How is the sales cost of products that are damaged, destroyed, lost or used for own purposes determined for excise taxation on the retail trade?

Sub-paragraph 14.1.212 Paragraph 14.1 Article 14 of the Tax Code of Ukraine № 2755-VI as of 02.12.2010 with changes and amendments (hereinafter – TCU) stipulates, in particular, that sale of excisable products by the retail trade entities is the sale of beer, alcoholic beverages, tobacco products, tobacco, industrial substitutes for tobacco and liquids used in electronic cigarettes directly to citizens and other end consumers for their personal non-commercial use, regardless of the payment form, including bottling in restaurants, cafes, bars and other catering establishments.

For excise taxation on the sale of excisable products by retail trade entities, spoiled, destroyed products or products presence or location of which is not confirmed by such business entity, including products lack of which was identified by the inventory results conducted by the retail business entity (including at request of the supervisory authority, provided according to Sub-paragraph 20.1.9 Paragraph 20.1 Article 20 of the TCU during audit conducted by the supervisory authority), are considered sold directly to citizens and other end consumers for their personal non-commercial use. This rule is not applicable to cases provided for in Paragraph 216.3 Article 216 of the TCU.

Paragraph 216.2 Article 216 of the TCU stipulates that date of occurrence of tax liability for spoiled, destroyed, lost excisable products (goods) is the date of compiling the relevant act. At this point, the lost products (goods) are those location of which the taxpayer cannot determine.

Paragraph 216.3 Article 216 of the TCU stipulates that tax liability for lost excisable products (goods) not arise if:

a) the taxpayer has documented these losses and provided the supervisory authorities with necessary evidence that the relevant excisable products (goods) were lost due to accident, fire, flood or other force majeure and its use in the customs territory of Ukraine is impossible;

b) excisable products (goods) are lost due to evaporation in the process of production, processing, storage or transportation of such products (goods) or for other reasons related to the natural result. This requirement is applicable in case of loss of excisable products (goods) within standards of losses approved in manner determined by the Cabinet of Ministers of Ukraine;

c) excisable products (goods):

were forcibly expropriated or confiscated for the state needs according to the Law of Ukraine № 4765-V as of 17.05.2012 "On the transfer, forcible alienation or confiscation of property under legal regime of the martial law or state of emergency", provided that in the future its previous owner or his / her authorized person will not take measures to obtain compensation for forcibly expropriated excisable products (goods);

were transferred to the Armed Forces of Ukraine and voluntary formations of territorial communities, National Guard of Ukraine, Security Service of Ukraine, Foreign Intelligence Service of Ukraine, State Border Guard Service of Ukraine, Ministry of Internal Affairs of Ukraine, Department of State Protection of Ukraine, State Service for Special Communications and Information Protection of Ukraine, other military formations, their divisions, military units formed according to the laws of Ukraine, subdivisions, institutions or organizations maintained at the expense of the state budget for the state defense needs, local self-government bodies, as well as in favor of the central executive body that ensures formation and implementation of policy in the civil protection, civil defense forces and / or health care institutions of state and communal property, and / or structural subdivisions on health care issues of regions, Kyiv and Sevastopol state administrations without prior or subsequent reimbursement of their cost;

were provided as humanitarian aid.

As follows, for excise taxation on the sale by retail trade entities of excisable products (goods), that were spoiled, destroyed, lost, considered as sold directly to citizens and other end consumers for their personal non-commercial use or used for their own needs, except for the cases determined in Paragraph 216.3 Article 216 of the TCU, their cost is used taking into account the retail price according to accounting data.

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