VAT-Bonds to be Issued ~ U-Tax Blog

Friday, June 13, 2014

VAT-Bonds to be Issued

On 27 May 2014 the Resolution of the Cabinet of Ministers of Ukraine of 21 May 2014 No. 139 (the “Resolution”) came into force. The Resolution provides for the issue of government bonds (so-called VAT-bonds) for the purposes of VAT refunding.

The terms of the issue of the VAT-bonds are the following:

- Refunding through the VAT-bonds is voluntary. А taxable person willing to obtain VAT-bonds should submit a respective application to his local tax authority;

- Amount of the VAT to be refunded through the VAT-bonds is currently unknown. In the nearest future the Ministry of Revenue and Duties of Ukraine is supposed to carry out the inventory of the VAT indebtedness. Based on the results of such an inventory the Cabinet of Ministers of Ukraine will approve the threshold limit of the issue;

- Refunding through the VAT-bonds will cover only those amounts of VAT which had been declared for refunding by 1 January 2014;

- Premised on the plain reading of the Resolution, the only amounts of the VAT confirmed by tax audits can be refunded through the VAT-bonds. It is unclear whether it will be possible to refund in such a way the VAT amounts confirmed by the court judgments awarded in the cases concerned with challenging the results of the tax audits;

- Taking into account the time set forth by the Resolution for drafting the inventory registers of the VAT indebtedness as well as the conduct of other formalities required for the issue of the VAT-bonds, the issue may be expected not earlier than in the middle of August 2014;

- VAT-bonds are going to be issued in non-documentary form (uncertified securities). The par value of the VAT-bonds is going to be UAH 1,000. The interest rate equals to that of the National Bank of Ukraine at the time of the the Resolution’s entry into force (9,5% per annum). The interest repayments are going to take place every six months;

- Circulation term of the VAT-bonds is 5 years. The Resolution stipulates the gradual repayment of the bonds. The state is going to repay 10% of the par value every six months. Thus, in 5 years 100% of the par value is going to be repaid.

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