Ukraine’s parliament suspends VAT abolition for oilseed exports

The Ukrainian parliament has revisited controversial plans to remove the ability to claim back VAT on sunflower seed, soybean and rapeseed exports following widespread protests, market sources said Thursday.

For sunflower seed the VAT change has been abandoned, for rapeseed the change has been postponed until 2020, and for soybeans the proposal will now come into effect on September 1, 2018 instead of March 1.

The news that the introduction could be deferred until September 1 had already surfaced in the market, with sources concerned that delaying the deadline could place additional burden on Ukraine’s strained trains, as exporters look to push out as much sunflower seed as possible before the revised deadline.

However, the change has alleviated some concerns at a time when Ukraine’s logistics once again come under scrutiny with the news that the country’s rail operator is looking to secure new engines in 2018, rather than buying much needed – and oft promised – railcars.

“In some ways, this is a positive step because everybody will have time to prepare their business for this change,” a spokesman for the Ukraine Grain Association told Agricensus.

The plan to cut off the ability to reclaim VAT on exports was mooted as a way of supporting Ukraine’s industrial sector, providing greater incentive for the processing of oils in Ukraine rather than the wholesale export of seeds.

Ukraine’s substantial crushing sector, which has seen new capacity added in recent years and will likely see additional capacity come online in 2018, could benefit from improved margins as a result of the change, with farmers left to shoulder the burden.