On 15 July 2021, the Verkhovna Rada of Ukraine adopted Law of Ukraine No. 1660-IX and Law of Ukraine No. 1661-IX ("Laws"), which amends the Tax and Customs Codes of Ukraine regarding stimulating the development of the ecological transport industry in Ukraine. The changes will take effect on 1 January 2022.
In particular, the Laws introduce the following changes:
- Until 1 January 2026 there is a VAT exemption for the following transactions: import into Ukraine and the delivery to the customs territory of Ukraine of EV vehicles, as well as the new vehicles (including those produced in Ukraine) with internal combustion engines with spark ignition fueled exclusively by compressed / liquefied natural gas methane or biogas.
- Until 1 January 2031, there is a VAT and import duties exemption for import into Ukraine in the customs regime of import of a number of goods of the enterprises which own, create or modernize their production facilities for the design of EV vehicles or vehicles with internal combustion engines with spark ignition fueled exclusively by compressed / liquefied natural gas methane or biogas, or tram cars or subway cars (except for goods from the Russian Federation and / or the occupied territory of Ukraine).
The import procedure and the intended use of such goods will be established by the Cabinet of Ministers of Ukraine. In case of misuse of these goods, a taxpayer must increase the tax liabilities based on the results of the tax period in which such a violation occurs, by the amount of import VAT that must be paid in respect of such goods, and must also pay a penalty interest. At the same time, the limitation period for determining the amount of the taxpayer's monetary obligations does not apply.
- Until 31 December 2035, the profits of enterprises exclusively producing the following are exempt from taxation:
(1) electric motors for EV vehicles;
(2) lithium (lithium-polymer) batteries for EV vehicles and chargers for them;
(3) EV vehicles;
(4) electric self-propelled / non-self-propelled tram cars or subway cars; and
(5) vehicles equipped with spark ignition internal combustion engines fueled exclusively by compressed / liquefied natural gas methane or biogas,
provided that the released funds are used for the development of electric transport and such use is associated with the activities of a taxpayer, the profit from which is exempt from taxation. The Cabinet of Ministers of Ukraine will control the use of these funds.
In case of violations of the intended use and the procedure for using the released funds, a company in breach is obliged to charge a tax liability for income tax from the amount of the released funds used for other purposes, pay fines and penalties. Misuse of subsidized funds can lead to the application of a fine in the amount of these funds, and in the case of intentional violation the amount of fine will be doubled.
Until 1 April 2022, the Cabinet of Ministers of Ukraine must ensure the adoption and harmonization of the regulatory legal acts necessary for the implementation of these Laws.
For more information, please contact Asters Partner Yaroslav Petrov, Associate Olena Sichkovska-Chornobyl and Junior Associate Olena Mitskan.
