Ukraine. VAT refund in September 2018

02.10.2018

Reports are coming from the ground that getting VAT refunds on a timely basis became more difficult for agricultural companies in September. 

UkrAgroConsult’s analysts made an attempt to assess the situation on the basis of available sources of information. According to the State Treasury Service of Ukraine, UAH 4.21 Bl worth of VAT was refunded on September 1-24.

The volatility of refunds at the time is presented on the left diagram. In the above-mentioned period, the highest daily total of refunds (UAH 803 Ml) was registered on September 14. 

Essentially, day-by-day VAT refunds must not be stable, as the amounts stated in tax invoices submitted for refund by small, medium-sized and large companies change significantly. In addition, swings in these amounts are possible due to technical issues while data processing or procedure peculiarities. For instance, the latter may include the impossibility to accumulate sufficient funding to cover the claimed amounts.

For instance, the pace of daily VAT refunds in September 2017 looked as presented on the right diagram.   

The two peak days – September 19 with UAH 4.989 Bl and September 22 with UAH 3.357 Bl – accounted for 86% of the total amount of September VAT refunds.

The introduction of automatic registration of VAT invoices in the Unified Register made refunds more regular within UAH 10-12 Bl a month from the middle of 2017.

So, to achieve the “planned” level of VAT refund in September 2018, the State Treasury has to transfer some UAH 5-6 Bl in the remaining four days.

We believe this is possible, but there is a complicating factor: the current situation with the state budget deficit, which had mounted by August.

The acuteness of the issue of financing government expenditures is now evidenced by at least the following three points:

 

 

  1. The Finance Ministry of Ukraine increased the number of auctions for domestic government bonds in September compared to its initial plans – now it holds them on a weekly basis;
  2. Because of the need of coupon payments on foreign-currency domestic government bonds and eurobonds, the Finance Ministry increased supply of foreign-currency domestic government bonds and, in late August, made an external private placement of USD 725 Ml worth of half-year notes. The rates were elevated in both of the above cases;
  3. When summarizing the work of an IMF mission that stayed in Kyiv during two weeks until September 19, the Fund’s Office in Ukraine did not comment on the amount, time and terms of the future trance. At least, they have not been announced by today. The government had hoped to get the tranche or part of it by the end of the fall. However, taking into account that some 2.5 months are normally required for the finalization of a tranche and passing all administrative and technical procedures within the IMF, we can suppose that the tranche money will come to Ukraine at best in November-December.

At the same time, we would like to hope that VAT refunds in the remaining September days will be made at a rapid pace and reach the level of the previous months, and that September’s complaints by agricultural companies resulted from technical faults and shortcomings of the system operators, not from a lack of money at the State Treasury.

 

UkrAgroConsult

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