The Ukrainian Agri Council (UAC) has addressed Taras Vysotskyi, Deputy Minister of Economy, Environment and Agriculture of Ukraine, regarding the issue of how state financial support is accounted for when calculating the share of agricultural production. The current approach creates a risk of failing to meet the 75% threshold and, consequently, losing Group 4 single tax payer status for agricultural enterprises.

The issue concerns the position of the State Tax Service of Ukraine (STS), which allows only subsidies granted under provisions effective prior to 2022 to be included in the calculation, while refusing to consider other existing state financial support programs.

Currently, agricultural producers receive state support under several programs, including:

• partial compensation of interest rates under the “5–7–9” loan program;
• budget subsidies per hectare of cultivated land;
• special budget subsidies for keeping cows, goats, and sheep;
• partial compensation for the cost of domestically produced agricultural machinery and equipment;
• grants for establishing or developing horticulture, berry growing, and viticulture;
• grants for establishing or developing greenhouse production, etc.

However, tax authorities do not allow farmers to include these types of budget support when calculating the share of agricultural production.

“The STS denies the inclusion of any types of budget support other than the subsidy under Article 16-1 of Law No. 1877 in line 3.1 of the Calculation and insists in its explanations and individual tax consultations: ‘The condition for inclusion in line 3.1 of the Calculation of amounts received from the state budget as financial support is the receipt of a budget subsidy in accordance with Article 16-1 of Section V-1 of Law No. 1877 and inclusion of the farm in the Register of Budget Subsidy Recipients,’ that is, a subsidy that has not been provided for eight years,” the appeal states.

The UAC emphasizes that such a position contradicts accounting standards.

“Funds received under state support programs from the state budget should be included in line 3.1 ‘Amount of financial support received from the state budget’ on the grounds that they constitute targeted financing from the state budget and the income is recognized under credit account 482 in accordance with paragraph 19 of National Accounting Standard (NAS) 15 ‘Revenue.’ According to general accounting requirements, a budget subsidy should be included in line 3.1 as financial support received from the state budget, since in substance the compensation received is targeted financing from the state budget,” the UAC stresses.

To resolve the issue as quickly as possible, the Ukrainian Agri Council calls on the Government to initiate an official clarification by the Ministry of Finance of Ukraine and to amend Order No. 772 of the Ministry of Agrarian Policy, removing the outdated reference to Article 16-1 of Law No. 1877.