To the attention of payers of 5% excise tax on the retail sales for accounting of products subject to this tax

Law of Ukraine № 2218-IX as of 21.04.2022 “On amendments to the Law of Ukraine “On the state budget of Ukraine for 2022” entered into force on 30.04.2022 (“Holos Ukrayiny” as of 30.04.2022 № 96 (7846)). Paragraph 3 Section II of Final provisions of this Law changed the date of entry into force of amendments to the Budget Code of Ukraine regarding implementation of procedure for crediting 5% of the excise tax on the retail sales of tobacco products to local budgets, as well as tobacco and industrial tobacco substitutes, liquids used in electronic cigarettes, paid for by their importers and manufacturers. Date has been changed to 01.05.2022 instead of 01.01.2023.

With amendments to the Budget Code of Ukraine as of 01.05.2022, norms of the Law of Ukraine as of 30.11.2021 № 1914-IX “On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to ensure balanced budget revenues” come into force on the transfer to producers and importers of the obligation to pay 5% excise tax on the sale by business entities – retailers of tobacco products, tobacco and industrial substitutes for tobacco, liquids used in electronic cigarettes, which is currently paid by business entities involved in the retail sale.

At the same time, until the end of 2022, business entities – retailers remain in order and under conditions in force until 01.04.2022 as payers of 5% excise tax on the retail sales of tobacco products, tobacco and industrial tobacco substitutes produced before 01.04.2022, including foreign producers, but not sold to the end users by 01.04.2022 (Paragraph 40 Sub-section 5 Section XX of the Tax Code of Ukraine (hereinafter – Code)).

In order to prevent double payment by producers and business entities – retailers of 5% of excise tax on retail sales of tobacco products, tobacco and industrial tobacco substitutes to payers from 01.05.2022, it is advisable to keep separate records of tobacco products, tobacco and industrial substitutes, exactly:

1)manufacturers and / or importers, business entities – wholesalers with data on the quantity and value of products sold since 01.05.2022 in the primary accompanying documents (consignment notes and others) must also indicate date of its production (or mark for production before or after 01.04.2022) and the maximum retail price;

2) business entities – retailers to provide:

separate reflection of tobacco products, tobacco and industrial tobacco substitutes produced before and after 01.04.2022 in financial and accounting documents in the place of trade;

reflection in settlement documents (RRO checks / software RRO) of obligatory requisites according to Regulations on the form and content of settlement documents / electronic settlement documents approved by Order of the Ministry of Finance of Ukraine № 13 as of 21.01.2016, in particular:

for business entities – retailers selling excisable products and registered as the excise tax payers (business entities registered as payers of other tax, excepting the VAT) – letter designation in a separate line, amount of rate of such tax, total amount of such tax for all products (services) specified in a check; name of such tax is printed at the beginning of line (line 22). In requisite “Excise tax” its name is given according to the Code. Abbreviations are allowed if necessary.

At the same time, retailing tobacco products, tobacco and industrial tobacco substitutes produced before 01.04.2022, business entities from 01.05.2022 must continue to ensure reflection in the calculation document of such mandatory requisite as “Excise tax” (separate line lettering, amount of rate of such tax, total amount of such tax for all products specified in a check).

Herewith, business entities that retail tobacco products, tobacco and industrial tobacco substitutes produced after 01.04.2022, as well as liquids used in electronic cigarettes, do not reflect such requisite as “Excise tax” on such products in the settlement document (line 22) from 01.05.2022.

Provisions of Paragraph 221.3 Article 221 of the Code must be taken into account conducting actual audits according to which, if there are such products of the same name in the place of trade on tobacco products, packs, boxes and souvenir boxes of which different maximum retail prices are indicated, the sale of such tobacco products is carried out at prices not higher than those indicated on the respective packs, boxes and souvenir boxes, increased by the amount of excise tax on sold by business entities – retailers of tobacco products, tobacco and industrial tobacco substitutes.

Part 2 of Article 17 of the Law of Ukraine № 481/95-VR as of 19.121995 “On the state regulation of production and turnover of ethyl alcohol, cognac and fruit alcohol, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel” stipulates that financial sanctions in the form of fines in case of retail sale of tobacco products at prices higher than the maximum retail prices for tobacco products set by manufacturers or importers of such tobacco products are applied to business entities (including foreign business entities operating through their registered permanent establishments) on the amount of excise tax on sales through the retail trade network of tobacco products.

Amendments provided by the Law of Ukraine № 1019-IX as of 02.122019 “On amendments to certain legislative acts of Ukraine on restricting turnover of excisable products, devices for consumption of tobacco products without their combustion and strengthening control over the sale of such products” come into force on 01.07.2022, particularly regarding attribution of tobacco-containing products for electronic heating (TVEN) to tobacco products, respectively, there will be liability for non-compliance with the maximum retail prices for such products.

It should be noted that a number of draft laws are currently being considered by the Verkhovna Rada of Ukraine, in particular № 7311 as of 24.04.2022, № 7311-d as of 01.05.2022 that stipulate that the excise tax on tobacco products, tobacco and industrial tobacco substitutes produced before 01.05.2022, instead of the current norm until 01.04.2022 from retail sales is paid by business entities – retailers.

As follows, in case of adoption of one of the draft laws, business entities – retailers will remain payers of 5% of the excise tax on retail sales of tobacco products, tobacco and industrial tobacco substitutes produced before 01.05.2022.