The Duma proposed to extend until 2026 the VAT exemption for the import and sale of breeding stock

Bill No. 184193-8 has been submitted to the State Duma on the extension of zero VAT on the sale and import of breeding stock until December 31, 2025, while this benefit is valid until December 31, 2022.

The authors of the amendments - Duma Vice Speaker Alexei Gordeev and Chairman of the Duma Committee on Agrarian Policy Vladimir Kashin - believe that the extension of the exemption will help companies free up funds for the development of breeding farms and create a competitive base for breeding products.

Zero VAT on sales and its charge on imports of pedigree livestock were introduced from October 1, 2016. At first, the benefit was valid until December 31, 2020, but then it was extended for two years. The deputies then already proposed extending the benefit until 2026, but the government did not agree to this.

From January 1, 2022, VAT should be 20% or 10% depending on the type of animal.

The authors of the bill believe that the preferential VAT rate has created conditions for improving the quality indicators of their own breeding base of genetic resources, and also ensured uninterrupted work in the production of MILK, edible eggs and MEAT.

Referring to Rosstat, the deputies indicated in the explanatory note that in 2021 the level of Russia's self-sufficiency in milk and dairy products amounted to 84.2%, while the level of 90% was determined by the food security doctrine.

"The annual sale of pedigree young animals of our own reproduction is carried out in the amount of 95-100 thousand heads, imports are about 37-50 thousand heads per year (93% of all imports are imported animals of the Holstein breed to complete production capacities as part of investment projects). Currently, there is the deficit of highly productive breeding animals in the country, the import of breeding young animals is steadily growing: in 2021 it amounted to 50.8 thousand heads, which is 17.6 thousand heads higher than in 2016," the explanatory note says.

According to the deputies, the performance indicators of cows of imported breeds are much higher compared to domestic breeds. "According to expert estimates, the termination of the VAT tax exemption for cattle will lead to a decrease in investments in the expansion of production to 5.3 billion rubles (with a potential VAT rate of 20%), and will reduce the ability of medium and small enterprises to rely on high-quality genetics," they write.

Reducing the volume of purchases of high-quality genetic material by enterprises will lead in the foreseeable time period (3-4 years) to a radical decrease in the total volume of raw milk production, which will entail a decrease in farm incomes, jobs and, in particular, tax revenues, deputies warn.

The financial and economic justification does not include calculations of shortfalls in budget revenues from the extension of the VAT exemption, meanwhile, according to the calculations carried out by the Ministry of Finance earlier, the expiration of the VAT exemption from 2021 on the sale of breeding stock in 2021 should have given the budget 5.9 billion rubles, and exemption from VAT on the import of breeding stock - 10.7 billion rubles.