Below
you can find a brief description of three major preferential tax
regimes established with a view of promoting the development of
agriculture in Ukraine.
І.
Fixed agricultural tax (FAT). The
switch to this tax, as a rule, entails a tax saving due to the
exemptions from: (і) corporate income tax; (іі) land tax, (ііі)
duty for special use of water and (iv) duty for conducting certain
types of entrepreneurial activity (in terms of trade activities).
FAT
is levied on agricultural manufacturers, namely on enterprises
engaged in:
– Manufacture
of agricultural products (crop production and animal
husbandry);
– Fish
farming and catch of fish in inland waters;
– Processing
of agricultural products.
It
is important to note that only legal entities can qualify for FAT.
The door to this tax is closed for sole proprietors.
In
order to qualify for FAT, an enterprise must have at least 75% share
of agricultural production in its total operations in the preceding
tax year. The enterprise should undergo a special registration with
the tax authorities resulting in the
issuance of an FAT certificate. Moreover, the enterprise should
confirm its FAT status annually by submitting certain documents to
the tax authorities.
The
taxable item is the area of agricultural land owned or used by the
taxpayer, including leased land plots. The normative monetary value
of one hectare of agricultural land makes up the base of assessment.
The
tax rates are differentiated and depend on the category of a land
plot constituting a taxable item. For example, the tax rate for
tillage is 0.15% of the normative monetary value, while for land
plots of water register it is 0.45%.
The
tax period is a calendar year. The tax return is to be filed by
February, 20 of the current year. The tax is paid by instalments on a
quarterly basis (in the first and second quarters 10% of the tax is
remitted, in the third quarter – 50% and finally in the fourth
quarter – 30%).
ІІ.
Special regime of VAT taxation for manufacturers. This
regime provides for an exemption of agricultural manufacturers from
remitting due VAT (surplus of output VAT over input VAT) to the tax
authorities. The said VAT is accumulated in special accounts of
manufacturers and can be used for the payment of VAT charged on the
purchased goods/services and for other production-related purposes.
The
regime covers agriculture, forestry and fishing. The Tax Code of
Ukraine sets forth a detailed list of activities within each of the
three abovementioned groups falling under the scope of this regime.
The
two important preconditions for the application of the regime are as
follows:
-
Production of agricultural goods/provision of agricultural services
directly by a taxable person (the regime does not extend to
processing enterprises and intermediaries);
-
Specific share of agricultural products/services in the total
operations of a taxable person (this must be at least 75 % of
all the goods/services supplied by him over the preceding year).
For
the application of this regime, just as for FAT, a special
registration with the tax authorities is required. The taxable person
is ought to receive a certificate attesting this specific
registration.
VAT
returns are submitted under general rules. The only peculiarity here
is that the taxable person needs to present additionally to the tax
authorities the copies of payment orders certifying the deposition of
VAT amounts to the special account.
Taxable
persons purchasing goods or services from those enjoying the special
regime at hand, are entitled to the input VAT on general grounds.
The
users of the special regime preserve the right to a VAT refund, but
only to the extent of export transactions. The surplus of input VAT
over output VAT caused by the performance of non-export transactions
is not subject to a cash refund. However, the taxable person is
eligible to carry forward such a surplus in his tax calculations.
III.
Special regime of VAT taxation for processing enterprises. Unlike
the regime available to manufacturers, this regime is of a temporary
nature (to be applied by January 1, 2015). The regime covers milk and
meat processing businesses.
This
regime is practically tantamount to that for manufacturers, except
for the following:
-
VAT due to the remittance to the tax authorities is not fully
transferred to the special account of a taxable person. The one part
of this amount is credited to the said account, while the other goes
to the state as an earmarked tax revenues to be spent for backing
animal husbandry projects (the ratio for 2014 is 50% to 50%);
-
The sphere of the utilization of the VAT amounts retained in special
accounts is much narrower. Whereas the regime accorded to
manufacturers allows using such funds practically for all
production-related purposes, the processing enterprises can utilize
these funds as payments for milk and meat purchased from the
manufacturers only.
