The official publication of Cabinet of Ministers Resolution No. 1261 dated October 29, 2024, “On the Introduction of the Export Support Regime,” has recently taken place.
This gives us an opportunity to understand not only how, but also when the rules for exporting grain and oilseed crops will change.
The first point to note is that the Resolution enters into force on December 1, 2024. This means that all the changes described below will apply exclusively from that date.
Firstly, from December 1, 2024, the requirement for exporter verification and the need to obtain export licenses in cases where verification has not been completed will be cancelled.
Also, from this date, only VAT payers will be entitled to export the relevant group of goods.
Prior to submitting a customs declaration, a VAT invoice must be registered for the relevant volume. However, the VAT rate to be indicated in such an invoice will depend on which category the exporter falls into.
There are two such categories, differing based on the share of unreturned foreign currency earnings. Category I includes companies where, over the past 12 months, the share of unreturned foreign currency earnings does not exceed 20% of the total value of exported goods for which the deadline for currency repatriation has passed. In other words, the calculation will be based not on the value of all goods exported at a given moment, but specifically on those for which the deadline for repatriation of proceeds has expired. The list of companies in this category will be updated monthly as of the 1st day of each month.
Category II includes companies for which this percentage exceeds 20%.
Now back to the VAT invoice registration. Exporters in Category I (with unreturned proceeds not exceeding 20%) will apply the 0% VAT rate immediately when registering the invoice, as was previously the case.
For Category II exporters, the invoice must be registered using the VAT rate applicable to the sale of such goods on the domestic market. Later, once the exporter receives the foreign currency proceeds for the goods, they will be able to issue and submit a correction to that VAT invoice applying the 0% rate. Information on the receipt of currency proceeds or the presence of advance payment under the contract must be submitted to the tax authorities by servicing banks within 3 days of the funds being credited or the bank receiving the customs declaration for the prepaid goods.
It is important to note that registering such a VAT invoice at a 14% or 20% rate will not lead to an increase in the exporter’s VAT liabilities, nor will it reduce the negative VAT balance or increase the payable VAT amount. In other words, such a VAT invoice will not affect the exporter’s tax liabilities. At the same time, the registration of a VAT invoice or correction at the 0% rate, after the return of proceeds, will be taken into account when calculating the VAT balance, and in the case of a negative value, the respective VAT amount will be subject to reimbursement.
However, the legislation still allows the tax authorities to suspend VAT invoice registration for both categories of exporters on general grounds. This creates risks for the performance of export contracts. Suspension of VAT invoice registration will deprive the exporter of the possibility to submit a customs declaration and thus to carry out the export — i.e., to fulfil the terms of the contract.
Naturally, there is a recommendation to submit the VAT invoice for registration in advance. But in this case, it should be understood that the period for early registration must not exceed 30 days before the submission of the customs declaration. If this period is exceeded and the customs declaration is not filed, the VAT invoice registration will be cancelled.
These last two paragraphs should be taken into account when drafting export contracts, not only with direct buyers from the exporter, but also when purchasing goods through a non-resident intermediary.
Another important innovation, which has been widely discussed within the grain community, is the introduction of minimum allowable prices. Specifically, the taxation basis — and therefore the price indicated in the customs declaration — must not be lower than the minimum price established by the Ministry of Agrarian Policy.
These prices will be set monthly by the 10th day and will be published in US dollars, separately for each type of product and different delivery terms. When minimum prices are first introduced, they will also be calculated retrospectively over the previous six months to allow their application to forward contracts. In cases where a contract was signed more than six months prior to December 1, 2024, the applicable minimum price for customs clearance will be the current one effective on the date the customs declaration is submitted. This should be taken into account by grain traders involved in long-term export contracts.
The minimum prices will be published on the official website of the Ministry of Agrarian Policy and will apply from the day following publication.
These new rules certainly alter the export procedure for grain to some extent, although many of these changes have already been experienced by traders in previous periods. In addition, the amount of unreturned foreign currency earnings will no longer affect a company’s ability to export or to obtain export licenses, along with all the associated risks. Some of the concerns raised by the grain industry have also been taken into consideration in the newly adopted regulations.
The main risks that remain for traders include the potential suspension of VAT invoice registration — which would effectively halt exports — and whether the minimum export prices set by the Ministry will be reasonable. These will soon become evident in practice.