On 16 March 2007 the Parliament adopted the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine for Encouragement of Energy-Saving Measures” #760-V (the Law). In general, the Law introduces certain tax privileges in respect of Corporate Income Tax (CIT), Value Added Tax (VAT) and customs duties for import, trade and use of energy-saving technologies.
The provisions of the Law as they relate to customs and tax privileges become effective on 1 January 2008.
Customs duties
Pursuant to the Law, effective 1 January 2008, the import of certain goods will be fully exempt from customs duties. Such goods include:
-
Equipment which operates on non-traditional and renewable sources of energy;
-
Energy-saving equipment and materials;
-
Devices for measuring, monitoring and managing fuel and energy resources;
-
Equipment and materials for production of alternative types of fuel (Energy-saving equipment);
-
Components for the production of above-mentioned equipment and energy-saving tools (Energy-saving tools).
The benefit is available only if such goods are used by a taxpayer in its own production and identical goods having similar characteristics are not produced in Ukraine.
The procedures for importation as well as the list and quantity of Energy-saving equipment and Energy-saving tools are to be established by the Cabinet of Ministers of Ukraine. The exemption is provided for three years from the moment the Law becomes effective.
Value added tax
In addition to the exemption from import customs duties, the Law provides that the import of Energy-saving equipment and Energy-saving tools will also be exempt from import VAT. This benefit is available only if such goods are used by a taxpayer for its own production.
The list and quantity of Energy-saving equipment and Energy-saving tools are to be established by the Cabinet of Ministers of Ukraine. The exemption is provided for three years from the moment the Law becomes effective.
Corporate income tax
According to the Law, net income earned by a corporate taxpayer from domestic sales of Energy-saving equipment will be exempt from CIT, provided such equipment is produced by the taxpayer. The Law stipulates that the funds saved by the Company as a result of this CIT benefit must be reinvested into ways to increase production.
Another CIT benefit concerns companies that are involved in the development, implementation and utilization of energy saving and energy efficient technologies. The National Agency maintains a Register of eligible companies. If a company is included on the Register, 50% of that company’s profits are exempt from CIT. This benefit will be available for a period of five years starting from the moment the company earns its first profit attributable to energy saving and energy efficient technologies.
Key contacts:
If you would like more information or would like to discuss any particular aspect of this alert, please contact:
This alert is written in general terms and is not intended to be a substitute for specific advice regarding tax, legal, or investment planning matters. It is intended as a guide only, and the application of its contents to specific situations will depend on the particular circumstances involved. Accordingly, where specific advice is necessary, or appropriate, consultation with a competent professional advisor is strongly recommended. While all reasonable care has been taken in the preparation of this alert, ZAT “Deloitte & Touche USC” accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies on it.