Ukraine: State reduces excise tax for small brewers

Ukraine’s Verkhovna Rada intends to reduce the rate of excise tax on beer from UAH2.78 per litre to UAH1.39 per litre for producers whose annual production volume does not exceed 200,000 hectolitres, as well as introduce the term “small beer producers,” open4business.com.ua reported on May 24.

According to an explanatory note to the bill backed by 284MPs last week, there are 204 breweries in Ukraine with an annual production volume of up to 3,000 hectolitres, which pay UAH30,000 per year for a wholesale beer trade license, and 28 breweries with a production volume of up to 200,000 hectolitres (for them the annual license cost is UAH500,000).

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 litre of beer produced by small brewers is significantly higher than the same indicator for 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 taxes along with the excise tax.

The bill will determine the entities eligible for 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 and 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.

The implementation of bill No. 5118 is expected to result in a decrease in annual budget revenues by UAH328.3 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 litres, the budget will be significantly replenished with tax receipts in the form of excise tax, single social security contribution, personal income tax, etc.

22 May, 2021