Production of excisable goods (products) is a technological process, including mixing, during which due to changes in the shape, properties or composition of raw materials, the semi-finished or finished products leads to the receipt of excisable goods (products, including raw materials) giving such goods other properties that leads or does not lead to an increase in the volume of such goods according to Sub-paragraph 14.1.281 Paragraph 14.1 Article 14 of the Tax Code of Ukraine (hereinafter – the Code).
Paragraph 215.1 Article 215 of the Code stipulates that excisable goods include tobacco products, tobacco and industrial tobacco substitutes.
According to Paragraph 215.3 Article 215 of the Code, the excise tax is levied on tobacco products, tobacco and industrial tobacco substitutes and is calculated at rates specified in Sub-paragraph 215.3.2 Paragraph 215.3 Article 215 of the Code (taking into account provisions of Paragraph 17 Sub-section 5 Section XX of the Code).
List of goods that belong to commodity item according to codes of Ukrainian classification of the FEA products, namely code 2401 correspond to the description “Tobacco raw materials; tobacco waste” are excisable products and are taxed at the excise tax rate of 1367.71 UAH per 1 kg (net) (Sub-paragraph 1 Paragraph 17 Sub-section 5 Section XX of the Code).
According to Paragraph 212.1 Article 212 of the Code, the excise tax payer is an individual who produces excisable goods (products) in the customs territory of Ukraine (Sub-paragraph 212.1.1 Paragraph 212.1 Article 212 of the Code).
Therefore, an individual who produces tobacco raw materials is the excise tax payer as a producer of tobacco raw materials (Paragraph 212.1 Article 212 of the Code).
In addition, the business entity is a subject to mandatory registration as excise tax payer by the supervisory authorities at the location of legal entities, residence place of individuals-entrepreneurs not later than the deadline for submitting the excise tax declaration for month when the entrepreneurial activity began (Sub-paragraph 212.3.2 Paragraph 212.3 Article 212 of the Code).
The following operations with excisable products are exempted from taxation:
sale and / or transfer of excisable goods (products) within one enterprise that were produced in the customs territory of Ukraine and used as raw materials for production of excisable goods (products) (Sub-paragraph 213.3.5 Paragraph 215.3 Article 213 of the Code);
import to the customs territory of Ukraine of unfermented (unprocessed) tobacco raw materials by tobacco fermentation plants that sell fermented (processed) tobacco raw materials to producers of tobacco products or its export;
sale of tobacco raw materials to tobacco fermentation plants to individuals who produce tobacco raw materials in the customs territory of Ukraine;
sale of fermented (processed) tobacco raw materials by tobacco fermentation plants to producers of tobacco products (Sub-paragraph 213.3.13 Paragraph 213.3 Article 213 of the Code).
In the case of sale of tobacco raw materials to business entities that are not producers of tobacco products and / or tobacco fermentation plants, from entities that made such sales, there is applicable fine of 200% of the value of sold tobacco raw materials. Raw materials sold in this way are subject to confiscation and destruction (Paragraph 221.5 Article 221 of the Code).
As follows, the business entity is a person who produces tobacco raw materials in the customs territory of Ukraine, carries out cultivation of excisable goods (products) – is a producer of tobacco raw materials, who must: register as the excise tax payer (Sub-paragraph 212.3.2 Paragraph 212.3 Article 212 of the Code) and submit the excise tax declaration; operations on the sale of tobacco raw materials to tobacco fermentation plants and manufacturers of tobacco products are exempted from taxation.
Restrictions on carrying activities for business entities, in particular individuals-entrepreneurs who are the single tax payers of Group I – III are established by the provisions of Paragraph 291.5 Article 291 of the Code.
Specifically, individuals-entrepreneurs involved in production, export, import, sale of excisable products (except for the retail sale of fuels and lubricants in containers up to 20 liters and activities of individuals related to the retail sale of beer and table wines) cannot be the single tax payers (Sub-paragraph 291.5.1 Paragraph 291.5 Article 291 of the Code).
So, in the case of carrying out production and sale of tobacco raw materials by individuals-entrepreneurs which according to code of Ukrainian classification of the FEA products belong to excisable products, such individual has no right to be registered on the simplified taxation system (Sub-paragraph 291.5.1 Paragraph 291.5 Article 291 of the Code).