Excise tax payers, attention!

Regarding determination of range of excise tax payers from the sale of tobacco products, tobacco and industrial substitutes for tobacco and liquids used in electronic cigarettes by retail trade entities from May 01, 2022.

Norms of the Law of Ukraine № 1914-IX as of 30.11.2021 "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to ensure balance of budget revenues" (hereinafter – Law № 1914) came into force on May 01, 2022 regarding the transfer of an obligation to producers and importers to pay 5% excise tax on the sale of tobacco products, tobacco and industrial tobacco substitutes, liquids used in electronic cigarettes by trade entities.

At the same time, retail trade entities until the end of 2022 remain in manner and under conditions in force until April 01, 2022 as payers of 5% excise tax on retail sales of tobacco products, tobacco and industrial tobacco substitutes produced before April 01, 2022, including foreign producers but not sold to end consumers by April 01, 2022 (Paragraph 40 Sub-section 5 Section XX of the Tax Code of Ukraine (hereinafter – Code)).

Taxation basis for excisable goods (products) with the use of ad valorem rates is: cost of imported and produced sold goods (products) at the maximum retail prices set by importer and producer, including value added tax and excise tax (Sub-paragraphs 214.1.1 and 214.1.2 Paragraph 214.1 Article 214 of the Code).

Maximum retail prices are prices set for excisable goods (products including all types of taxes (levies). Excise tax on excisable goods sold by retail trade entities is not included in the maximum retail price.

Maximum retail prices for excisable goods (products) are set for tobacco products, tobacco, industrial tobacco substitutes and liquids used in electronic cigarettes, producers or importers of goods (products) by declaring such prices in the manner prescribed by this Code.

Sale of excisable goods by retail trade entities at which the maximum retail prices are set may not be carried out at prices higher than the maximum retail prices increased by the excise tax amount on retail sale of excisable goods (Sub-paragraph 14.1.106 and Paragraph 14.1 Article 14 of the Code).

In addition, Article 17 of the Law of Ukraine № 481/95-VR as of 19.12.1995 "On state regulation of production and turnover of ethyl alcohol, cognac and fruit, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel" establishes penalties in case of sale of tobacco products by retailer trade entities at prices exceeding the maximum retail prices, increased by the excise tax amount on retail sales of excisable goods in the amount of 100 percent of the value of tobacco products available to the business entity.

If before January 01, 2022 the tax liability to declare the maximum retail prices was applicable only to cigarettes with filter and without filter, then with the entry into force of the Law № 1914, the tax liability is applicable to all tobacco products and liquids used in electronic cigarettes.

Whereas, from May 01, 2022 producers and importers are payers of 5% excise tax on retail sales of tobacco products, tobacco and industrial tobacco substitutes produced from April 01, 2022 and liquids used in electronic cigarettes produced from January 01, 2022 starting from May 01, 2022:

1) determining taxation basis during calculation of tax liability for the 5% excise tax payment:

producers and importers take into account cost of sold tobacco products, tobacco and industrial tobacco substitutes  produced from April 01, 2022 and liquids used in electronic cigarettes produced from January 01, 2022;

retail trade entities take into account only cost of sold tobacco products, tobacco and industrial tobacco substitutes produced before April 01, 2022;

2) it is expedient to ensure separate accounting of tobacco products, tobacco and industrial tobacco substitutes depending on the date of their production and liquids used in electronic cigarettes, namely:

producers and / or importers, wholesale trade entities with data on the quantity and cost of products sold since May 01, 2022 in the primary accompanying documents (consignment notes and others) must also indicate date of its production (or a note on the production of tobacco products before or after April 01, 2022) and the maximum retail price;

retail trade entities – separate reflection in the financial accounting and accounting at the trade place of tobacco products, tobacco and industrial tobacco substitutes produced before and after April 01, 2022, as well as liquids used in electronic cigarettes produced before and from January 01, 2022;

3) selling excisable goods in retail trade, the retail trade entities continues to take into account requirements of Sub-paragraph 14.1.106 Paragraph 14.1 Article 14 of the Code regarding the sale of tobacco products, tobacco and industrial substitutes for tobacco and liquids used in electronic cigarettes, which may not be carried out at prices higher than the maximum retail prices, increased by the excise tax amount on retail sale of excisable goods, including those paid by producers and importers of excisable goods.