Forța Fermierilor Warns of Risks in Moldova’s Reverse VAT Mechanism

Forța Fermierilor: the ‘reverse charge’ mechanism for VAT carries risks

The introduction of a ‘reverse charge’ mechanism whilst maintaining the 8 per cent VAT rate on wheat, maize and sunflower seeds, as provided for in the final version of the fiscal policy – “is a risky experiment, particularly given the current state of the state budget”, according to the leadership of the ‘Forța Fermierilor’ Association

Add Logos Press as a preferred source on Google

Under this system, farmers will not pay VAT when selling these agricultural products, as the obligation to pay this tax passes to the end consumer (trader or processor). At the same time, the state budget will have to reimburse farmers, within a short timeframe, for the VAT they paid when purchasing production inputs (‘input’ VAT).

‘The reverse charge mechanism (initiated by the Ministry of Finance) has not been widely discussed with farmers,’ states a press release from ‘Forța Fermierilor’. In our view, the ‘reverse taxation’ system poses serious risks: buyers of cereals and oilseeds may reduce their purchase prices for agricultural produce by the amount of VAT. At the same time, the state budget may lack the funds to refund the VAT accumulated by farmers when purchasing production inputs. Furthermore, the approved amendments do not currently specify exact deadlines for VAT refunds to farmers — we have received only a verbal assurance from the Ministry of Finance. We would also like to emphasise that the ‘reverse charge’ mechanism will complicate accounting and reporting for farmers. Some of them may have to deal with as many as four different VAT rates at once: 20 per cent, 12 per cent, 8 per cent and, on top of that, the ‘reverse charge’ mechanism.

The ‘Forța Fermierilor’ Association plans to discuss the issue of VAT in the context of ‘reverse charge’ at an extended meeting of the organisation’s council, scheduled for 21 October. Representatives of other sectoral associations of agricultural producers will also take part in this meeting.

Incidentally, in a conversation with a Logos Press correspondent, one of the leaders of the agricultural producers’ association put forward a hypothesis which has so far received little public discussion within the agribusiness sector: the higher the VAT rate on expensive agri-food products (fresh fruit, for example), the more difficult it will be for the state to find the funds to refund VAT in a timely manner when these products are exported.

This story was translated with the assistance of artificial intelligence.The translation was also reviewed by the Logos Press editorial team.

How did this story make you feel?