Discussion of changes in taxation in agriculture was organized by Kesarev Consulting

As a part of the EU Commission-funded project Kesarev Consulting Ukraine initiated creation of the expert working group in order to discuss the details of the changes in taxation aimed at decreasing the amount of agriculture lands being unofficially leased/ used and increasing the budget revenues, while protecting the interests of legal farmers.

 The first session of the working group, consisting of the representatives of the Ukraine Agrarian Ministry, Parliamentary agrarian committee and relevant industry associations, took place on March 01, 2016 andwas chaired by B. Akhidzhanov, Director of the Financial and Credit Policy Department, Ministry of Agrarian Policy and Food of Ukraine.

 The concept of the taxation changes, which are provided for by the Single Strategy of Agriculture and Rural Development for 2015-2020, is the following:

   1. Introduction of the Minimum tax social liabilities (MTSL) per 1 hectare of agricultural lands:

–      MTSL: object – agriculturally used lands; basis – normative monetary valuation; rate – 1 per cent.

–      MTSL payers are natural persons and legal entities – owners of land plots, land shares, and in case the land plot or the land share is leased out – these are the land users (leasers).

–      An MTSL payer – a natural person – shall pay to the budget a positive difference between the size of the MTSL tax liabilities and the total sum of the personal tax (PIT) on incomes received from the sales of agricultural products, which was paid for the account (tax) year.

–      An MTSL payer – a legal entity – shall pay to the budget a positive difference between the size of the MTSL tax liabilities and the total sum of the personal income tax withheld and paid by a legal entity as by a tax agent from the incomes of natural persons for leasing out their land plots or land shares and from the salary of its employees as well as from the Unified Social Tax charged and paid on the legal entity’s payroll.

2. Land tax reform:

–      Approximation of the rates of the land tax to the rates of the single tax of the 4th group of the simplified system of taxation by setting the minimum rates of the land tax on the level of 0.35 per cent of normative monetary value;

–      To allow legal entities, which are the payers of the corporate income tax on a common basis, to cut their liabilities for paying the corporate income tax by the sum of the land tax paid;

–      To allow natural persons to cut their liabilities for paying the PIT from the proceeds obtained from the sales of agricultural products by the sum of the land tax paid.

 The regulation approach and details were presented to the working group participants by Mikhail Sokolov, Executive Partner of Kesarev Consulting, and discussed. The approach was approved by the representatives of the agrarian associations, experts and the Agrarian Ministry.

 The Project expert team was commissioned with the preparation of the draft law and its presentation to the Working Group by mid-April 2016. The draft Law was prepared by the Project experts beforehand and is now in the process of discussion with the working group.

 The MTSL concept and implementation instruments were presented during an extendedmeeting aimed at discussion of the current issues of agriculture development, which was held in the Verkhovna Rada of Ukraine by the initiative of then the Rada Speaker Volodymyr Groysman. The meeting brought together MPs, representatives of the relevant ministries, the State Fiscal Service of Ukraine, agrarian associations and experts.