Amendments to the Tax Code of Ukraine regarding excise tax

On September 1, 2024, Law No. 3878-IX "On Amendments to the Tax Code of Ukraine Regarding the Implementation of Provisions of European Union Law on Excise Tax" (hereinafter - the "Law") was published.  The Law introduces a number of changes to the Tax Code that came into force on September 1, 2024 (with some exceptions). The Law was adopted to bring Ukrainian legislation in line with European Union legislation, particularly in terms of approximating excise tax rates to the minimum level set in the EU.

Below we comment on the main provisions stipulated by the Law. We would be pleased to discuss the relevant changes in more detail in the context of your business.

Key changes:

• Increase in Fuel Excise Tax Rates:
  • The excise tax rates on fuel have been increased, and the new rates will come into effect on January 1, 2028.
  • To reach the level of the new rates, the Transitional Provisions of the Tax Code provide a schedule for the gradual increase of the rates from September 1, 2024, to December 31, 2027, inclusive.

For reference, we provide a comparison of the old and new rates for the main types of fuel.

• The Cabinet of Ministers of Ukraine must address the issue of introducing a lowering coefficient to excise tax rates on heavy distillates (gasoils) for agricultural producers.

Other changes 

• The Law introduces a new category of excise goods within alcoholic beverages, namely “intermediate products” - these are wines and other fermented beverages (including mixtures), with an actual alcohol concentration higher than 1.2 percent but not exceeding 22 percent by volume of ethyl alcohol, classified under UKT ZED codes 2204, 2205, 2206 00. The excise tax rate is set at 8.42 UAH per liter (from December 1, 2024, it will be 12.23 UAH).

• Starting from January 1, 2025, the formulas for calculating the total amount of excise tax liabilities on cigarettes and the weighted average retail price of cigarette sales must take into account the excise tax on retail trade.

• The provision has been extended non-recognition as an excise warehouse of premises for storing fuel used exclusively for refueling electric generators (up to 2,000 liters), and the volume has been increased to 5,000 liters for enterprises in combat areas.

These provisions apply provided that:

• The business entity uses fuel only for refueling generators and keeps separate records of the fuel received;

• Calculations for fuel for these needs are made only in non-cash form.

At the same time, a provision has been added stating that if the above requirements are met, fuel received for refueling electric generators is not taken into account when applying the criterion defined in subparagraph 14.1.6 of the Tax Code of Ukraine regarding the non-exceeding of 1,000 cubic meters of fuel received by such business entity during a calendar year.