Palm Oil Loses Preferential VAT Rate in Russia

Lawmakers in Russia’s State Duma, the lower house of parliament, approved an amendment cancelling the preferential VAT rate for palm oil and fixing its increase to 20%, RIA Novosti reports.

The amendment cancels application of the preferential VAT rate of 10% in respect of palm oil sales operations. The standard rate of 20% will apply. The provision will come into force after lapse of one month from the law issuance date in case of its adoption but not earlier than the first day of the next VAT fiscal period. All other vegetable oils will continue to be subject to VAT at the preferential rate of 10%.

Russian producers of natural foods believe that the abolition of palm oil benefits will make the market healthier and reduce profit of counterfeit producers, particularly when making dairy products. At the same time, representatives of oils and fats and dairy industries surveyed by TASS have different opinions regarding the usefulness, cheapness and possible harm of palm oil.

“The cancellation of palm oil benefits will positively affect Russian producers of natural vegetable oils. If VAT is increased now, palm oil price will grow naturally. Oils and fats plants and processors will probably turn for sunflower oil as an alternative,” says Vladimir Kaimakov from Donmasloprodukt.

“Support of the draft law marks a shift towards enhancing food safety in the country,” says Ruslan Mamrukov, CEO of Mamruko, another oil and fats producer.

According to Sergei Lyakhov from the EkoNiva-APK Holding, VAT increase for palm oil will definitely influence the dairy market.

“If palm oil products are less affordable, then products made of natural milk will be able to get a vaster niche on the market,” he says.

Not all producers agree on the harm of palm oil. Its exclusion from food recipes will inevitably lead to the deterioration of end products, Oleg Kharlanov from EFKO claims. “Palm oil is a critical ingredient of modern high-technology specialized fats and margarine used in certain leading branches of the domestic food industry,” the expert said.