Apple adds 20% VAT to App Store prices in Ukraine

It has been revealed to AIN.UA that within the next few days (January 13–14), Apple will raise its prices for applications and in-app purchases (excluding auto-renewable subscriptions) on the App Store in Ukraine by 20%.

This is due to the recently adopted and signed law on the “Facebook tax” that obliges foreign online services used by Ukrainians, like Facebook, Netflix, Steam, and including the Apple and Amazon services, to pay a tax of 20%.

What will change on the App Store?

Prices for paid applications and in-app purchases (excluding auto-renewable subscriptions) on the App Store in Ukraine will increase by 20% because of the new value-added tax.

“Once these changes go into effect, the Pricing and Availability section of My Apps will be updated. You can change the price of your apps and in-app purchases (including auto-renewable subscriptions) at any time in App Store Connect. If you offer subscriptions, you can choose to preserve prices for existing subscribers,” Apple told developers.

What does the law stipulate?

  • The bill supplements the Tax Code (on taxation of services provided in Ukraine by non-residents) with a provision on taxation of digital services.
  • Under the new regulations, digital services provided by non-resident companies (i. e., companies without a permanent establishment in the country) to individuals in Ukraine are subject to VAT (20%).
  • If the services are provided through an intermediary, it is deemed a supplier for the project. If the intermediary is also a non-resident, it shall be subject to this article.
  • Such companies should register in Ukraine as VAT payers, and there is a simplified registration and reporting procedure in place for them.
  • At the same time, the regulation on the “foreign advertising tax” is excluded from the Code, meaning that Ukrainian legal bodies and individual entrepreneurs need not pay the 20% tax when purchasing digital services from foreign companies.
  • The new rules have been effective since January 1, 2022.

As was expected, the new tax has put a strain not on companies but on users, who saw technology companies simply raise their prices by 20% for them. Furthermore, foreign companies are reluctant to register an LLC in Ukraine. That is because, apart from VAT, there are corporate income tax, wage tax, and office expenses.

What companies have already raised their prices?

The law has been effective since January 1, 2022, but eBay, Amazon, Meta, Google, and other technology companies announced price hikes for their services back in December 2021.

  • Google issued a warning note to users of its paid services in Ukraine, saying that it would begin charging 20% VAT on digital services for individuals and individual entrepreneurs in Ukraine who are not registered as businesses.
  • eBay also added VAT to the cost of its services, and this rate will apply to all fees paid for services by private users residing in Ukraine.
  • Amazon sent out to its non-commercial users in Ukraine a notice about withholding 20% added-value tax (VAT) from the beginning of 2022. In its message, the company has advised that non-commercial users should indicate their tax registration number in their Seller Central account.
  • Adobe sent out letters to its users too, warning that it would start charging 20% VAT on January 11.
  • From January 3, 2022, Meta has also added 20% value-added tax (VAT) on the services of its social media, Facebook, in Ukraine.