Peculiarities of excise taxation and turnover of excisable goods during the martial law

The following peculiarities of excise taxation and turnover of excisable goods are envisaged during the martial law according to the Law of Ukraine as of 15.03.2022 № 2120-IX “On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine regarding validity of norms during the martial law”.

1. Operations on physical transfer (release, shipment) of fuel in the customs territory of Ukraine must not be considered as realization of fuel (changes to Sub-paragraph 14.1.212 Paragraph 14.1 Article 14 of the Tax Code of Ukraine (hereinafter – Code)):

as humanitarian aid in manner prescribed by the Cabinet of Ministers of Ukraine,

carried out in connection with its forced alienation or seizure for needs of the state according to the Law of Ukraine “On transfer, forcible alienation or seizure of property under the martial law or state of emergency” without compensation for forcibly expropriated or seized fuel,

carried out in connection with its transfer for needs of ensuring defense of the state and functioning of other spheres of the state, defined by Sub-paragraph 14.1.212 Paragraph 14.1 Article of the Code, without prior or subsequent reimbursement of its value.

Paragraph 69.5 Sub-section 10 Section XX "Transitional Provisions" of the Code stipulates that operations on voluntary transfer or alienation, or seizure of excisable goods for needs of the state defense and functioning of other areas of the state specified in this Paragraph (without prior or subsequent reimbursement of their value) for tax purposes are also not considered as sales operations.

In addition, taking into account amendments to Paragraph 216.3 Article 216 of the Code, these operations will not be subject to tax liability.

In view of above specified, for such operations the business entities that:

are excise tax payers – fuel producers or persons who sell fuel will have an obligation to:

compile application for replenishment (adjustment) of fuel balance and excise invoice, calculation of excise invoice adjustment for such operations, which are referred to as lost fuel (operation code for compilation in one copy 2 – lost, damaged, destroyed fuel (Paragraph 214.7 Article 214 and Paragraph 216.3 Article 216 Section VI of the Tax Code of Ukraine),

reflect such operations in annex 1-1 and annex 10 to the declaration;

receive fuel exclusively for needs of their own consumption or industrial processing and are of the excise tax payers on sale of fuel will have an obligation to compile excise invoice for such operations that are classified as lost fuel (operation code for compilation in one copy 2 – lost, damaged, destroyed fuel (Paragraph 214.7 Article 214 and Paragraph 216.3 Article 216 Section VI of the Tax Code of Ukraine).

Herewith, there is no obligation to obtain additional license for the wholesale and / or retail sale to carry out such operations;

receive fuel exclusively for needs of their own consumption or industrial processing and are not managers of excise warehouses – excise tax payers on the sale of fuel there will be no obligations:

obtain a license for the wholesale or retail sale;

be registered as excise tax payers and to register excise warehouses;

take into account the fuel amount transferred free of charge for these needs during calculation of amount that business entities are entitled to receive for storage during a year for use solely for their own consumption (1000 cubic meters and 10000 cubic meters for the single tax payer of Group IV).

2. Temporarily, for a period before cessation or abolition of the martial law, state of emergency on the territory of Ukraine, there is established zero rate of excise tax on certain types of fuel (Paragraph 41 Sub-section 5 Section XX of the Code), in particular:

motor gasolines;

heavy distillates (gas oil);

liquefied gas (propane or a mixture of propane and butane) and other gases;

butane, isobutane.

Given above specified, for the following fuel:

excise tax payers – fuel producers when replenishing amount of the fuel balance in system of electronic administration of the fuel and ethyl alcohol sale must make applications for replenishment (adjustment) of fuel balance, in column 6 which indicate zero rate of excise tax;

ethylene producers, before receiving or importing to the customs territory of Ukraine as raw materials for ethylene production do not issue tax bill in the amount of excise tax, according to provisions of Paragraph 229.2. and 229.3 Article 229 of the Code by the mechanism of importation to the customs territory of Ukraine without payment of excise tax or sale of fuel by producers at zero rate of excise tax (as Paragraph 41 Sub-section 5 Section XX of the Code sets zero rate regardless of the use of such fuel).

3. It is envisaged that resumption of accounting for ethyl fuel and alcohol in excise warehouses that are partially destroyed and located in areas of hostilities or in the temporarily occupied territories by armed forces of the Russian Federation will be carried out on the basis of inventory conducted after an end of the martial law (Paragraph 69.13 Sub-section 5 Section XX of the Tax Code).

As follows, after an end of the martial law, managers of excise warehouse according to the inventory results must:

A) Compile and submit for registration to the State Tax Service electronic documents containing data on the actual fuel residues and volume of fuel or ethyl alcohol turnover, as it is provided for in Article 230 of the Code, namely:

Certificate of summary accounting data on the volume of turnover (receipt / release) and balances of alcohol in the excise warehouse of the alcohol producer and / or producer of certain products, approved by Order of the Ministry of Finance of Ukraine № 43 as of 27.01.2021;

Certificate of summary accounting data on the volume of turnover (receipt / release) and fuel balances in the excise fuel warehouse approved by Order of the Ministry of Finance of Ukraine № 944 as of 27.11.2018.

B) Compile and submit for registration excise invoices for lost fuel (operation code for compilation in one copy 2 – lost, damaged, destroyed fuel (Paragraph 214.7 Article 214 and Paragraph 216.3 Article 216 Section VI of the Code).

C) Match the data (update of data) on registered excise warehouses, tanks, flow meters and level meters located on them.

4. It is allowed to import tobacco products marked with excise tax stamps to the customs territory of Ukraine, which are not strict accounting documents and printed outside the customs territory of Ukraine at the request of producers or importers of tobacco products (Paragraph 69.20 Sub-section 5 Section XX of the Code).

Such use of excise tax stamps, which are not strict accounting documents and printed outside the customs territory of Ukraine at the request of producers or importers of tobacco products, is possible after availability of information on the official web portal of the State Tax Service about inability to ensure sale of excise tax stamps to importers of tobacco products.

Given the fact that in this case there is no application – an calculation of excise stamps for labeling of tobacco products and liquids used in electronic cigarettes, importation to the customs territory of Ukraine of tobacco products labeled with such stamps is possible only if:

excise tax stamps have sizes, colors and requisites provided by regulations on production, storage, sale of excise tax stamps and labeling of alcoholic beverages, tobacco products and liquids used in electronic cigarettes, approved by the Cabinet of Ministers of Ukraine pursuant to Paragraph 226.3 Article 226 Code,

providing information on excise tax stamps with indication of series and numbers of excise tax stamps marked by tobacco products imported to the customs territory of Ukraine;

payment of excise tax amounts before submitting customs declaration to the customs authority, which is confirmed by relevant payment documents, as well as obtaining information from the State Tax Service on such payment with relevant requisites of the payment document.

5. Moratorium on conducting actual audits has been terminated (Paragraph 69.2 Sub-section 10 Section XX of the Code), including audits on the legislative compliance control over compliance with which is entrusted to regulatory authorities, in particular, the Law of Ukraine “On state regulation of production and turnover of ethyl alcohol, cognac and fruit, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel”

It is also provided that in case of legislative violations law as a result of actual audits, the taxpayers are liable according to the Tax Code of Ukraine and laws control of which is entrusted to regulatory authorities; legislative requirements on the moratorium (suspension) of fines financial sanctions (fines) for a period of the martial law, state of emergency and / or for a period of quarantine established by the Cabinet of Ministers of Ukraine throughout Ukraine to prevent spread of the coronavirus disease (COVID-19) are not applicable in this case, including provisions of Sub-paragraph 112.8.9 Paragraph 112.8 Article 112 of the Code.

Given above specified, in case of detection during actual audits by regulatory authorities of violations of the Law of Ukraine “On state regulation of production and turnover of ethyl alcohol, cognac and fruit, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel”, the business entities will receive financial sanctions according to Article 17 of this Law.