The European Business Association (EBA) has asked the State Tax Service (STS) to exclude from the amendments to the procedure for suspending the registration of a tax invoice the provision on blocking tax invoices for exporters who have a positive history and do not abuse the non-return of foreign exchange earnings for exported goods, the business association’s website notes.

"Recently, the State Tax Service published a draft resolution of the Cabinet of Ministers of Ukraine on Amendments to the Procedure for Suspending the Registration of Tax Invoices/Adjustment Calculations in the Unified Register of Tax Invoices and a draft order of the Ministry of Finance on Amendments to Certain Normative Legal Acts of the Ministry of Finance of Ukraine," the EBA said.

"The proposed amendments to Cabinet of Ministers resolution No. 1165 would complicate the administration of VAT registration and adjustment calculations for export operations for several reasons," it said.

"First, enterprises that meet the condition of returning at least 80% of export revenue will have to register tax invoices and adjustment calculations in the general order, wasting time and resources on such actions. Second, in most cases, large enterprises will not pass the unconditional registration of such tax invoices and adjustment calculations because minor conditions might not be met, such as late submission of reports or the presence of a small amount of tax debt, which is reflected in the taxpayer’s integrated card by the State Tax Service during the transition from administrative appeals of STS decisions to judicial appeals," the report reads.

"Third, the formula used to calculate the total volume of export operations includes the amount of purchases from a risky counterparty, whose risk status may later be canceled by the STS or a court," it says.

"The business community believes that the proposed approach to changes would effectively shift control of grain and oilseed exports to manual management by potentially blocking tax invoices and adjustment calculations. There is no liability for STS officials for making erroneous or knowingly unlawful decisions regarding the recognition of enterprises or transactions as risky, leading to losses for exporting enterprises due to the blocking of tax invoices and adjustment calculations," it states.

"Business representatives are concerned that the proposed changes could halt the export of products indefinitely due to consecutive requests for all possible primary documents and the prolonged status of riskiness," the EBA added.

"In such a challenging time for both businesses and the country, these innovations could exacerbate the threat of unpredictable and excessive business losses, including additional and extensive separate administration of export operations in terms of VAT, while the unblocking of tax invoices and adjustment calculations, along with the procedure for providing explanations/appeals of territorial commission decisions to the STS or the court, will lead to contract disruptions, unpredictable costs for transportation downtimes, storage expenses in terminals, and grain spoilage," the EBA said.

"Adding time to the procedure for unblocking tax invoices and appealing refusals will result in the loss of the economic viability of the operation. Appeals against refusals to unblock may lead to a lengthy process of changing contract prices and registering new tax invoices," it said.

"Blocking a tax invoice within the context of the proposed mechanism would mean blocking the physical export of goods, and the physical blocking of exports could lead to the collapse of the entire Ukrainian seaport system … The burden of all negative consequences and responsibility for illegal activities and tax evasion within the country should remain with lawbreakers who directly engage in such actions," it said.

"In this context, the European Business Association proposes two aspects: ensure unconditional registration of tax invoices/adjustment calculations for bona fide exporters who meet the condition of returning at least 80% of foreign exchange revenue within the legally established timeframes, FOR all other exporters, ensure unconditional registration of tax invoices in the presence of a positive tax history. In such cases, checks for the riskiness of operations and the taxpayer are not carried out," the association noted.