BEB: enterprises founded by public associations of people with disabilities pose a threat to the economy

The BES is sounding the alarm: enterprises and organizations founded by public associations of people with disabilities pose a threat to the economy.

The reason, according to the Bureau, is their illegal use of tax benefits.

The BES analysts have identified numerous cases when enterprises and organizations founded by public associations of people with disabilities, in order to receive benefits, create the appearance of compliance with legal requirements (at least 50% of the staff are people with disabilities, at least 25% of expenses are labor costs, etc.

Schemes exposed by the BES include:

♦ engagement of individual entrepreneurs and individuals under civil law contracts (allows to comply with the requirements for the share of persons with disabilities in the company's staff and payroll)

♦ creating the appearance of a production process at an enterprise without actually producing products;

♦ claiming VAT refunds from the budget generated by the sale of consumer goods for cash, which is reflected in the tax reports as sales of goods to final consumers at a zero VAT rate.

The BES found that in the period from January 2021 to July 2023, enterprises founded by public associations of people with disabilities claimed UAH 2,689 million for refund, of which UAH 2,289 million, or 85%, were risky amounts.

It is reported that proposals for amendments to the Tax Code were sent by the BES to the Ministry of Finance.

Theyresponded that the current rule on zero-rate VAT on the supply of goods and services directly produced by enterprises and organizations of public associations of people with disabilities is inconsistent with the process of adapting national legislation to EU standards and also reduces the revenue side of the state budget of Ukraine.

At the same time, in 2019, the Verkhovna Rada adopted Law No. 344, which extended the validity of this benefit from 2020 to January 1, 2025.

In addition, the Ministry of Finance has "thrown the ball" to the Ministry of Social Policy, which ensures the formation and implementation of state policy in the field of social protection of the population, including persons with disabilities.

"Taking into account the above, the Ministry of Finance of Ukraine sent a corresponding request to the Ministry of Social Policy and the materials sent by the BES by letter dated November 13, 2023 No. 11/3.1.2/28257-23. If the criteria for enterprises and organizations founded by public associations of persons with disabilities established by Resolution No. 1010 are revised and the relevant amendments to Resolution No. 1010 are made, there will be legal grounds for considering amendments to the Code."

Now the BEB is appealing to the Tax Committee (letter No. 11/3.1.2/303-24 of January 11, 24) to develop a draft law.

However, there are questions about the proposals.

The following are of concern.

First, these enterprises and organizations of public associations of persons with disabilities are entitled to apply income tax exemptions and a 0% VAT rate if they have a permit to use such a benefit issued by the Ministry of Social Policy.

Secondly, enterprises and organizations eligible for such benefits are registered with the relevant supervisory authority (if they have a permit).

Therefore, almost UAH 2 billion 300 million of unjustified reimbursement (if any) is not unavoidable.