The law No.5600 proposed by the Ukrainian government will affect only businesses that for many years have enjoyed the norms designed specifically for them and their profiteering [schemes],’ said Finance Minister Serhiy Marchenko Thursday addressing the MPs before the crucial vote in the Verkhovna Rada.
The finance minister stressed the policy ‘will not affect ordinary citizens’, but, in the first place, it aims to address ‘VAT-related schemes, carbon emission tax, which is the lowest in Europe and the world, and subsoil-use royalties rates’.
His claims drew criticism from the ‘European Solidarity’ and ‘Golos’ MPs on concerns such policy can drive off investors and put pressure on small businesses. The opposition also voiced concern over taxation for secondary housing market, higher taxes for the land sale, and stripping local governments of right to use tobacco excises.
The policy got 264 votes from Zelensky’s Servant of the People’ party and its two small parliamentary fractions.
The law that regulates revenues is routinely submitted to Ukraine’s parliament by Finance Ministry each year.
Made effective July 1, the policy introduces a range of higher rates of taxes, excises, and subsoil-use royalties.
(a) alcohol tax, green tax and rental payment for radio frequencies’ use are set to grow by 5%,
(b) rental payments for subsoil use (with no extraction of natural resources involved), rental payments on special uses of water and forests will grow by 14,5%
(c) excise tax for beers will get a new graduated rate and will depend on their alcohol content
Tax administration and collection got amendments that allow (a) to skip court proceedings when collecting tax debts, and (b) imposes temporary international travel restrictions for executives of companies facing tax debts.
- 18 % annual income tax rate is introduced for the sale of property except for first two sold objects
- to block VAT-related schemes, the law introduces restrictions on VAT refund for intermediaries involved in imports/exports of goods
- Another update brings in VAT to the secondary housing market deals, which can allegedly drive up housing prices
Excise taxes are amended
(a) to remove preferential excise tax for suppliers of power, and (b) put restrictions on tobacco surplus stock practices common before new excise duties are introduced, with 5% excise duty on tobacco products earlier paid by retailers now set to be paid by tobacco producers and importers.
Green tax updates
- Waste water dischargers face a 60% increase in waste water tax
- Carbon emission tax is tripled – 30 hryvnas per ton
- Coal industry waste is now subject to three times’ higher green tax – 1,5 hryvnas per ton of waste.
Subsoil -use royalties and taxes
The amended policy (a) introduces graduated rate system for royalties on iron ore to bring it in line with IODEX 62% FE CFR China, (b) lowers rates of iron ore royalties – from 11-12% to 3,5-10%, (c) updates calculating rates for rental payments on special uses of water
Land and farming tax amendments
The policy brings in (a) a land tax on unregistered farmed land plots and (b) a special 1-hectare tax for farm land owners and users ( no less than 1,500 hryvans per a hectare), (c) tax on and sets 4 times smaller land lot sizing subject to taxation – from 3 hectares to 0,5 hectare.
The new policy will bring in some tax relief initiatives – poultry, ostrich and quail farmers are set to be granted flat-tax exempt status.