The Verkhovna Rada at first reading passed bill No. 3656 on amending the Tax Code of Ukraine with regard to the rate of value added tax on transactions for the supply of certain agricultural products that proposes to reduce the VAT rate from 20% to 14% for the agricultural sector. Some 233 MPs voted in favor of the draft law concerned.
The document provides for amending Paragraph 193.1 of Article 193 of the Tax Code of Ukraine by adding a new subparagraph ‘g’ and establishing 14% VAT on operations for supply to the customs territory and admission into the customs territory of Ukraine of agricultural products classified by the following foreign economic activity codes: 0102 (live bovine animals); 0103 (live swine); 0401 (regarding whole milk), 1001 (wheat), 1002 (rye), 1003 (barley), 1004 (oats), 1005 (corn), 1201 (soybeans), 1204 00 (linseed), 1205 (rapeseeds), 1206 00 (sunflower seeds), 1207 (other oil seeds and oleaginous fruits,), 1212 91 (sugar beet).
“First of all, such a reduction will reduce the tax burden on agricultural producers that in turn will reduce the cost of raw materials by the amount of VAT reduction exactly for processors of such products, whereas, in general, reducing the VAT rate on transactions for selling grains, oilseeds and whole milk will not lead to budget losses, since these goods are not sold to the final manufacturer that is actually VAT payer,” said Mykola Solsky, the head of the Ukrainian Parliamentary Committee on Agrarian Policy and Land Relations, at the presentation of the bill.
According to the explanatory note to the document, which refers to the analysis carried out by UCAB based on data from the USDA and market operators for certain types of oilseeds and grains (sunflower, rapeseed, corn), reducing the VAT rate from 20% to 14% will not lead to large-scale distortions in the structure of VAT receipts/losses for any of the stakeholders (state/enterprise).