July 18 2002, 09:19 UNIAN

Ukraine: VAT refund not to depend on shipment terms

UNIAN and Intefax-Ukraina informational agencies quote the Head of State Tax Administration Nikolai Azarov, who says that state authorities cannot give directions to exporters about the terms, on which they should perform their exports.

"That means that tax authority mustn't put the VAT refund or non-refund into dependence on shipment terms at frontier. An elucidation of this point is being prepared and will be announced on Friday," Mr. Azarov said to press-conference in Kiev on July 17 and added that he had closely investigated this contentious issue himself.

He said that tax authorities had to the exporter "one question only": "We must be absolutely sure that the merchandise has been exported out of Ukraine and payment for it has really arrived on the exporter's current account."

"I think that such an understanding will exclude any unclearness and ambiguities of law interpretation. Everything, which goes further, on which terms it was done - this is none of our questions," Mr. Azarov said.

As Interfax-Ukraina reported earlier, in March this year the State Tax Administration issued a new interpretation of the law "About Value Added Tax", according to which in cases when a tax-payer does not transport the merchandise out of the customs territory of Ukraine (the INCOTERMS DAF, FCA, FOB, and EXW bases), the zero rate of VAT is not to be applied. On such a reason tax authorities of Zaporozhye claimed that the company named MASA Invest Group return formerly refunded VAT and pay a fine. However the company lodged a complaint against tax authority's actions in court. The Supreme Economic Court is to announce its decision on this case on July 25.

Exporters say that taxing the export transactions on DAF, FCA, FOB and EXW basis will result in substantial decrease in exports, and as for the attempts to reclaim the VAT, refunded for several years, and to make companies pay fines - these will force many exporters to stop their foreign trade activities.