Peculiarities of classifying products as excisable fuel according to the requirements of the Law № 466

The Law of Ukraine as of 16.01.2020 № 466 introduced a number of amendments to the Tax Code of Ukraine. As follows, starting from 23.05.2020 amendments to Sub-paragraph 215.3.4 Paragraph 215.3 Article 215 of the Tax code of Ukraine according to which the list of excisable fuel has been supplemented by such products:

Individuals who carry the sale of fuel with these types of fuel, and those individuals who fall under the definition “administrator of the excise warehouse”, are subject to mandatory registration as the excise tax payers for the sale of fuel.

They must:

- register all excise warehouses in the system of electronic administration of fuel and ethyl alcohol sale;

- compile excise invoices and register them in the Unified register of excise invoices – in cases prescribed in Paragraph 231.1 Article 231 of the Code;

- obtain appropriate licenses to work with fuel.

Export of excisable fuel outside the customs territory of Ukraine is not taxed with the excise tax.

Peculiarities of classifying products as excisable fuel

Regarding products classified by Ukrainian classification of products of the foreign economic activity codes 2710 19 62 00 - 2710 19 68, 2710 19 71 00, 2710 19 75 00, 2710 19 99 00, 2710 20 31 00, 2710 20 35 00, 2710 20 39 00

Changes in excise tax at the rate of 213.50 euros per 1000 liters of petroleum products classified by Ukrainian classification of products of the foreign economic activity codes 2710 19 62 00 - 2710 19 68, 2710 19 71 00, 2710 19 75 00, 2710 19 99 00, 2710 20 31 00 , 2710 20 35 00, 2710 20 39 00, included in the Code by the Law № 466, apply only to a mixture of gas oils (namely, diesel fuel), less than 85% vol. of which, including expenses, is distilled at 350 ° C temperature (according to the ISO method 3405, equivalent to the ASTM D 86 method), except for household fuel.   

At the same time, base oils and similar petroleum products, which during fractional distillation according to ISO 3405 at 350° C temperature are usually distilled in an amount of up to 35% vol., are not taxed with the excise tax.

First of all, products classified according to Ukrainian classification of products of the foreign economic activity codes 2710 19 62 00 - 2710 19 68, 2710 19 71 00, 2710 19 75 00, 2710 19 99 00, 2710 20 31 00, 2710 20 35 00, 2710 20 39 00 and not taxed with the excise tax according to the Law № 466 are the following petroleum products:

- solid, semi-solid and plastic oils in any packaging and container;

- viscous, thick and pasty mixtures.

In such terms, the main basis for excise tax at the rate of 213.50 euros per 1000 liters is the compliance of petroleum products with Ukrainian classification of products of the foreign economic activity codes 2710 19 62 00 - 2710 19 68, 2710 19 71 00, 2710 19 75 00, 2710 19 99 00, 2710 20 31 00, 2710 20 35 00, 2710 20 39 00 description: “Liquid fuels, based on gas oils (diesel fuel), less than 85 %vol. of which, including expenses, is distilled at 350°C (according to the ISO method 3405, equivalent to the ASTM D 86 method), except for household stove fuel.”  

At the same time, according to Ukrainian classification of products of the foreign economic activity products under the codes 2710 19 62 00 - 2710 19 68, 2710 19 71 00, 2710 19 75 00, 2710 19 99 00, 2710 20 31 00, 2710 20 35 00, 2710 20 39 00 are not subject to excise tax at the rate of 213.50 euros per 1000 liters, if these products are not mixtures based on gas oils (diesel fuel) with added heavy-light fractions of liquid fuel, mineral oil (oils), etc.  

Accordingly, such products are not subject to the provisions of the Law of Ukraine as of 19.12.1995 № 481/95-VR “On the state regulation of production and turnover of ethyl alcohol, cognac and fruit, alcohol beverages, tobacco products and fuel” because according to the terminological definition of Sub-paragraph 14.1.141 1 Paragraph 14.1 Article 14 of the Code and Sub-paragraph 215.3.4 Paragraph 215.3 Article 215 of the Code such products do not belong to excisable fuel.

Please note that the excise tax at the rate of 139.50 euros per 1000 liters is applicable to the household fuel (Ukrainian classification of products of the foreign economic activity codes 2710 19 62 00, 2710 19 64 00, 2710 19 68 10, 2710 19 68 20, 2710 19 68 90, 2710 20 31 00, 2710 20 35 00, 2710 20 39 00).

Regarding solvents or diluents on the methanol basis; other ready-made mixes on the methanol basis (code 3814 00 90 90 according to Ukrainian classification of products of the foreign economic activity)

Taking into account the detail of product heading 3814 at product categories, product subcategories and their text description, complex organic solvents on the methanol basis in accordance with Rule 6 of the Basic rules for interpretation of Ukrainian classification of products of the foreign economic activity are classified in the product category 3814 00 90 under the code 3814 00 90 90.

Given that complex organic solvents and diluents of heading 3814 are mixtures of individual similar organic solvents which are mixed in appropriate quantitative ratios, the question of which component (solvent) they are made is decided by applying Rule 3 (b) of the Basic rules for interpretation of Ukrainian classification of products of the foreign economic activity.

According to Rule 3 (b) of the Basic rules for interpretation of Ukrainian classification of products of the foreign economic activity, mixtures, multi-component products consisting of different materials must be classified according to the material or component that determines the basic properties of these products, provided that this criterion can be applied.

Based on the above mentioned information, the methanol-based solvents and thinners; other methanol-based ready-made mixtures are those in which methanol in quantitative terms, indicated as a percentage by mass in the mixture, is dominated by each of the other components.

For example, a complex organic solvent, diluent or other ready-made mixture:

- based on methanol will be a solvent consisting of 40 wt. % methanol, 10 wt. % butanol, 20 wt. % ethanol and 30 wt. % isopropanol or a solvent containing 95 wt. % methanol, and the rest – any artificially added solvents (eg, pentanol, butanol, propanol);

- not based on methanol will be a solvent consisting of 20 wt. % methanol, 20 wt. % ethanol and 50 wt. % isopropanol.

Given that the excise tax at the rate of 245.50 euros per 1000 liters is applicable only to complex organic solvents, diluents or other ready-made mixtures on the methanol basis, in which methanol in quantitative terms, indicated as a mass percentage of the mixture, is dominated by each of the other components.