Ukraine. State subsidies for agricultural producers at the expense of VAT


The Verkhovna Rada (Parliament) passed as a basis a bill amending the Tax Code with respect to ensuring balanced revenues in 2017 (the bill registered under number 5132).

The draft law’s text does not mention VAT refunds to agricultural producers. However, while considering the document on December 6, parliamentary tax committee head Nina Yuzhanina said the committee had elaborated proposals to the bill which require inclusion in its final text.

Among these proposals is an amendment supplementing the current Law “On State Support to Agriculture of Ukraine” with Part V: “State support to producers of individual types of agricultural products.”

The point is that an agricultural enterprise operating in the vegetable growing, livestock and poultry sectors may be included in the Register of budget subsidy recipients and receive a subsidy for developing agricultural producers and stimulating agricultural production, reports UkrAgroConsult.

It is planned to finance the subsidy at the expense of accumulated VAT from operations with vegetable/livestock/poultry products. The relevant ministry believes that, whereas the agri-producers brought UAH 3.6 Bl worth of VAT to the 2015 State Budget, the subsidy amount may total roughly UAH4 Bl in 2017.

Reportedly, about half this amount will be spent on supporting poultry and egg producers: Myronivsky Hliboproduct and Avangard are named among possible beneficiaries.

This mechanism of budgetary funds redistribution will allow avoiding criticism from the IMF, as the memorandum signed with the Fund has a clause requiring granting no tax benefits to agricultural producers.

On December 6, the Bill 5132 was passed in the first reading with a reduced preparation period.



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