VAT refund resumption? Fast facts

03.08.2016

The issue of VAT refund to grain exporters arises with an enviable permanency. Actually, there is no problem only in seasons when the VAT is not refunded.

 

In the new 2016/17 season, along with the usual problem of non-transparent and unclear distribution of VAT refund, the largest Ukrainian traders have another "headache". Besides that VAT is not refunded, the State Fiscal Service can arrive with checks regarding possible violation of VAT refund regime. According to information from traders' sources, one can talk about the audit of companies which are currently among 20 largest grain exporters.

 

Since January 01, 2016, after a nearly three-year pause, a regulation was recommitted, according to which grain exporters are entitled to VAT refund. The regulation was described as support for farmers, as traders will pay them higher prices. Some kind of a bumper, intended to soften the blow caused by cancellation of a special taxation regime for grain producers, who were deprived of a right to manage 80% of funds kept in special accounts.

 

The system worked, and now the price which traders pay to farmers for grain in Ukrainian currency is considerably higher than prices which they pay in US dollars, i.e. VAT refund is included into the hryvnia prices. Anyway, it was so until recently. Why did the system work? In January-May the amount of VAT refund payments totaled UAH 6.3-7.9 bln monthly, which probably allowed buyers to pay higher prices for goods in the domestic market. A collapse came out of the blue, when in June payments decreased by nearly 95% - from UAH 6.68 billion to UAH 0.11 billion. Will traders be able now to include VAT refund into the prices which they pay for grain?

 

Amount of VAT refunded to exporters in the first half of 2016, UAH bln.

January

February

March

April

May

June

7.9

8.1

6.3

7.1

6.7

0.1

Source: State Treasury Service of Ukraine

 

The reason for VAT refund payments decline is trivial – no money in the budget. In this case a rhetorical question arises, what the reason was for resumption of VAT refund practices, if there is no money for their implementation.

 

 

 

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