The Government has adopted a new procedure for VAT refund

Today, the Government has approved the new Procedure for the Update of the VAT Refund Register developed by the Ministry of Finance with the aim to improve the business climate in Ukraine and to tackle corruption. The approved Procedure makes VAT refund transparent and timely as well as sets equal conditions for all VAT payers.

What was the problem?

The State Fiscal Service used to have two registers for VAT refund. VAT refund was made on the basis of the conclusions of the State Fiscal Service submitted to the State Treasury Office. Delays in sending these conclusions on the feasibility of VAT refund or suspending them enabled the State Fiscal Service to manipulate VAT amounts requested for refund.

The arbitrary and untransparent VAT refund procedure offered a lot of opportunities for corruption and was most often criticized by business.

Solution

To ensure the transparent refund of VAT, the Single Public Register of Refund Applications was created on January 10, 2017. Also, the Ministry of Finance developed a procedure for the update of the Register and agreed it with the State Fiscal Service and the State Treasury Office.

The creation of the Single VAT Refund Register is one of the main elements in the anti-corruption package of tax amendments (draft law No. 5368) which was elaborated by the Ministry of Finance jointly with business and civil experts and was supported in public by a number of leading business and civic associations including the US Chamber of Commerce, the Ukrainian Association of Small and Medium-Sized Business “Fortetsya”, the Business Council USA-Ukraine, the European Business Association, the Association of Ukrainian Entrepreneurs (SUP), the Ukrainian Business Association, the Ukrainian Chamber of Commerce and Industry, the Council of the Business Ombudsman, the civil platform “Taxes for Economic Freedom” (uniting 17 associations), the Coalition “For a Liberal Tax Reform” (uniting 15 associations), the Coalition “For the De-Shadowing of the Economy” (uniting 7 associations) as well as the group of civic experts of the Reanimation Package of Reforms representing leading research centers and civil organizations.

The new procedure for the update of the VAT Refund Register includes the following regulations:

• the Refund Applications Register is created and updated on the basis of the databases of the State Fiscal Service and the State Treasury Office;
• a clear set if data is defined which are to be inserted into the Register;
• refund applications are automatically inserted into the register on the respective operational day in the chronological sequence of their submission by applicants;
• the State Treasury Office refunds VAT on the basis of the data available in the Register;
• the Register is published on the official website of the Ministry of Finance.

What are the advantages?

First, this procedure shall help reduce corruption related to VAT refund. Second, equal conditions are set up for all VAT payers improving the business climate in Ukraine. Also, the new procedure makes VAT refund timely and transparent.

“We are making consequent steps to improve the conditions for doing business in Ukraine. We have regular meetings with the representatives of the business community to better understand what problems are most critical for them and to react to them as fast as we can. Now, we have developed a new mechanism for VAT refund which is transparent and timely. Each company, each taxpayer must be subject to equal terms”, Minister of Finance O. Danyliuk said.