02 June 2010

Ukraine Government annouces procedures for VAT Bonds

Ukraine Government Announces Procedures for VAT Bonds
The Ukraine government has now set out the terms for converting VAT refunds due in to State Bonds. See procedures below and also comments from Astapov Law Firm

Procedure of issuing VAT bonds
The bonds will cover all VAT refunds claimed prior to 1 May 2010. The refund must have been confirmed by the tax authorities by this date and included in the inventory register maintained by the tax authorities;
• Maturity period of VAT bonds is 5 years;
• VAT bonds will be redeemed twice a year in the amount of 10% of the bonds' nominal value;
• Interest is 5,5% p.a.;
• By 25 June 2010 companies should submit to the
local tax authorities an application for acquisition of the bonds;
• The procedure is voluntary.

Statement from Astapov International Law Firm, Kyiv:

During the years of struggle with the state for VAT refund enterprises have developed various legal measures to protect their rights.
Most obvious legal measure is to claim VAT refund at administrative court. In this case the tax-payer has various options in specifying its demands such as claiming VAT reimbursement and damages, collecting budget indebtedness, forcing the state treasury to transfer the funds within 7 banking days.

But in spite of high chances of success and years spent in the court proceedings, the enforcement of such decision is very complicated due to the mere lack of money at the accounts of State Treasury.

Another legal option for tax-payer to get the VAT debt is administrative. The actions involve numerous demands to tax authorities and respective officials purporting to force the state to pay the debt voluntary. Upon certain circumstances such approach may be more effective than the judicial one and many companies prefer not to argue with the state in the court.
And the latest possibility to reimburse the state debt is to convert it to VAT bonds recently offered by the government, though the economic effect of such conversion is quite doubtful.

Tatyana Kuzmenko

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