The Cabinet of Ministers has approved a draft law that brings electricity taxation rules closer to the standards of the European Union (EU); the reports the Ministry of Finance.
The document changes the method of calculating value-added tax (VAT) and excise tax and contains provisions aimed at facilitating the integration of the Ukrainian and European electricity markets. The first possible window for such integration is set for the first quarter of 2029.
Excise tax rate set in euro
The draft sets the excise tax rate at 2.8 euro per MWh. The rate is specified in euros per megawatt-hour.
The document also defines the concepts of “sale of electricity” and “final consumption of electricity”, the taxpayers, the taxable object, operations that are not taxable, as well as the method of calculation and payment deadlines.
Changes to VAT taxation and transitional rules
The draft law changes the method of calculating VAT and introduces additional rules for the period from 1 January 2029 until Ukraine’s accession to the European Union (EU). For taxation purposes, the territories of member states will include the territories of countries to which the Treaty establishing the Energy Community applies.
Also, the purchase and sale of electricity under a negative-price procedure will be equated to the supply of electricity for VAT purposes. These provisions will apply until the date of Ukraine’s accession to the EU.
Effective date and international obligations
The provisions of the draft law, once adopted by parliament, will come into force on 1 January 2029. The provisions on the extension of the Treaty establishing the Energy Community to the territories of member states and on treating purchase-and-sale under the negative-price procedure as supply will apply until the date of Ukraine’s accession to the EU.
The draft law has been prepared as a step to adapt legislation to the EU acquis and is urgent for fulfilling Ukraine’s international obligations. Its adoption has been named a key condition for receiving macro-financial assistance from the EU.
