State dialogue with furniture makers

On March 19 2020, the Ukrainian Association of Furniture Manufacturers and the members of the Voice consignment held an online meeting to discuss current issues in the furniture industry and the state of the business in the context of the COVID-19 pandemic.

Representatives of the Ukrainian Furniture Association – President Volodymyr Patis, Member of the Audit Committee Oksana Donska, Head of the Suppliers Platform and member of the Voice team Mykola Viknyanskiy, Head of the Advocacy and Lobbying Platform Pavlo Pisnoy, members of the Association Taras Shvigar, LLC “Kronospan”, Igor Kurilenko, Commercial Director of Graid LLC, Furniture Exporter Volodymyr Sizik, Owner of Safos LLC and UAFM Executive Director Valentyna Khraban.

From the Voice consignment, Kira Rudyk (consignment chairman, first deputy chairman of the Verkhovna Rada Committee on Digital Transformation), Yaroslav Zheleznyak (deputy chairman of the faction, first deputy chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy) participated in the dialogue, Mykola Viknyanskiy, Yaroslav Rushchyshyn (Secretary of the Verkhovna Rada Committee on Economic Development), Volodymyr Tsabal (Secretary of the Verkhovna Rada Committee on Budget), Roman Gavrish, Darka Khilyuk, Katya Nikolaenko.

During the discussion, UAFM presented the results of a survey of Ukrainian furniture manufacturers on the challenges and opportunities during the COVID-19 crisis. In particular, it was stated that 91% expect significant losses for the company, 52.5% expect a reduction of revenue by 51-100%, 35.3% of the respondents will have to cut staff due to the current situation. All this requires an immediate move towards rapprochement between the authorities and business to preserve Ukraine’s economy.

The dialogue participants had the opportunity to openly share the pain of the furniture business and the situation in Ukraine and the state apparatus and as a result, the Ukrainian Association of Furniture Manufacturers identified 10 questions to the authorities and received the following answers:

1. Support, including financial support, in organizing and conducting the first in Ukraine B2B furniture exhibition Furniture of Ukraine Business Expo.
Considering this issue, the deputies consider that the exhibition is quite possible. From yes, realistically to lay in the budget next year, assured in GOLOS, about what this proposal will be submitted later.
2. Adoption in the normative legal acts of Ukraine of the concept of the furniture industry with the corresponding introduction of the industry in the export strategy of the state, granting of individual privileges and introduction of other instruments in order to stimulate the development of the furniture industry.
GOLOS plans to contact the Cabinet of Ministers of Ukraine with a proposal to amend the export strategy through the decision of the CMU, as well as to ask the CMU to provide in the budget 2021 a separate program for the promotion of these sectors.
3. Customs: protection against a possible shortage of furniture components and materials. Speeding up and/or simplifying border checks at drivers.
Quarantine restrictions on border crossings do not apply to freight. Drivers of trucks, including transit vehicles, may cross the border of Ukraine provided they undergo a medical examination immediately during the border crossing. On the site of the New Customs office, you can find an operational map of the work of the quarantine checkpoints. At the same time, the deputies sent a request to the State Customs Service of Ukraine to ensure the fast and uninterrupted crossing of the border by truck drivers in order to ensure proper exchange of goods.
4. Is it possible for the quarantine period to withdraw the taxation of wages and other payments to employees of enterprises in the furniture industry, namely PIT and UST?
Initiatives to reduce or abolish the PIT, EO, ESA for the time of quarantine are discussed by deputies of the GOLOS party in the Verkhovna Rada of Ukraine, but their adoption depends first of all on the possibilities of the State Budget, the possibilities of which have been greatly reduced due to the quarantine measures taken. Therefore, the lawmakers analyzed the possibilities of the State Budget, but unfortunately, the proposal was rejected by the anti-crisis group of the Verkhovna Rada of Ukraine.
5. Is it possible to introduce a type of payment to an employee of the enterprise “for a simple” tax-exempt period?
The issue of the abolition of the ERU for downtime has been submitted to the anti-crisis group of the Verkhovna Rada of Ukraine, with a working group of representatives of all factions. However, this issue has yet to be rejected. In order to resolve the complex issue of the relationship between employees and employers during the quarantine period, Law No. 530-IX of 17.03.2020 eliminated the quarantine period of restriction for the period of leave without wages. Thus, in order not to lay off workers and to bear the cost of wages, an additional mechanism for settling this issue was established. At the same time, deputies note that the exemption from the PIT and military dues for downtime will lead to an increase in the actual receipt by employees of “hands-on” income, rather than reducing the cost of employers.
6. Increase the amount of the minimum non-taxable income paid to the employee or his family as financial assistance.
Answering this question, MPs from GOLOS reported that it is already under consideration by the working group. In the near future, the outcome of the consideration of this issue will be known.
7. Securing furniture companies from employees’ claims through quarantine employment relationships.
In answering this extremely difficult question, GOLOS representatives report two scenarios if, for example, a quarantine entails the entrepreneur losing the ability to fulfil his contractual obligations. There are two possible options that will reduce the number of lawsuits:
not to dismiss employees, but by mutual agreement to send them on unpaid leave. According to the new Law of Ukraine “On Protection of the Population from Infectious Diseases”, the term of leave without leave of pay for the quarantine period is not included in the general term. So you can talk to your employee about a free quarantine vacation.
to make a formal confirmation of the fact of force majeure is an official basis for avoiding responsibility by mutual agreement;
Force majeure certificates are issued at regional offices of the Chamber of Commerce and Industry of Ukraine.
8. Encouraging the opening of FOPs among self-employed persons providing services of designing, assembling, delivery and other services related to furniture production by enabling the conclusion of service contracts between legal entities (taxpayers on the general tax system) and FOPs for 1 and 2 groups.
Bill No. 3275 proposes raising the limits for first-group FOPs to 1 million, the second to 5 million and 3 to 7 million, as it was in Bill No. 1210, which has been signed by the President for more than 1.5 months. Analyzing the issue of making contracts possible VOs 1 and 2 with legal entities, deputies of GOLOS concluded that this creates big risks of withdrawing funds from big business with virtually no tax. Soon the GOLOS plans to hold a webinar on the change of administration and taxation.
9. Acceleration (reduction of time to 1 month) and simplification of a VAT refund procedure for furniture exporters.
GOLOS deputies insist on being informed in each case of non-compliance with these standards, on the basis of which they can demand from the authorized body to suspend the violation of the terms of consideration of applications for VAT refund, or the terms of the compensation itself. It should be noted that in accordance with Art. 200 of the Tax Code of Ukraine, the total period of VAT refunds when conducting a tax audit of the tax return is from 36 to 49 days, depending on whether the tax return is correctly filled in and whether the representatives of the controlling authority promptly made all the necessary information in the Register of applications for refunding the amount of budgetary tax refund value-added and the State Treasury transferred this amount to the applicant on time. Thus, provided that all parties: both the VAT claimant and the controlling authority and the State Treasury will act responsibly and on time, the VAT must be returned approximately 40 working days from the date of filing the application in the Register. This term can be considered reasonable and reasonable.
At the same time, in cases where VAT is refunded for operations performed before 1 July 2015 and not confirmed by documentary checks; as well as for the purchase of goods/services for the period up to January 1, 2017, from taxpayers who have used the special tax regime determined in accordance with Article 209 of this Code, the VAT refund period will be from 66 to 81 days, which is connected with the carrying out in such not a documentary but a documentary check that lasts twice as long.
Thus, in this case, we can speak not about the legislative problem of regulation of this issue, but about the quality and timeliness of implementation of these norms by the authorized bodies. For this purpose, the deputies have already prepared a deputy’s appeal to the State Tax Service of Ukraine and the State Treasury Service of Ukraine with a request to ensure timely realization of the applicants’ right to VAT refund.
10. Creating favourable conditions for the expansion of production of panel materials in the territory of Ukraine in order to reduce its cost and increase the competitiveness of the Ukrainian furniture industry in the world.
At the moment, Mykola Viknyanskyi, a member of the UAFM board of directors, together with analysts and plate manufacturers, conducts audits and macro-analyzes in order to develop measures and implement them in execution. In the near future, it will be known what the entrepreneurs with economists came to.

Thus, the MEPs and MEPs have achieved great success in establishing a dialogue. However, much work remains to be done. Unambiguously, the common belief of furniture makers and MPs proves that through joint efforts and coordinated actions we will be able to implement truly effective changes and jointly confront the threat of economic crisis.

The Ukrainian Association of Furniture Manufacturers expresses its respect and gratitude for the openness and dialogue to the deputies of the Voice consignment. 

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