Paper VAT refund
Konstantin Pilkov, Cai & Lenard’s Managing Partner, gave a legal commentary for Business TV channel regarding VAT-bonds issue planned by the Government.
The draft resolution on issuance of the domestic state bonds to settle VAT refund debt is currently under consideration of the Cabinet of Ministers of Ukraine. The Government plans the bonds issuance in order to settle VAT refund debt, which formed as of 1 January 2014 and was confirmed by the inspections. It is planned that a bond yield rate will be set at the level of 9% per annum.
“Of course, business will have to accept this instrument. Under conditions where the terms for settlement of VAT refund debt, established by the Tax Code, are violated and the probability to receive VAT refund is very small, even in case of being successful in an action against tax authority, business is forced to “make advances”. As a lawyer, I’m not discussing advantages and disadvantages of the VAT-bonds for taxpayer in economic categories. From the legal point of view this instrument is definitely unjust. What are the conditions for a taxpayer to pay tax debt by instalments according to the Tax Code? Without even taking into account the fact that it is practically impossible, in that case the law requires from taxpayer to pay 120 % of the National Bank rate (i.e. 11.4% per year). And what are the conditions for the government to pay its debt to taxpayer by instalments? 9%. It is obvious that after receiving bonds most of the taxpayers won’t be waiting for payment of yield or redemption; they will sell bonds at a deep discount. Even in these details unfairness to business is observed” - Konstantin Pilkov commented.