Taxpayers, attention!

Changes that have taken place in legislation, in the control over circulation of excisable products (goods) in connection with adoption by the Verkhovna Rada of Ukraine of the Law of Ukraine № 3173-IX as of 29.06.2023 "On changes to the Tax Code of Ukraine and other laws of Ukraine in connection with introduction of electronic traceability of the circulation of alcoholic beverages, tobacco products and liquids used in electronic cigarettes"

Law of Ukraine № 3173-IX as of 29.06.2023 "On changes to the Tax Code of Ukraine and other laws of Ukraine in connection with introduction of electronic traceability of the circulation of alcoholic beverages, tobacco products and liquids used in electronic cigarettes" entered into force from 27.07.2023 (from day following the publication day) (hereinafter – Law № 3173). Law № 3173 will enter into force on 01.01.2026, except for certain of its norms, which will enter into force on 22.01.2024 (after 180 calendar days from the date of its publication) and norms that entered into force and were put into effect on 26.07.2023 (from the publication date of the Law № 3173).

Norms will be put into effect from 01.01.2026, in particular, regarding introduction of complex changes to the Tax Code of Ukraine (hereinafter – Code) and to the Law of Ukraine № 481/95-VR as of 19.11.1995 "On state regulation of production and circulation of ethyl alcohol, cognac and fruit alcohol, alcoholic beverages, tobacco products, liquids used in electronic cigarettes and fuel" (hereinafter – Law № 481), that provide for introduction of electronic excise tax mark and electronic traceability of circulation of alcoholic beverages, tobacco products and liquids used in electronic cigarettes, which ensures reflection of circulation of products (goods) subject to labeling in the Electronic system of circulation of alcoholic beverages, tobacco products and liquids used in electronic cigarettes at all stages of movement of such products (goods) from the manufacturer/importer to the final consumer.

From 26.07.2023 (from the publication date of the Law № 3173), the following norms came into force and were put in effect:

1) changes to Sub-paragraph 14.1.252 of Paragraph 14.1 Article 14 of the Code and to Clause 11 of Article 1 of the Law № 481 in terms of clarification of definition of the term "tobacco products", in particular inclusion of other tobacco products and its substitutes as tobacco products, as well as tobacco products for inhalation without burning by heating;

2) in Clause 22 of Article 1 of the Law № 481 (in definition of the term " storage place") words "and tobacco products" are replaced by words "tobacco products, tobacco raw materials and liquids used in electronic cigarettes", therefore expanding list of products that must be stored in storage places, information about location of which is entered in the Unified state register of storage places;

3) changes to Part 1 of Article 11¹ of Law № 481, which clarified requirement for manufacturer or importer to set the maximum retail price for tobacco, industrial tobacco substitutes per pack, box or souvenir box of tobacco products;

4) changes to Article 17 of Law № 481, which:

in Clauses 22 and  25 reference to Parts 3 and 4 of Article 15 of Law  № 481 is brought into line (in terms of establishing restrictions on the sale (transfer) of fermented tobacco raw materials only for export or to manufacturers of tobacco products, as well as for import to the customs territory of Ukraine or purchase of cigarette paper and filters for production of cigarettes and/or their sale in the customs territory of Ukraine only if there is a license for production of tobacco products);

envisage to establish application of financial sanctions in the form of fines in case of:

retail sale at prices higher than the maximum retail prices for tobacco, industrial tobacco substitutes, liquids used in electronic cigarettes, set by manufacturers/importers, in the amount of 100 percent of the cost of products (goods) available to the business entity, but not less than 10 000 UAH;

production and/or storage, and/or transportation, and/or sale of falsified liquids used in electronic cigarettes, without excise tax marks of the established sample or with counterfeit paper excise tax marks, in the amount of 200 percent of the cost of products (goods), but not less than 17 000 UAH.

From 22.01.2024 norms regarding introduction of the following changes will enter into force and be put in effect to:

1) Article 225 of the Code – introduction of registration of tax invoice when manufacturer imports alcoholic beverages to the customs territory of Ukraine in containers that are not consumer containers, for their bottling in consumer containers. Procedure for registration, circulation and repayment of such tax bills will be established by the Cabinet of Ministers of Ukraine (new Paragraphs 225.5 ¹ and 225.10 were added to Article);

2) Article 1 and Article 2¹ (published in the new version) of the Law № 481 – improvement of procedure for maintaining the Unified register of equipment and strengthening control over circulation of tobacco raw materials:

mandatory registration of equipment for preparation or processing of tobacco, tobacco raw materials in the Unified state register of equipment for preparation or processing of tobacco, tobacco raw materials, industrial production of tobacco products is introduced;

list of equipment for preparation or processing of tobacco, tobacco raw materials, industrial production of tobacco products, which must be entered in the Unified register of equipment, is clarified, namely:

automated machines (mechanisms) designed for:

preparation or processing of tobacco, tobacco raw materials;

slicing of tobacco leaves for subsequent use in production of tobacco products;

production of reconstituted tobacco;

production (manufacture) of cigarettes, cigarillos by inserting tobacco leaf or tobacco mixture into cigarette paper or cigarette sleeves, or tobacco leaves with subsequent formation of such tobacco products;

packing a certain number of cigarettes, cigarillos into packs of the appropriate format by dividing single flow into portions of a certain amount, placing such portions into a blank of a pack of the appropriate format and finally forming a pack with a certain number of such tobacco products;

automated machines (mechanisms) – equipment with electric or non-electric heating for processing materials by changing temperature and mechanical devices used for industrial production of pipe, snuff, sucking, chewing tobacco or its substitutes (cutting, mixing, forming pipe tobacco, terry cloth, tobacco-containing mixtures for hookahs, final formation of a pack (package) of tobacco or shag for sucking, chewing, sniffing or inhaling without burning by heating);

automated machines (mechanisms) designed for applying excise tax marks to bundles of the appropriate format.

list of information that must be contained in the application for registration/exclusion of equipment from the Unified register of equipment and documents submitted to such applications is clarified;

procedure for destroying equipment is introduced at the request of the equipment’s owner.

In addition, it is provided that Procedure for maintaining the Unified register of equipment is approved by the Cabinet of Ministers of Ukraine, and application forms for registration of equipment for preparation or processing of tobacco, tobacco raw materials, industrial production of tobacco products, for making changes to information contained in the Unified register of equipment, for exclusion information contained in the Unified register of equipment is approved by the Ministry of Finance of Ukraine;

3) Articles 2, 3, 15 and 17 of Law № 481 – additions to list of excisable products, storage places of which are subject to entry into the Unified state register of storage places, the following changes were made:

obligation to enter storage places of tobacco raw materials (Article 2 of the Law) and liquids used in electronic cigarettes (as provided for by changes to Articles 2 and 15) into the Unified state register of storage places is established, as well as liability for violation of such requirements is provided (changes to Article 17);

it is stipulated that production and/or storage of tobacco raw materials can be carried out only:

by business entities (including foreign business entities operating through their registered permanent representative offices) that have license for production of tobacco products (only if such storage place is located at different address (indoors) than production location);

by tobacco fermentation plants that sell (transfer) fermented tobacco raw materials to manufacturers of tobacco products or for export;

by business entities involved in tobacco cultivation;

it is introduced to provide business entity with an extract on entry of the storage place in the Unified register (to replace Certificate on entry of the storage place in the Unified register);

it is envisaged to cancel license in case of production, storage, transportation, sale of unaccounted for tobacco raw materials, which are stored in the storage place not entered in the Unified register (additions were made to Part 24 of Article 3);

requirements for registration / exclusion from the Unified register of storage places of the ethyl alcohol, alcohol distillates, bioethanol and alcoholic beverages, tobacco products, tobacco raw materials and liquids used in electronic cigarettes have been clarified.