Is the excise tax subject to the write-off of destroyed, damaged, lost excisable goods and whether the excise tax liability is adjusted as a result of such write-off?

Information and Reference Department, published 26 May 2022 at 09:56 Chapter: News

Sub-paragraph 213.1.6 of Paragraph 213.1 Article 213 of the Tax Code of Ukraine as of 02.12.2010 № 2755-VI with changes and amendments (hereinafter – TCU) stipulates that the excise tax object is amount and cost of lost excisable goods (products), except for cases envisaged by Paragraph 216.3 Article 216 of the TCU.

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

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

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

c) excisable goods (products) were:

forcibly alienated or confiscated for the state needs according to the Law of Ukraine № 4765-V as of 17.05.2012 "On the transfer, compulsory alienation or seizure 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 goods (products);

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 units, military units, subdivisions, institutions or organizations formed according to the laws of Ukraine, maintained at the state budget’s expense for needs of ensuring state defense, local self-government bodies, as well as in favor of the central executive body that ensures formation and implementation of state policy in the civil protection sphere, civil protection forces and / or health care institutions of state, communal property, and / or structural units for health care regional, Kyiv and Sevastopol city state administrations without prior or subsequent reimbursement of their cost;

given as humanitarian aid.

In case of full or partial return by the buyer of excisable goods (products) produced (manufactured) in the customs territory of Ukraine, the seller to eliminate defects of goods (products) or its destruction (processing) due to the impossibility of eliminating such defects adjusts the excise tax liability in reporting period in which such return occurred (Paragraph 217.5 Article 217 of the TCU).

Amount of adjustment is calculated by the taxpayer using the maximum retail prices, excise tax rates, taking into account the minimum excise tax liability, which was in effect on the date of occurrence of such tax liability for such goods (products).

Amount of adjustment is indicated in the excise tax declaration for reporting period in which such return occurred.

Herewith, in case of full or partial return by the buyer of excisable products marked with excise tax stamps (alcoholic beverages, tobacco products), their manufacturer to eliminate deficiencies or destruction, makes adjustment of tax liabilities taking into account rules of Resolution of the Cabinet of Ministers of Ukraine № 1251 as of 27.12.2010 "On approval of Regulations on the manufacture, storage, sale of excise stamps and labeling of alcoholic beverages, tobacco products and liquids used in electronic cigarettes" regarding compliance with procedure for returning stamps to their seller.

Adjustment is made regardless of the period in which tax liabilities were accrued on the sale of such excisable goods (products).

If the buyer returns excisable goods (products) for other reasons, no adjustment of tax liabilities for excise tax is made.

More information is in the “Knowledge Base” of public information and reference resource