Introduction of the export security regime for export of certain categories of goods

On January 12, 2023, the Parliament of Ukraine adopted the Draft Law on Amendments to the Tax Code of Ukraine and some other legislative acts of Ukraine regarding the application of the export security regime during the period of military, state of emergency №8166-д (further - "Law"), which introduces the regime of export security for export of certain products of plant origin. The law was submitted to the President for signature. We highlight the main changes below.

The export security regime

• The Cabinet of Ministers of Ukraine  (“CMU”) has the right to introduce an export security regime for the export of goods included in commodity categories 1001 (wheat), 1003 (barley), 1005 (corn), 1201 (soybeans), 1205 (rape seeds), 1206 (sunflower seeds), 1512 (sunflower, safflower or cottonseed oil), 2306 (oilcake and other waste from the extraction of vegetable or microbial fats and oils) according to the Ukrainian classifier of goods in foreign economic activity, under martial law or state or emergency. The CMU must determine: the list and minimum export prices of goods (hereinafter - goods for which the export security regime has been introduced) and the period for the introduction of the export security regime.
• Only registered VAT payers can export relevant goods. Business entities purchasing or supplying respective goods for use in transactions subject to export security regime are subject to mandatory registration as VAT payers.
• A VAT payer for the purpose of exporting the respective goods is obliged to create a VAT invoice (applying the 14/20% VAT rate prescribed for supplies within Ukraine) and register it in the Unified Register of Tax Invoices before submitting a customs declaration for customs clearance of such transaction.
• Further export of the respective goods does not give the right to apply the 0% rate. The exporter can apply the 0% VAT rate (by registering an adjustment calculation to the initial VAT invoice) only:
  • after the completion of the servicing bank's foreign exchange supervision of compliance with the settlement deadlines, and
  • on condition that the difference between the invoice and customs value of the corresponding goods in customs declarations is not negative.
• In the event of a negative value from VAT as a result of the corresponding adjustment, this amount is subject to budgetary compensation.
• The exporter is exempt from the necessity to register a VAT invoice with a rate of 14/20% VAT for an export transaction if:
  • the total declared customs value of the goods exported by that exporter during the current month does not exceed the ⅀Limit (one-third of the export revenue for the last 6 months according to customs declarations, in respect of which currency supervision procedures have been completed), and
  • no violation of the requirements of currency legislation by such exporter has been established during the previous 12 months (according to the information provided by the State Tax Service);
• The State Customs Service calculates ⅀Limit for each exporter monthly based on data which the National Bank of Ukraine collected from servicing banks.

Peculiarities of settlements 

• For the export of goods, in respect of which the regime of export security is applied, the following forms of settlement are prohibited (unless established otherwise by the CMU):
  • enrollment of counterclaims;
  • use of resident accounts opened abroad to receive funds from non-residents;
  • use of other forms of cash settlements with a non-resident that do not involve the movement of funds from abroad to the accounts of residents in Ukraine.

The law enters into force on the day following its publication, and is put into effect for business entities in one month after its publication. Practical aspects of the implementation of this Law will play a important role for exporting companies. We expect significant delays in confirming the application of the 0% VAT rate if the President signs this law.