Starting
from 1 December 2024, Ukraine will introduce a new export compliance regime
for certain types of agricultural products, sparking active discussion among
market participants. One of the key innovations is the mandatory registration
of VAT payers, which is now a prerequisite for exporting.
Another
significant change is the introduction of minimum export prices to prevent
underestimating the customs value of goods. Additionally, the process of
interaction between customs authorities, the tax service, and the National Bank
has been transitioned entirely to an electronic format, aimed at ensuring
greater transparency and compliance with legal norms.
These and
other aspects were discussed during an online meeting of the Trend&Hedge
Club on 27 November, attended by Ukraine's Deputy Minister of Agrarian Policy
and Food, Taras Vysotskyi, and the managing partner of Kosovan Legal Group,
Anatolii Kosovan.
Registration of Tax Invoices
Taras
Vysotsky explained that successful VAT invoice registration requires confirming
the origin of goods, being a registered VAT payer, and having a corresponding
VAT credit. The main reasons for registration being halted include the risk
status of counterparties or the lack of confirmed goods origin.
"Pay special attention to the origin of goods and the reliability of clients to avoid problems with invoice registration. It is critical at the initial stage to avoid working with risky counterparties, as this can lead to delays and financial losses," emphasized Vysotsky.
Kosovan
highlighted that the greatest risk lies in the counterparty's risk status:
"Unfortunately, the risk status is currently not public, and you cannot
know when a counterparty has been deemed risky. This automatically leads to the
suspension of invoice registration and, consequently, the inability to issue
customs declarations, effectively blocking the execution of export
contracts."
Newly established companies are also automatically classified as risky. "In practice, newly created companies registered as taxpayers will never be able to register a large VAT invoice. The tax authorities will simply halt the registration. This has been a consistent practice for years," Kosovan stressed.
Another
reason for registration suspension could be insufficient VAT credit. According
to Vysotsky, the tax authorities analyze the volumes and amounts specified in
the invoice, which must match the registered data. If discrepancies or
insufficient credit are identified, the registration will be halted, and
customs will not allow the goods to be released.
Regarding
the possibility of recognizing registration delays as force majeure, Kosovan
noted: "The Chamber of Commerce does not consider situations related to
tax authorities' decisions as force majeure if these decisions comply with
current legislation. In such cases, it is necessary to seek internal solutions
or adjust contractual obligations."
Foreign Currency Revenue Return
The export
security regime provides differentiated VAT rates depending on the discipline
of foreign currency revenue returns. Taxpayers who return their revenue on time
are entitled to apply a zero VAT rate for exports. However, if the amount of
unpaid funds from export operations exceeds 20% of the total amount of such
operations over the past 12 months, a 14% VAT rate is applied.
According to
Kosovan, the new rules for calculating the 20% quota have important nuances.
Only goods for which the return control period has ended are included in the
calculation. "I emphasize that the comparison involves the amount of goods
not just exported, but for which the control period for returning foreign
currency revenue has concluded. So, if you exported a large batch of goods
yesterday, it still won’t count because the control period hasn’t ended, and
it’s important to calculate correctly," noted Kosovan.
Minimum Export Prices
Minimum
export prices under the export compliance regime are set by the Ministry of
Agrarian Policy based on customs statistics from the previous month, applying a
10% discount. These prices are approved monthly by the 10th and published on
the ministry's official website. Exports are permitted only if contract prices
are not lower than the established minimum thresholds.
Kosovan noted: "If the invoice price is lower than the minimum, the tax invoice will not be registered. This means the goods cannot leave the country. To avoid such situations, it is advisable to provide for the possibility of adjusting contract terms."
For forward
contracts, minimum prices are applied retrospectively—from six months before
the start of the export compliance regime. Minimum prices were approved by an
order on 10 November and have been in effect since June, meaning contracts
signed after 1 June must comply with the minimum prices set at that time.
According to
Vysotskyi, if the final price falls below the minimum, this issue cannot be
resolved through tax credits or other mechanisms. In such cases, additional
agreements must be made to ensure the price aligns with established standards.
Licensing
Taras Vysotskyi stated: "Starting 1 December, licensing and verification will be abolished. They have fulfilled their purpose, and the new export compliance regime will become the primary control mechanism."
On Potential Contract Delays
Regarding concerns that the new regime might lead to delays in contract execution, Taras Vysotskyi explained: "This is a new procedure, and the initial days of its implementation may indeed require more time for standard operations. However, this is not related to currency control but rather the need to adapt to the new rules."
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