Government contracts and VAT: when tax liabilities arise for contractors

In the practice of executing government contracts, one of the key issues for businesses remains the correct determination of the date of occurrence of VAT tax liabilities. This is especially relevant in cases where payment is made at the expense of budget funds through the bodies of the State Treasury Service of Ukraine.

The essence of the issue

An enterprise concludes a government contract for the manufacture and supply of products, where a government body acts as a customer. The terms stipulate that payment is made within 10 calendar days after delivery – from the Treasury accounts.

In such a situation, a logical question arises:
can the executor determine VAT tax liabilities by the date of receipt of funds, and not by the date of delivery?

Position of tax authorities

In individual tax advice dated 01.04.2026 No. 1910/IPK/99-00-21-03-02, the tax authority clearly states:
the determining factor is the source of financing.

If the payment is made:

by the administrator of budget funds or their recipient
from accounts opened in the State Treasury Service

then such funds are considered budgetary within the meaning of the Budget Code of Ukraine.

Key rule

In this case, a special provision of the Tax Code applies – clause 187.7 of article 187 of the Tax Code of Ukraine, according to which:

the date of occurrence of VAT tax liabilities is
the date of crediting budget funds to the supplier’s account.

Practical significance for business

This means that the executor of a state contract:

has the right not to charge VAT on the date of delivery
determines tax liabilities only after receiving funds
draws up and registers a tax invoice on the date of receipt of payment
Important nuance

To apply this rule, documentary confirmation of the budgetary nature of the funds is required. In particular:

the contract must explicitly state that payment is made
from an account with the State Treasury Service of Ukraine

This is key evidence for tax authorities.