New mechanism of distribution of excise tax on the retail sales of tobacco products between local government budgets

The Government’s decision approved new mechanism of distribution of excise tax on the retail sales of tobacco products between local government budgets (Resolution of the Cabinet of Ministers of Ukraine № 515 as of 03.05.2022 “Some issues of crediting excise tax on the sale by retail trade entities of tobacco products, tobacco and industrial tobacco substitutes, liquids used in electronic cigarettes”). Such changes were introduced in connection with innovations in collection of this tax, provided by the Law of Ukraine № 1914 as of 30.11.2021.

Principle of this mechanism is that the excise tax on the retail sales of tobacco products is distributed among local government budgets by shares determined by the State Tax Service on a monthly basis in proportion to the cost of tobacco products sold by retail trade entities in the relevant territory for the last (tax) reporting month, taking into account data of registrars of settlement operations, including software (abb. RRO / PRRO).

As follows, amount of excise tax on the retail sales of tobacco products credited to the relevant local government budget will depend on the relevance of addresses of business entities for which RROs are registered, including PRROs and completeness of mandatory requisites in the relevant columns of settlement documents, in particular, codes of commodity subcategories according to Ukrainian classification of the FEA products.

Therefore, to ensure that local governments receive appropriate amount of excise tax on the retail sales of tobacco products and prevent unnecessary grounds for actual audits of business entities, the taxpayers are asked to pay attention to the need to fill in all requisites of settlement documents and registration data.