On April 13, the Public Union "Ukrainian Agri Council" (UAC), the Association of Pig Breeders of Ukraine (APB) sent an appeal to Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Hetmantsev with a proposal to revise some tax legislation provisions that operate during martial law. The initiative was supported by the Ukrainian Business Council (UBC).

The appeal refers to sub-item 9.5 of item 9 of subsection 8 of the Transitional Provisions of the Tax Code of Ukraine, which stipulates that from April 1, 2022 until the cessation or abolition of martial law, state of emergency in Ukraine, single tax payers of the third group, who use the features of taxation established by this paragraph, are exempt from the obligation to charge and pay value added tax on transactions for the supply of goods, works and services, the place of supply of which is located in the customs territory of Ukraine and when importing goods into the customs territory of Ukraine, as well as from the submission of tax invoices on value added tax, and their registration as a payer of value added tax is suspended.

"This norm, in particular in terms of transactions with goods produced in Ukraine, puts Ukrainian producers in an unequal position relative to their foreign competitors and leads to the decline of domestic production. This is due to the possibility of importing and selling competing foreign goods in the customs territory of Ukraine without paying VAT, despite the fact that their producers have already received VAT refunds in the country of origin," is mentioned in the UAC’s statement.

Thus, the current legislation encourages importers who currently pay VAT when importing goods into the customs territory of Ukraine to re-register as single tax payers of the third group and also to stop paying VAT on import.

The UAC explains that domestic producers, even in the case of transition to a new single tax of the third group (2%) in the production of their products will be forced to pay VAT as part of the price of purchased material and technical resources: fuel, electricity, components and consumables.

"For example, in the production of milk and meat, such input VAT is 13-14 % of the selling price of the product without VAT," the UAC added.

In particular, the above legislation threatens the pig industry. “The consequence of the tax changes provided by the Law of Ukraine 2142-IX of March 24, 2022 is non-competitive working conditions for domestic producers. In particular, the exemption from accrual and payment of value added tax (VAT) on pork imports will reduce the barrier price, when the import of products from abroad becomes economically justified, by 20-32% (by 20% when imported within annual quotas in under the agreement on duty-free trade with the EU and 30-32% for imports above the established quota). Such unequal conditions will lead to an accelerated collapse of the domestic pig and processing industries, which will make Ukraine completely dependent on imported food supplies and harm Ukraine's food security," the Association of Pig Breeders (APB) said.

The UAC and APB are convinced that the way out of this situation should be either abandon for non-VAT payers to carry out operations to import into the customs territory of Ukraine any goods, or, based on provisions of Article 275 of the Customs Code of Ukraine, the introduction of such entities for the period of martial law special duty or additional import duty in the amount of 20 percent of the customs value of goods.

According to preliminary information, the Verkhovna Rada Committee on Finance, ax and Customs Policy welcomed the business statements.