VAT refund for farmers in 2025: how the mechanism works and what you need to know

VAT refund to farmers in Ukraine is an important instrument of state support for the agricultural sector. Since 2024, the mechanism for compensating value added tax (VAT) has become even more relevant in the context of martial law and economic pressure. In this article, we will examine in detail how the VAT refund works, who can count on it, what documents need to be collected and what nuances are worth paying attention to.

What is VAT and why is it refunded?

VAT (VAT) is an indirect tax that is included in the price of a product or service. In the agricultural sector, its rate is 20%, and it is this that affects the final cost of production. The state allows you to return part of the VAT paid when purchasing goods and services if the enterprise is engaged in export or production of agricultural products. Thus, farmers can reduce the tax burden and improve the liquidity of their business.

Who is eligible for a VAT refund in 2025?

According to the current legislation of Ukraine, the following categories can count on a VAT refund:

• Legal entities and sole proprietors registered as VAT payers;
• Agricultural enterprises that export agricultural products;
• Enterprises operating under a special tax regime (clause 209.1 of the Tax Code of Ukraine);
• Farmers selling products on the domestic market, but eligible for a tax credit.

How the VAT refund mechanism works: step-by-step instructions

1. Registration as a VAT payer. Without registration, a farmer is not entitled to a tax credit.
2. Formation of a tax credit. All purchases (seeds, equipment, fertilizers, etc.) must be confirmed by tax invoices from registered payers.
3. Submission of a tax return. Every month, before the 20th day of the month following the reporting month, a declaration is submitted electronically through the EC.
4. Waiting for a desk audit. The tax authority checks the correctness of the data within 30 days.
5. Refund of funds. If there are no violations, the money is returned to the payer's special account within 5 working days after the end of the audit.

What can the returned VAT be spent on?

Returned funds can be used for business development:

• Purchase of new agricultural machinery;
• Expansion of sown areas;
• Purchase of fertilizers, fuels and lubricants, plant protection products;
• Wages of employees;
• Financing of logistics and marketing of products.

What documents are needed to return the VAT?

What is important for a farmer to consider in 2025?

When applying for a VAT refund, it is important to follow a number of recommendations:

• Use only official tax invoices registered in the Unified Register of Tax Invoices;
• Keep accounting and tax records using professional programs;
• Execute export transactions within the framework of current currency legislation;
• Submit tax reports on time (before the 20th);
• Comply with the deadlines for desk and documentary audits.

Common mistakes that prevent the return of VAT

Even with formal compliance with all conditions, farmers often lose the right to a refund. Reasons:

• Errors in product codes or classification in the declaration;
• Late submission of the declaration;
• Absence of registered invoices;
• Use of non-targeted purchases without the right to a tax credit;
• Absence of supporting documents for export.

What changes in the VAT refund can be expected in 2025?

The government plans to modernize the control system and speed up inspections for farmers. Among the possible innovations:

• Reducing the period of desk audit to 10 days;
• Integration of automatic data verification algorithms;
• Additional benefits for small farms;
• Mandatory digitalization of reporting for all recipients of VAT refunds.

Conclusion

VAT refund to farmers in Ukraine —This is not just a tax operation, but a strategic tool for supporting the industry. Competent use of this opportunity allows farmers not only to save money, but also to effectively invest in business development. It is important not only to know the mechanism, but also to strictly follow the legal requirements so as not to lose the right to compensation.