Overview
At a recent All-Ukrainian Congress of Farmers webinar, agricultural cooperation expert Iryna Zubrytska detailed the three most common forms of cooperation among Ukrainian farms:
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Contracts for agricultural works
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Joint activity agreements
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Equipment leasing with crew
Each form offers unique benefits but also comes with tax, legal, and operational nuances that farmers must understand to avoid disputes and penalties.
1. Contract for Agricultural Works
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Most common and straightforward cooperation model
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Suitable when the customer lacks equipment, labor, or resources
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Payment can be cash or part of the harvest
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Key risks:
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Poor documentation of material transfers (e.g., seeds, fertilizers)
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Excise risks when transferring fuel — compliance requires meeting strict conditions (no excise registration, fueling on contract lands, using fuel trucks with flow meters)
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Avoiding excise issues:
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Use fuel coupons/smart cards
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Compensate fuel costs in payment
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Switch to equipment leasing with crew
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2. Joint Activity Agreements
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Used when land cannot or will not be leased (e.g., state-owned or institutional plots)
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Can include multiple parties pooling resources such as funds, equipment, expertise, or land
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Must be carefully worded to avoid being reclassified as a lease or service contract
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Tax specifics:
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VAT registration required if turnover exceeds ₴1 million
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Not advisable for single tax group 3 payers to be operators due to fiscal risks
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Income is taxed at the participant level, not within the joint activity itself
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3. Equipment Leasing with Crew
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Newer option in Ukrainian law (since 2014)
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Ideal for avoiding excise fuel transfer risks
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Lessee refuels equipment with their own fuel legally
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Crew remains employees of the lessor, who handles all payroll and responsibilities
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Requires proper KVED registration (e.g., 7731 or 0161) and notarization if involving an individual entrepreneur
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Repairs usually split: current repairs by lessee, overhauls by lessor
Bottom Line for Farmers
Each cooperation form—contract, joint activity, or equipment leasing—can be effective if aligned with:
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Farm size and resources
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Tax and excise compliance capabilities
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Ownership and usage rights of land and equipment
Making the wrong choice or mishandling documentation can result in tax penalties, requalification of agreements, and lost income. Farmers are advised to consult legal and accounting experts before formalizing cooperation.
