Changes in tax administration and processing of electronic VAT account for farming producers

The Ministry of Finance, the State Treasury Office and the State Fiscal Service have jointly adopted changes in the treasury processing of farming producers’ accounts which makes it possible to implement a new VAT application procedure for them.

In the end of December 2015 the Parliament adopted amendments to the Tax Code granting a grace period before the abolition of the special VAT application mode for farming companies. According to that, the special VAT mode for farming companies will still remain valid in 2016 as indirect state support for the Ukrainian agriculture. The volume of this support will be depending on the kind of agricultural products. Also, exporters of grain and industrial crop receive back their right to claim VAT reimbursement.

Based on the adopted amendments, the following VAT mode will be applied to the farming companies in 2016 compared to 2015, when they retained the whole VAT amount:

- transactions related to grain and industrial crop: 85% of the VAT are to be paid to the state budget, 15% are kept on the payer’s dedicated account;

- transactions related to cattle breeding (livestock and milk: 20% of the VAT are to be paid to the state budget, 80% are kept on the payer’s dedicated account;

- transactions related to other agricultural products: 50% of the VAT are to be paid to the state budget, 50% are kept on the payer’s dedicated account.

To launch this mode, three additional accounts in the electronic VAT administration system were initiated and deployed for the farming companies. These accounts are used to transfer the respective funds to the state budget and to the farmers’ dedicated account in different shares depending on the type of products as above.

To make it possible, the software for the electronic VAT administration was amended. Thanks to that, on January 20, 2016, a mechanism for automatic transfers to the state budget and to the payers’ dedicated accounts was launched. On January 21, the State Treasury Office transferred all available funds amounting UAH 4.7m to the dedicated accounts of the farming companies. 

These funds had been transferred to the new electronic VAT accounts of the farming companies in the period from January 11 to January 20, 2016. 

From now on, this procedure will be executed automatically.

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