Law of Ukraine

"On Amendments to the Tax Code of Ukraine and Certain Laws of Ukraine to Increase Control over Circulation of Excise Goods and Clarify Certain Tax Norms"

Date of entry into force:
September 4, 2014

Amendments to Article 14, paragraph 14.1, sub-paragraph 14.1.177 of the Tax Code of Ukraine clarify the definition of the term "customs post".

The Law amends Article 219 of the Tax Code of Ukraine, according to which each party of a derivative (contract) pays a tax in the amount of 5 personal exemptions per each derivative (contract) concluded outside a stock exchange.

According to the new version of Article 229, paragraph 229.1, sub-paragraph 229.1.15 of the Tax Code of Ukraine, the following is forbidden during bioethanol production:
  • production and storage of ethanol in bioethanol production facilities. If the company has separate units, it is forbidden to produce and store ethanol in separate units that produce bioethanol;
  • storage of bioethanol in manufacturer warehouses without its denaturation with petrol (1-10%).

During import of alcohol, a representative of the controlling authority at the excise warehouse of the company producing vodka and spirits, among others, makes a note on the waybill registered in the Single Register of Waybills for Transport of Ethanol and Alcoholic Beverages to indicate approval of its import, by means of the "Entry permitted" stamp and a personal signature, notes the time of entry and the vehicle mileage, makes a note in the ethanol receipt registration log, and takes part in the work of the ethanol receipt commission (new version of Article 230, paragraph 230.13, sub-paragraph "a" of the Tax Code of Ukraine).

The Law supplements Article 230 of the Tax Code of Ukraine with a new paragraph 230.13-1, according to which, during dispatch of ethanol, a representative of the controlling authority at the company's excise warehouse shall:
  • make a note on the waybill registered in the Single Register of Waybills for Transport of Ethanol and Alcoholic Beverages to indicate approval of its dispatch, by means of the "Exit permitted" stamp and a personal signature; note the time of exit and the vehicle mileage; note down the number and date of the ethanol dispatch and receiving protocol drafted according to the form established by the central executive authority that provides for creation of state policy in the sphere of agriculture; and make a note in the ethanol dispatch registration log;
  • within three days, forward a certificate of dispatch of ethanol to the controlling authority at the location of the ethanol buyer, and make an appropriate note in the above log.

The Law amends subsection 5, paragraph 1 of the Tax Code of Ukraine, according to which the following excise tax rates are applied to alcohol distillates and alcoholic beverages produced by distillation of grape wine or grape husks (codes 2208 20 12 00, 2208 20 62 00 according to the UCC FEA):
  • UAH 56.42 per 1 liter of 100-percent alcohol between April 1, 2014 and December 31, 2014;
  • UAH 59.96 per 1 liter of 100-percent alcohol between January 1, 2015 and December 31, 2015;
  • UAH 63.50 per 1 liter of 100-percent alcohol between January 1, 2016 and December 31, 2016;
  • starting from January 1, 2017, the excise tax rate determined by Article 215, paragraph 215.3, sub-paragraph 215.3.1 of the Tax Code of Ukraine shall be applied.

According to the Law, the Single State Register of Equipment for Industrial Production of Cigarettes and Cigars (hereinafter referred to as "Single Register of Equipment") is a list of technological equipment for industrial production of cigarettes and cigars that contains information about such equipment as specified by this law, and is kept by the central executive authority that provides for creation and implements state tax and customs policy (amended Article 1 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products").

The Law supplements the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" with a new Article 2-1, which implements a procedure for keeping the Single State Register of Equipment.

Licenses for production of cognac and alcoholic beverages using the cognac technology are only issued to business entities that operate a complete technological production cycle, including distillation and maturation (amended Article 3 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products").

According to amendments to Article 11 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products", in case the excise tax stamps standard is changed, already purchased excise tax stamps of the previous standard shall be used in production of alcoholic beverages and tobacco products until they are used up, and alcoholic beverages and tobacco products marked with such stamps shall remain in circulation until sold, within the term of their useful life.

Article 12 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" and Article 5 of the Law of Ukraine "On Grapes and Grape Wine" are supplemented with new parts, according to which the heads fraction and the tails fraction of cognac alcohol are sent to alcohol purification for technical purposes, or utilized, at the manufacturer's discretion.

The Law supplements Article 15 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" with a new part, according to which import or purchase of cigarette paper classified as UCC FEA item 4813 (except for sub-item 4813 10 00 00) and filters for industrial production of cigarettes: acetate filter rods (acetate cellulose fiber tubes covered with cigarette paper) included in UCC FEA sub-item 5601 22 90 00 (except filters as finished products, for sale to end consumers in a separate consumer packaging, which cannot be used for industrial production of cigarettes) can only be carried out by business entities that hold a license to manufacture tobacco products. Such goods (products) are imported or purchased by business entities without the right for further resale on the customs territory of Ukraine.

Amendments to Article 17 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" increase the amounts of fines for violation of the norm of that law.

Article 17 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" is supplemented with a new part, according to which, in case of discovering facts of illegal import and/or purchase of cigarette paper or filters, or storage and/or use of equipment for industrial manufacturing of cigarettes and cigars that is not included in the Single Register of Equipment, the inland revenue authorities, within three working days of discovering such facts, shall arrest such cigarette paper, filters, or equipment, and address the court in order to procure a resolution to confiscate and destroy the above. Destruction of the confiscated goods is controlled by the inland revenue authority that arrested them.

Article 18 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" was amended to exclude parts 17 and 18, which provided for the following:
  • the norms of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohols, Alcoholic Beverages, and Tobacco Products" relating to cider and pear cider (with no added alcohol) shall apply starting January 1, 2010l and norms relating to the requirement for cognac production to use of a minimum of 30% (adjusted to pure alcohol volume) of own-produced cognac alcohol or cognac alcohol distilled in Ukraine using wine stock from domestic raw materials starting January 1, 2017, with regard to the norms listed below;
  • business entities manufacturing cognac and alcoholic beverages using the cognac technology shall manufacture cognac using the following minimal volumes (adjusted to pure alcohol volume) of own-produced cognac alcohol or cognac alcohol distilled in Ukraine using wine stock from domestic raw materials:
  • 10% - between April 1, 2013 and December 31, 2013;
  • 0% - between January 1, 2014 and December 31, 2014;
  • 5% - starting January 1, 2015;
  • 25% - starting January 1, 2016;
  • 30% - starting January 1, 2017.
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