The Verkhovna Rada intends to reduce the rate of excise tax on beer to UAH 1.39 per liter from UAH 2.78 per liter for producers whose annual production volume does not exceed 200,000 hectoliters, as well as introduce the term “small beer producers.”
At a plenary session of parliament last week 284 MPs with the required minimum of 226 votes backed bill backed at first reading No. 5118 on amendments to Article 215 of the Tax Code of Ukraine.
According to an explanatory note to the document, there are 204 breweries in Ukraine with an annual production volume of up to 3,000 hectoliters, which pay UAH 30,000 per year for a wholesale beer trade license, and 28 breweries with a production volume of up to 200,000 hectoliters (for their annual license is UAH 500,000).
These companies account for 13% of the beer market in Ukraine, while the remaining 87% is divided among nine large beer producers. According to the document, the total tax burden per 1 liter of beer produced by small producers is significantly higher than the same indicator at the enterprises of the beer giants.
In addition, the authors of the bill said that all small beer producers are under significant regulatory and financial pressure, since they pay other tax payments along with the excise tax. In this regard, the reduction in the excise tax rate is proposed.
The bill will determine the entities of applying the reduced rate by introducing the term “independent small brewery” – an enterprise legally and economically independent from any other brewery, geographically located separately from other breweries.
According to the explanatory note, the bill brings the tax legislation of Ukraine closer to the EU legislation, complies with the EU Council Directive 92/83/EEC on the harmonization of the structures of excise duties on alcohol and alcoholic beverages dated October 19, 1992.
As expected, the implementation of bill No. 5118 will result in a decrease in annual budget revenues by UAH 328.3 million due to a decrease in excise tax rates on beer. At the same time, in the long term, due to the expected growth in beer production by about 20 million liters, the budget will be significantly replenished with tax receipts in the form of excise tax, single social security contribution, personal income tax, etc.