On December 8, 2023, the Ministry of Finance of Ukraine published the draft law “On Amendments to the Tax Code of Ukraine regarding revising excise tax rates on tobacco products”. This draft law aims to adopt the tax legislation regarding the excise tax on tobacco products in Ukraine to EU legislation. There are some main peculiarities of the draft law:
- Setting of excise tax rates on tobacco products in euros. This proposal aims to guarantee that the minimum excise tax rates for cigarettes have reached €90/1000 units as required by Council Directive 2011/64/EU. Setting tax rates in euros is a means of reinsurance for the government under a possible national currency devaluation.
- Transition to a slight differentiation of tax level between cigarettes and Heated Tobacco Products (HTP) from January 1, 2025. The level of differentiation of the excise tax on cigarettes and HTP will gradually increase to 20% in 2028. The ratio of excise duty differentiation on HTP and cigarettes is higher in EU countries (in 2023 it was 66,3% on average). In addition, according to the leakage in media[1] a new draft proposal of the EU legislation mentioning new minimal differential cigarettes vs HTP by 50%.
- Proposal on different approach for calculating the excise tax rate for tobacco products produced in Ukraine vs imported analogues. This approach is not in line with the provisions of the World Trade Organization and the EU legislation, which does not allow the establishment of different excise tax rates on specific products produced on the domestic market or imported. It is vital to ensure a unified approach for calculating the excise tax rate for tobacco products produced in Ukraine and imported from abroad.
The full draft of the legislative initiative is available in the attached files
[1] Commission to Propose EU-Wide Vaping Levy