How does the EU VAT system work and what challenges does Ukraine face in implementing it?
Tax specialists from the Ministry of Finance and the State Tax Service explored these questions during the second training session in the series on the fundamentals of EU tax law, dedicated to value added tax (VAT).
Over the course of three days, Marek Uusküla, EU4PFM International Expert on Indirect Taxation, provided an in-depth overview of the principles of the EU VAT system, its key components and the practical aspects of aligning national legislation with EU requirements.
Key takeaways:
- VAT is one of the most highly harmonised taxes in the EU
- The transition to the EU VAT system was challenging for all Member States
- Many practical issues emerge only after accession
- Joining the EU VAT system requires a large-scale legislative reform, an assessment of the country’s administrative capacity, and significant economic transformation
- A successful transition depends on the full and accurate transposition of the EU acquis, effective administration and control, and a well-informed and adequately prepared business community.
In concluding his presentation, Marek Uusküla outlined three potential scenarios for Ukraine’s integration into the EU VAT system.
- Speed without capacity
Rapid transposition of the directives without adequate IT infrastructure and administrative preparedness. This approach carries a high risk of disputes and may undermine confidence in the system.
- Balanced approach
Phased implementation of legislation with a strong focus on practical execution and institutional preparedness. This is the most favourable scenario and would help build trust with the EU.
- Long road of derogations
The introduction of numerous temporary derogations and fragmentation of the legal framework, which could slow Ukraine’s integration into the EU internal market.
The training, organised by EU4PFM, took place at the Ministry of Finance and brought together more than 230 participants in a hybrid format, both online and offline.
