New VAT-subsidies to Milk and Meat Producers ~ U-Tax Blog

Thursday, March 29, 2012

New VAT-subsidies to Milk and Meat Producers

As mentioned in my post of 28 December 2011, a new procedure for the discharge of VAT by processing enterprises involved in the production of dairy and meat products has been in operation since 1 January 2012.

The new procedure was introduced by the Law of Ukraine "On Amendments to the Tax Code of Ukraine Aimed at Supporting Agricultural Producers" of 22 December 2011 No 4268-VI (effective as from 1 January 2012). This Law restated para 1 of subsection 2 of Section XX «Transitional Provisions" of the Tax Code of Ukraine governing the procedure for subsidizing milk and meat producers at the expense of the VAT payable by enterprises engaged in processing the milk and meat purchased from such producers.

Prior to the amendments entered into force, the processing enterprises had paid VAT to the special fund of the state budget from which those funds had been subsidized to milk and meat producers with the ambit of the State Support to Cattle Breeding Budget Program.

Since 1 January 2012 the processing enterprises have had to remit to the special fund of the state budget the only part of the VAT due (for example, in 2012 - 30% in 2013 - 40%). The rest has gone to their special accounts opened with the bodies of the State Treasury of Ukraine.

The funds accumulated on these special accounts are disposed of by the processing enterprises themselves. The processing enterprises use these funds for paying subsidies to the agricultural producers catering them with milk and meat.

Thus, there has occurred the partial return to the system of paying subsidies to milk and meat producers existed before the enactment of the Tax Code of Ukraine. The return is partial because in the past all the VAT due not just part of it as now was directly transferred through special accounts by the processing enterprises to the milk and meat producers.

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