VAT in ITA projects in Ukraine 2026: exemption conditions and Annex 8 fines

Working on an international technical assistance (ITA) project does not, by itself, exempt an organisation’s purchases from VAT in Ukraine. The exemption applies when the project is registered, the purchase is in the project procurement plan within the approved volumes, the contract price is marked “VAT exempt” (Bez PDV), and the implementer files an information confirmation in the form of Annex 8 with the State Tax Service (STS) every month by the 20th. The Tax Code sets no fine for failing to file Annex 8, but the STS treats this very document as confirmation of the right to the exemption.

In summer 2026 the tax authorities addressed this twice: the STS office for Kyiv set out the conditions of the exemption and how to report it in the VAT return on 9 July, and the STS office for Dnipropetrovsk region answered the question about fines on 13 August. Below we combine both clarifications into one scheme and show which VAT documents in an ITA project the auditor and the donor will want to see. We covered general VAT rules in grants in our article VAT in a grant project.

What has changed

No new rules appeared in 2026, but the position became clearer. In its clarification of 09.07.2026 the STS office for Kyiv reminded where the exemption comes from and how to confirm it (kyiv.tax.gov.ua). On 13.08.2026 the STS office for Dnipropetrovsk region explained separately that the fine under clause 120.1 of Article 120 of the Tax Code does not apply to a failure to file Annex 8 (dp.tax.gov.ua).

The legal basis is Article 197 of the Tax Code, in particular clause 197.11. Two types of transactions are exempt from VAT, each with its own exemption code:

• supply of goods and services and import of goods into the customs territory of Ukraine as international technical assistance, exemption code 14060523;
• supply of goods and services and import of goods financed by international technical assistance, exemption code 14060524.

The procedure for attracting, using and monitoring ITA was approved by Cabinet of Ministers Resolution No. 153 of 15.02.2002. Its paragraph 23 requires the implementer and subcontractor that use tax exemptions to prepare and file, every month by the 20th, an information confirmation in the form of Annex 8 with the STS office where they are registered, in paper and electronic form. The electronic form has the identifier J0299103 and is available in the STS Electronic Cabinet.

Who is affected

• NGOs and charitable foundations that are implementers or subcontractors of registered ITA projects;
• suppliers of goods and services to such projects that are VAT payers: they report the exempt transactions in their own VAT return;
• non-resident legal entities that implement a project and are not registered for tax in Ukraine: they file Annex 8 with the STS office at the place of their accreditation and, according to the Kyiv STS clarification, a copy with the Secretariat of the Cabinet of Ministers;
• project accountants and finance managers who prepare financial reports for the donor and documents for the grant audit.

What to do and by when

1. Check the project registration. State registration is confirmed by the registration card, which is entered in the Register of ITA projects (programmes). Without the card it is too early to talk about the exemption.
2. Match the purchase against the procurement plan. The project procurement plan is published on the Unified web portal of executive authorities. The exemption covers goods and services in that plan and only within the approved volumes.
3. Draft the contract correctly. The supply contract states the price of goods or services with the note “VAT exempt”.
4. File Annex 8 every month by the 20th. Form J0299103 via the Electronic Cabinet, plus a paper copy, because Resolution No. 153 refers to paper and electronic form. Keep the acceptance receipts.
5. Suppliers: complete the VAT return correctly. Exempt transactions go to line 5.1, their adjustments to line 5.1.1, with details in Annex 4. Column 4 of Table 2 of Annex 4 shows the amount of VAT not paid to the budget because of the exemption. The procedure for completing the VAT return was approved by Ministry of Finance Order No. 21 of 28.01.2016.
6. Build a VAT file for the audit. Registration card, procurement plan, “VAT exempt” contracts, monthly Annex 8 forms with receipts and a purchase register reconciled with the plan.

Is there a fine for not filing Annex 8

The STS office for Dnipropetrovsk region analysed this as follows. Clause 120.1 of Article 120 of the Tax Code sets a fine of UAH 340 for failing to file or late filing of tax reporting, and UAH 1,020 for a repeated violation within a year. However, the Tax Code does not provide for applying this sanction to a failure to file Annex 8.

At the same time the tax authority recalls two rules. Under clause 30.3 of Article 30 of the Tax Code, a taxpayer may use an exemption from the moment the grounds for it arise and throughout its term. Under clause 30.8 of Article 30, the tax authorities control whether exemptions are granted and accounted for correctly.

Our conclusion as auditors: the absence of a fine does not mean Annex 8 can be skipped. The STS office for Kyiv states directly that filing this confirmation is what confirms the right to the exemption. Without it, during a tax audit it is harder for the organisation to prove that purchases without VAT were lawful.

Common mistakes and risks

• “Our grant is from an international donor, so no VAT.” Not every grant is a registered ITA project. The exemption is tied to the registration card and the procurement plan, not to where the money comes from.
• Purchases outside the plan. An item that is not in the procurement plan, or a volume above the plan, is not covered.
• A contract without the “VAT exempt” note. The supplier charges a price including tax, the organisation pays, and the tax is already in the budget.
• Annex 8 filed “when someone remembers”. The deadline is monthly, by the 20th. Gaps show immediately when the auditor puts the purchase register next to the receipts.
• A non-resident files with the wrong office. For a non-resident that is not registered for tax, the recipient office is determined by the place of accreditation.

Whether the donor accepts as an eligible cost VAT that did not have to be paid depends on the grant agreement. Check the tax section before the first purchases.

FAQ

How we help

We review VAT in ITA projects before the donor’s auditor does: we reconcile purchases with the plan, contracts and Annex 8 forms and help close the gaps. See grant audit, NGO accounting and NGO audit. We also cover grant project taxes in our free webinars for NGOs. You can reach us via contacts.

Prepared by the MK Audit team