Ukraine may reinstate VAT redemption for farmers

Ukraine’s parliament adopted on May 14 the first draft of a bill that reinstates the redemption of export VAT to those agricultural producers that sell their grain abroad without intermediaries.

Ukraine’s tax legislation regulating VAT reimbursement was quite volatile in 2014 when the export tax redemption was introduced and reinstated, back and forth, a number of times. There has been no export VAT reimbursement for farmers since January 2015.

Roman Topolyuk: It may take another two-to-three months for this legislation to be fully adopted and implemented, we estimate. If the bill is approved, the positive economic effect for Ukraine’s farmers would be around USD 10-20 per exported ton of grain (at a VAT rate of 20%), we estimate.

Kernel (KER PW), the bulk oil producer with a farming division, could generate around USD 15-30 mln more on selling its grain abroad, compared to the current regime of no export VAT-redemption (the consensus expects the company’s EBITDA of USD 333 mln in FY2016). The positive effect for farmer Industrial Milk (IMC PW) would be around USD 4.0-4.5 mln, or 7-8% of EBITDA). Ukrlandfarming (UKRLAN), which have guided 3 mmt of corn and wheat harvest in 2015, may receive additional annualized benefit of USD 30-60 mln, we estimate.