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Back-and-forth with VAT A real headache for feed importers over the past year caused a dispute with the Russian Ministry of Finance about the retro- spective VAT hike on imported feed additives in the period 2016-2018. Over the past few years, 20 – 25% of feed additives in Russia have been imported under the preferential tax re- gime. This means that importers paid 10% VAT instead of the standard 18%, taking advantage of a government regulation that allowed companies to pay lower taxes on specific prod- ucts in the food and feed industries. The problem is that the regulation was rather unclear and contained certain gaps, which were only sorted out and clearly spelled out at the end of 2018 and became effective and understandable from the first quarter of 2019. The Russian Ministry of Finance ruled that because of the ex- istence of those gaps all feed additives had to be imported into Russia with 18% VAT between 2015 and 2018, meaning that importers were obliged to pay in retrospect an additional Rub6 billion ($ 90 million) to the federal budget. “This is ab- surd because a regulation adopted late in 2018 clearly sub- jected feed additives to a soft 10% VAT rate, adjusting the orig- inal regulation,” Mikhnyuk states. He adds: “We appealed to the Finance Ministry, to the Agricultural Ministry and to the Presidential Administration, but were not able to establish meaningful negotiations with the government. We believe this case raises reasonable concerns about the consistency of


policy by the Ministry of Finance in this area.” On November of 2019, the Higher Court of the Russian Federation supported feed additives importers, but this only resulted in all cases on VAT payment in the regional courts initiated by importers against the Federal Custom Service stalling and there are still no progress in this area. According to Mikhnyuk the problem is that, when there is a financial dispute between an importer and the Customs Service in Russia, the importer has to first pay, and can only later seek justice in court.


Interventional fund may be needed The National Feed Union is planning to make a proposal to establish an interventional fund of crucial feed additives simi- lar to the one we have on the grain market. The idea is that the government purchases certain volumes of the crucial feed additives that no livestock company can effectively op- erate without. Those volumes could be released on to the market to prevent acute price turbulence, like that caused by the Covid-19 pandemic. “Basically, we expect that it will take at least a year to establish that fund, if our proposal is ap- proved,” Mikhnyuk added. “The idea is good, but a big ques- tion is: who would run the bank and who would decide when to release the feed additives on to the market?” said Denisov. “This would help to mitigate price hikes, but what if the pric- es for feed additives on the market go down? In that case someone would have to bear the losses.”


Over the past few years, 20 – 25% of feed additives in Rus- sia have been imported under the preferential tax regime.


▶ ALL ABOUT FEED | Volume 28, No. 4, 2020


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