said.

The Directorate General for Taxation and the Customs Union of the European Commission on the implementation of Directive 112 confirmed that the Ukrainian tax legislation on VAT as a whole complies with EU legislation, the Ministry of Finance said.