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In 2007, the authorities claimed that they returned 78 percent of VAT claimed and, at the beginning of 2008, then-Prime Minister Yulia Tymoshenko announced that the VAT refund problem would be resolved by April 2008. Despite these declarations, claims for refunds have grown and currently exceed Hr 30 billion ($3.75 billion).

The issue of VAT refunds continues to be of critical importance for all existing and potential investors. Many companies have refunds outstanding for more than two years but the law does not provide for any interest on the money owed.
A number of international investors have declined to invest in Ukraine due to the uncertainty around obtaining a VAT refund in a timely manner. The refund problem seriously hits exporters as they do not generate output VAT (on goods and services sold) that could offset VAT input (on goods and services purchased). Many exporters of grain, oilseeds and metals experience serious difficulties with obtaining refunds.

In practise, the tax authorities make every effort to reject the amounts claimed as a refund. They don’t accept tax returns, delay tax audits and reject a substantial portion of refund claims. In many cases such rejections do not appear to have a legal basis, but challenging such a decision in court is time-consuming and expensive. Even if the taxpayer wins in court and proves the right to a refund, enforcing the court decision is problematic, and it is increasingly difficult to obtain money from the state.

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