Paying for ChatGPT and Claude in 2027: classification of the payment, VAT, deductible costs
A language model subscription is an electronic service supplied by a non-resident, not a royalty. VAT under Articles 208 and 208-1, deductible costs, the 30 per cent adjustment and the benefit-in-kind risk.
KBSDC Editorial
Before a subscription payment for a language model is processed and treated as a deductible cost, four matters must be established. The VAT, corporate income tax and personal income tax consequences all turn on them.
| Matter to be established | Legal significance |
|---|---|
| The person named as recipient in the service account: the company, the sole proprietor or an individual | Identifies the actual consumer of the service for tax control purposes |
| Whether the purchaser is registered for VAT | Determines which provision of the Code applies: Article 208 or Article 208-1 |
| Whether the particular non-resident supplier is registered for VAT in Ukraine | Determines whether VAT is included in the invoice or is to be charged by the recipient |
| Who has access and for which work tasks it is used | Determines whether there are grounds to treat the payment as a benefit in kind |
There are no court judgments concerning ChatGPT, Claude or Gemini, and audit practice is still developing. What follows applies the provisions of the Code in force together with an analogy to situations on which the supervisory authorities have already settled an approach: corporate mobile telephony, company cars, and the reimbursement of an employee’s personal expenses.
1. Classification of the payment
Access to the model is supplied over the internet automatically, without human intervention on the supplier’s side. Under sub-clause 14.1.56-5 of the Code such a transaction is an electronic service.
“Access to the model is supplied over the internet automatically, without human intervention on the supplier’s side.”
The transaction bears no features of a royalty within the meaning of sub-clause 14.1.225 of the Code: the company acquires no proprietary rights in the model. The same sub-clause excludes from the concept of a royalty a payment for the use of a computer program by an end user where the use is limited to the program’s functional purpose and to a number of copies. Ruling of general application issued by the Ministry of Finance under No. 133 of 4 March 2026 classifies transactions in computer programs and digital content as services.
| Classification | Provision | Consequence |
|---|---|---|
| Electronic service supplied by a non-resident | Sub-clause 14.1.56-5, clause 186.3-1 | The place of supply is the territory of Ukraine and the transaction is subject to VAT |
| Not a royalty | Sub-clause 14.1.225 of the Code, Ruling No. 133 | The rates, reliefs and withholding rules established for royalties do not apply |
| Not subject to withholding tax on non-resident income | Sub-clause (k) of sub-clause 141.4.1 | No withholding tax is deducted from the consideration for the service |
An incorrect classification at the first stage produces errors at every subsequent one. If the payment is processed as a royalty, sub-clause 196.1.6 of the Code will be applied, under which royalties are not an object of VAT, and no VAT liability will be charged under Article 208.
2. Determining the VAT liability
The place of supply of an electronic service is determined by the location of the recipient (clause 186.3-1 of the Code). The classification that follows depends on the status of the purchaser and the registration status of the supplier.
Sequence of steps:
Establish from the invoice and the service account who is named as the purchaser and whether a Ukrainian VAT identification number is stated.
Check the supplier against the register of VAT payers. OpenAI has been registered for VAT in Ukraine since November 2024. The status of Anthropic, Grok and other suppliers is to be verified against the register rather than against the wording of the invoice.
Identify the applicable row in the table below.
A VAT payer should not conflate VAT included in the non-resident’s price with the obligation to charge VAT under Article 208 of the Code.
| Purchaser | Non-resident’s registration under Article 208-1 | VAT consequences |
|---|---|---|
| A legal entity or sole proprietor registered for VAT | Irrespective of registration | The recipient charges VAT under Article 208 of the Code, issues a tax invoice and is entitled to recover the same amount as input VAT in the same period. The non-resident’s registration does not displace that obligation. Stating the VAT identification number in the service account prevents the supplier from adding 20 per cent to the price |
| A legal entity not registered for VAT | Irrespective of registration | The recipient charges VAT under Article 208, files a separate calculation and cannot recover the amount as input VAT |
| A sole proprietor not registered for VAT | Registered (confirmed in the case of OpenAI) | The non-resident charges VAT and includes it in the invoice. The sole proprietor pays the invoiced amount. This is confirmed by Ruling No. 133 |
| A sole proprietor not registered for VAT | Not registered | In its published guidance the State Tax Service requires VAT to be charged under Article 208 even where the non-resident’s turnover is below UAH 1 million. That position is contestable, since Article 208-1 and clause 180.2 of the Code place the obligation on the non-resident, and the penalty for operating without registration is likewise imposed on the non-resident (clause 117.5 of the Code). In relation to a taxpayer on the simplified (single tax) system who is not registered for VAT, that position of the supervisory authority was called into question by the Administrative Court of Cassation within the Supreme Court in its judgment of 23 July 2025 in case No. 520/32392/24. See further the article “Purchasing services from a non-resident: when a person not registered for VAT must account for the tax, and when not” |
For a VAT payer the tax point is the first event, meaning the earlier of payment and supply. It may therefore be either payment or the date of the invoice, provided the service has already been supplied by that date.
A separate risk remains after the input VAT has been recovered: if the use of the services is found to be non-business, the input VAT is clawed back by way of a compensating output VAT liability under sub-clause (d) of clause 198.5 of the Code.
3. Two payment structures
Payment by the company for a corporate account and reimbursement to an employee of a personal subscription paid for earlier have different tax consequences.
| Corporate account held by the company or sole proprietor | Reimbursement of an employee’s personal subscription | |
|---|---|---|
| Contract and invoice | In the company’s name, corporate email, VAT number where possible | In the individual’s name, consumer terms of service |
| Means of payment | Corporate card or the company’s account | The employee’s personal card with subsequent reimbursement |
| Personal income tax and military levy | Do not arise where business use is substantiated | As a rule a benefit in kind, termed an additional benefit in the Code (sub-clause 14.1.47, sub-clause 164.2.17) |
| Focus of the audit | The connection between the service and the business activity, supporting accounting documents, who in fact used the access | The character of the payment to the employee, including where an internal order exists |
| Typical document | Invoice and bank statement; for a non-resident’s electronic services any payment document suffices (clause 208.5-1 of the Code) | Employee expense claim, proof of payment by the employee, decision on reimbursement |
An internal order on the use of artificial intelligence systems and a corresponding job description do not in themselves exclude the risk that the payment will be treated as a benefit in kind. They carry evidential weight only in combination with a corporate account and documentary evidence of actual business use.
Where a benefit in kind is found to have been provided in non-monetary form, the personal income tax base is increased by the gross-up coefficient under clause 164.5 of the Code. The military levy, a 5 per cent surcharge, is calculated on the ordinary price of the benefit as defined by the Code, with no gross-up applied.
4. Corporate income tax and the 30 per cent adjustment
The object of corporate income tax is the accounting financial result adjusted by the statutory tax adjustments provided for in the Code. Claims by the supervisory authority therefore arise where the taxpayer applies those adjustments and it is established that the transaction has no connection with the business activity or that the supporting accounting documents are defective. A taxpayer whose annual income falls below the statutory threshold and which has elected not to apply the adjustments is taxed on the accounting financial result alone, but the substance of the transaction is examined on audit in the same way.
Sub-clause 140.5.4 of the Code applies separately: where the supplier has a legal form included in the List approved by Resolution of the Cabinet of Ministers of Ukraine No. 480, a taxpayer whose income exceeds the statutory threshold increases its financial result by 30 per cent of the value of the services.
The adjustment does not apply where the transaction is a controlled one, where the price is supported on an arm’s length basis, or where a certificate of the non-resident’s payment of corporate tax is available.
For sole proprietors on the general system and for legal entities, documentary substantiation of costs is of fundamental importance. For sole proprietors in groups one to three of the simplified system it is of no legal significance.
5. Illustrative calculation
The monthly subscription is USD 20. For illustration a rate of UAH 45 to USD 1 is assumed, giving UAH 900 exclusive of the non-resident’s VAT. The figures are illustrative and are intended to compare the consequences of the two structures rather than to reproduce the National Bank rate on any particular date.
| Consequence | Corporate account, business use substantiated | Personal account, the company reimburses UAH 900 |
|---|---|---|
| Employee’s personal income tax | Does not arise | 900 × 1.219512 × 18% ≈ UAH 198 |
| Military levy | Does not arise | 900 × 5% = UAH 45 |
| VAT for a registered VAT payer | Output VAT under Article 208 of the Code and recovery of the same amount as input VAT in the same period | Depends on who is named as recipient in the invoice |
| Costs and financial result | The value of the service, with a possible 30 per cent increase under sub-clause 140.5.4 | The reimbursement is treated as a payment to an employee rather than as the acquisition of a service by the company |
For the USD 200 tariff the calculation is the same and only the multiplier changes: UAH 9,000, personal income tax of approximately UAH 1,976, military levy of UAH 450. Arranging corporate access before use begins removes the need to withhold personal income tax and the military levy on a reimbursement.
6. Supporting documentation
Letter of the Ministry of Finance No. 41010-06-5/7983 of 24 March 2023 permits an invoice to be treated as a supporting accounting document once payment has been made. For a non-resident’s electronic services, clause 208.5-1 of the Code expressly provides that any payment document suffices. That is not enough where a dispute arises as to personal use.
| Document | What it establishes |
|---|---|
| Invoice issued to the company or sole proprietor, with a bank statement | The subject matter, the amount, the contracting party and the fact of payment |
| Corporate email address and a business tariff | The party to the terms of service |
| VAT identification number in the service account | Prevents the supplier from including the tax in the price |
| Internal order specifying positions, tasks and a prohibition on personal use | The internal purpose of the expenditure |
| Job description or employment contract | The link between the access and the duties of a specific employee |
| Individual logins or a record of users | Attribution of use to individuals rather than a shared departmental password |
| Materials evidencing use: tasks, outputs, correspondence | Actual use, as distinct from use documented on paper only |
| Accounting policy on log retention | The retention arrangements, without blanket disclosure of client data during an audit |
The use of a corporate card issued to a director is not treated as a cash advance to be accounted for, since the company’s own funds are being spent. Payment by the director’s personal card followed by reimbursement, by contrast, does require an expense claim.
The texts of the provisions are cited from the official text of the Tax Code.
7. Common accounting errors
| Action of the taxpayer | Consequence |
|---|---|
| Payment from a personal card and reimbursement without an expense claim or an invoice issued to the company | No supporting accounting documents for the cost; the payment is treated as reimbursement of personal expenses |
| A single login for a whole department | No purpose attributable to an individual employee |
| Processing the payment as a royalty | Incorrect classification and failure to charge VAT under Article 208 of the Code by reason of applying sub-clause 196.1.6 |
| Failure by a VAT payer to charge the liability on the date of the first event, that is the earlier of payment and supply | Breach of Article 208 of the Code |
| Charging VAT again under Article 208 on an amount in which the supplier has already included VAT under a personal account | Double taxation of the same amount |
| Relying solely on payment from the company’s account to establish the business connection | The source of the funds does not establish the connection with the business activity |
Points to record in the company’s accounting policy
A subscription to a language model is processed as an electronic service supplied by a non-resident, and not as a royalty or a software licence.
VAT is charged by reference to the status of the purchaser and the registration of the particular supplier, and not by reference to the brand of the service.
Personal income tax arises not from the fact of paying for access to an artificial intelligence system, but from the structure of a personal account combined with reimbursement, or from a failure to substantiate business use. The cost of remedying the consequences of that structure exceeds the cost of avoiding it.
Related reading
- Purchasing services from a non-resident: when a non-VAT payer must charge the tax
- What the tax authority sees in 2026: a full review of the data sources
- Tax limitation periods of 1095, 2555 and 1231 days
- Business purpose in transactions with non-residents
- Lawful tax saving or evasion: where the line runs
Frequently asked questions
Is a ChatGPT subscription payment a royalty?
No. The company acquires no proprietary rights in the model and uses the service as an end user. Sub-clause 14.1.225 of the Tax Code excludes such a payment from the concept of a royalty, and Ruling No. 133 of 4 March 2026 classifies transactions in computer programs and digital content as services.
Must a VAT payer charge VAT if the supplier is registered in Ukraine?
Yes. A company or sole proprietor registered for VAT charges the liability under Article 208 of the Code regardless of the supplier's registration under Article 208-1, issues a tax invoice and claims the input credit in the same period. Stating the Ukrainian VAT number in the service account prevents the supplier from adding 20 per cent to the price.
What should a non-VAT-registered sole proprietor do?
Where the supplier is registered in Ukraine (as OpenAI has been since November 2024), the non-resident charges the VAT and includes it in the invoice. Where the supplier is not registered, the tax authority requires the recipient to charge VAT under Article 208, although that position is contestable in the light of the Supreme Court judgment of 23 July 2025 in case No. 520/32392/24.
When does a subscription become a benefit in kind?
Where the account is held by an individual and the company reimburses the cost, or where business use is not substantiated. Personal income tax of 18 per cent then applies, with the gross-up coefficient under clause 164.5 of the Code, together with the 5 per cent military levy on the ordinary value.
Which documents support the deduction?
An invoice issued to the company or the sole proprietor together with a bank statement, a corporate email address and business tariff, the VAT number in the service account, an internal order listing positions and tasks, a job description, individual logins and materials evidencing actual work use.
