The Decision of the Parliament Unblocked EUR 100 million "Polish Loan"

On December 1, the Parliament adopted the Law "On Amendments to the Tax Code of Ukraine on the Rate of Value Added Tax on Certain Transactions for the Period of Implementation of the Agreement between the Government of Ukraine and the Government of the Republic of Poland on the granting of tied aid loan and other state debt issues", developed by the Ministry of Finance.

The Agreement between the Government of Ukraine and the Government of the Republic of Poland on granting the tied aid loan dated 09.09.2015 provides for granting loans totaling up to EUR 100 million with a repayment period of 30 years and at a yield rate of 0.15% per annum for the financing of projects for the development of border road infrastructure and arrangement of Ukrainian-Polish border checkpoints and other projects - individual contracts under the Agreement.

Goods, works and services financed under contracts with Polish enterprises under this Agreement are exempt from payment of any taxes, duties, or other charges or mandatory payments established by Ukraine or on its territory under current Ukrainian legislation.

However, as of today, when Polish enterprises purchase goods/services in the customs territory of Ukraine, VAT is paid at their own expense as part of the value of purchased goods/services. Accordingly, the amount of such paid tax increases the cost of work. It happens due to the unclear definition of the range of taxes from which Polish companies are tax-exempt and the mechanism of exemption by contractors within the Agreement.

Thus, the adoption by the Parliament of the Law on Amendments to the Tax Code unblocks the use of the Polish loan. Namely, it introduces a mechanism for contractors to apply a zero rate of VAT under the Contract, as well as the possibility of reimbursement of VAT already paid by contractors from their funds when fulfilling the contract conditions.

Also, the Tax Code has been amended to ensure the implementation of the debt policy function by the established Ukrainian Debt Management Office.

The development of border road infrastructure and the arrangement of Ukrainian-Polish border checkpoints will contribute to the simplification of business between the countries as well as to the development of comprehensive relations between Ukraine and Poland.