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Main Excise Tax Changes

30/ 07/ 2020

Andrii Matlak

Tax Expert of Accountor Ukraine

On May 23, 2020, the Law of Ukraine # 466-IX “On Amendments to the Tax Code of Ukraine to Improve Tax Administration, Eliminate Technical and Logical Inconsistencies in Tax Legislation” entered into force. These changes, in particular, affect the excise tax.

Accountor Ukraine informs about the main changes regarding the excise tax:

– The norms of the Tax Code are brought in line with the Law of Ukraine “On the Electricity Market”, namely:

• “Wholesale electricity supplier” has been excluded from the list of excise tax payers;

• The definition of “excise tax payers – electricity manufacturers” has been edited;

TCU Article 212. Tax Payers

Before

Now

212.1.12. Wholesale electricity supplier

212.1.13. Electricity producers who have a license for conducting business activities related to generating electricity and who sell it outside the wholesale electricity market.

Companies engaged in the production of electricity and/or supply of electricity shall not be taxpayers if electricity is sold on the wholesale electricity market, except for the taxpayers specified in sub-clause 212.1.12 of this clause.

212.1.12.  Excluded

212.1.13. Electricity producers who have a license for business activities related to generating electricity and who sell it on the electricity market.

• Transactions related to sale and / or transmission of electricity generated at electrical energy facilities within one enterprise are excluded from the objects of excise taxation;

TCU Article 213. Taxation Objects

                        Before

Now

213.1.2. sale and / or transfer within one enterprise of excisable goods (products) for the purpose of own consumption, industrial processing, for the employees, as well as realization of contributions by excisable goods (products) to the authorized capital;

213.1.2. sale and / or transfer within one enterprise of excisable goods (products) for the purpose of own consumption, industrial processing, for the employees, as well as realization of contributions by excisable goods (products) to the authorized capital.

This norm does not apply for transactions related to transmission of electricity within one enterprise (code 2716 00 00 00 according to the UCG FEA) produced at power facilities.

 

• The approach to determining the excise tax base for electricity has changed;

TCU Article 214. Tax Base

Before

Now

214.1.3. the cost of electricity sold, value-added tax excluded;

214.1.3. the cost of electricity sold by the producer of electrical energy, calculated on the basis of prices prevailing on the electricity market in the reporting (tax) period excluding value-added tax and excise tax determined at the rate set bysubparagraph 215.3.9 of paragraph 215.3 of Article 215 of this Code.

The cost of electricity sold by the producer is equal to the share of the amount of electricity sold by the producer in the total sales of the producer’s electricity from the total cost of electricity sold by the producer in such reporting period.

 

 

– The list of excisable goods has been supplemented with tobacco products heated electrically (TPHE) by means of a heater with electronic control;

– The definition of “e-cigarette” has been added (a product that can be used for consuming (inhaling) vapors formed when components of such a product heat the liquids which may or may not contain nicotine. E-cigarettes can be disposable or reusable); as well as of “liquids used in e-cigarettes” (liquid mixtures of chemicals, which may or may not contain nicotine, and which are used to create vapors in e-cigarettes and are contained, in particular, in cartridges, refill containers etc.).

– The rate of excise tax on liquids used in electronic cigarettes (3000 hryvnias per 1 liter) has been defined, and the relevant taxation procedure has been added. Besides, rules for marking containers (packages) containing liquids for e-cigarettes with excise tax stamps have been implemented.

To sum it up, the changes in electricity excise taxation were inevitable due to the launch of electricity market. The above changes have eliminated certain inconsistencies in tax legislation.

As for the changes in tobacco products taxation, they are a logical result of tax laws being brought in line with technical progress, given that e-cigarettes and TPHE have been on the market for several years.

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