How the "export support regime" for agricultural products works and what schemes for circumventing it are invented by the "gray" exporters

Press service of the State Tax Service of Ukraine, published 17 January 2025 at 09:04 Chapter: News

In recent years, there has been a problem with export of agricultural products and processed products of unknown origin, i.e., origin of which was not traceable along the supply chain. As a result, the budget did not receive tax revenues and foreign exchange earnings.

“Export support regime” has been introduced since December 2024, which has changed export rules of agricultural products and their processed products – now it can only be carried out by entities registered as the VAT payers, and all supply chains are checked before the products are exported from territory of Ukraine. This has made it possible to effectively prevent the execution of scheme operations.

However, there are entities that are still trying to register tax invoices for "export" of agricultural products and their processed products, ignoring operation rules of this system.

Vivid "cases" of attempts to register tax invoices for products without origin

Company "A" decided to "test" system by trying to register export invoices for 46 tons of soybeans using tax limit formed as a result of purchasing parking spaces in Kyiv city and parking lot maintenance services. Registration of invoices was stopped. But, due to such a daring attempt, it is now known that the average "yield" of soybeans in the underground parking lot is 1.7 centners per square meter.

Company "B" imported fruits, vegetables, fish, and meat, but also tried to export soybeans. System stopped this attempt.  

Company "C" tried to register export invoices even though it had no bank accounts, land, products or fixed assets and did not pay taxes. System automatically blocked export tax invoice for a shipment of sunflower oil worth 5.7 million UAH.

Company "D" submitted invoice with product nomenclature “Soybeans”, but with a product code corresponding to wheat. Tax invoice for the 24500 kg batch was stopped. Monitoring established that the company did not purchase either soybeans or wheat. Entity also had no information regarding the origin of products, no tax payments, no fixed assets and no land.

Typical attempts to circumvent export support regime:

- registration at the expense of formed limit in the Electronic VAT Administration System for import of food products;

- registration at the expense of formed limit in the Electronic VAT Administration System for purchase of fixed assets on the domestic market that have no relation to operations with agricultural products;

- substitution of the nomenclature that does not correspond to code of Ukrainian classification of the foreign economic activity products in the tax invoice;

- absence of any origin and even open accounts in banks;

- registration of 1 ton of products in the absence of its purchase, production and history of operations with agricultural products;

- 12 business entities, being at risk since 2020 – 2023, also tested this system.

All these attempts were stopped by the current export support regime.

Reminder! Basic operation rules of the "export support regime":

1) export of such products can only be carried out by entities registered as the VAT payers;

2) customs clearance of the export begins after registration of tax invoice in the Unified Register of Tax Invoices, monitoring of which continues for three working days;

3) origin analysis of such products, declaration and payment of taxes along the supply chain is carried out before the actual export of such products outside the customs territory of Ukraine;

4) only those entities whose foreign exchange earnings have been returned for the previous 12 months are entitled to apply zero VAT rate on such operations. The remaining entities will have such a right only after the foreign exchange earnings on these operations have been returned;

5) for entities that have a positive history of export operations with the product origin, have been registered as the VAT payers for at least a year and submit reports on time, have land, declared employees with proper salaries, have no tax debts, are not in liquidation, signs of unconditional registration of tax invoices have been introduced.

To date, more than 1000 entities have already used this regime, registering more than 11000 tax invoices.

TOP 5 of products:

- corn – 1718 of tax invoices/adjustment calculations in the amount of 5 504.9 thousand tons for a total volume of 45 935.5 million UAH;

- sunflower oil – 3822 tax invoices/adjustment calculations in the amount of 804.5 thousand tons for a total volume of 37 734.9 million UAH;

- wheat – 982 tax invoices/adjustment calculations in the amount of 2 185.3 thousand tons for a total volume of 19 128.3 million UAH;

- soybeans – 1045 tax invoices/adjustment calculations in the amount of 596.5 thousand tons for a total volume of 9 739.3 million UAH;

- rapeseed – 230 tax invoices/adjustment calculations in the amount of 245.1 thousand tons for a total volume of 5 440.5 million UAH.

It should be noted that as of today, 712 tax invoices/adjustment calculations of 218 business entities for a total amount of 98.8 billion UAH are in the status "registration of tax invoices/adjustment calculations canceled according to Sub-paragraph 97.2 Paragraph 97 Sub-section 2 Section XX "Transitional provisions" of the Tax Code of Ukraine". Of these, 419 tax invoices/adjustment calculations of 150 business entities for a total amount of 96.6 billion UAH were sent for registration in a period from 02-06.12.2024.

State Tax Service monitors such operations on an ongoing basis not only by the exporting entity, but also by its supply chains. Only honest declaration, payment of taxes and return of foreign exchange earnings are the guarantee of registration of tax invoice for further export of such products outside the customs territory of Ukraine.

For reference:

During 2022-2024, the State Tax Service established operations of more than 1.5 thousand entities that carry out customs clearance of products in the "export" regime and which, at the time of analysis, according to Information System of the State Tax Service, had no information regarding the origin of exported products, no tax payments, no fixed assets and land, bank accounts, etc.

Regarding the specified entities, relevant information was sent to the State Customs Service and Bureau of Economic Security to take measures within their competence.

Operation rules of the export support regime specified in the notification are regulated by Article 19 Note 2 of the Law of Ukraine "On foreign economic activity” and by Resolution of the Cabinet of Ministers of Ukraine № 1261 as of 29.10.2024 “On the introduction of the export support regime".