The Draft Law №5600 “On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine to Ensure Balanced Budget Revenues” was registered on June 2, 2021 at the initiative of Shmygal Denys Anatoliyovych, Cabinet of Ministers of Ukraine.

Chronology:

− June 2, 2021 – the Draft Law №5600 was registered;

− July 1, 2021 – adopted by the Verkhovna Rada of Ukraine in the first reading;

− until July 15, 2021, the Committee adopted amendments for the second reading.

− currently, the Secretariat of the Committee is still compiling a table of amendments for the second reading of the draft law. Now the table has more than 11 thousand edits;

– the second reading is tentatively forecast for the beginning of September 2021.

The draft Law №5600 provides:

– introduction of excise tax (3.2%) for taxpayers who produce electricity from renewable energy sources (RES) or use cogeneration units.

Consequences of the adoption of the Draft Law №5600:

– the introduction of the excise tax is an actual reduction of the “green” tariff by 3.2% for existing power plants from renewable energy sources;

– adoption of tax changes would be contrary to guarantees provided by the Government of Ukraine on June 10, 2020 at the signing of the Memorandum of Understanding on the settlement of problematic issues in the field of renewable energy in Ukraine (hereinafter – the Memorandum) and which were confirmed by the Verkhovna Rada of Ukraine by adopting the Law of Ukraine “On Amendments to Certain Laws of Ukraine Energy ”of July 21, 2020 № 810-IX (hereinafter – the Law № 810-IX);

– contribute to an unfavorable investment climate of Ukraine;

– contribute to increasing the number of arbitration claims;

– lead to an increase in the market price of clean electricity.

Actions:

– Regarding this, the leading associations in renewable energy in Ukraine – EUEA, UARE and UWEA issued a joint statement on the categorical disagreement on the introduction of excise tax on electricity from renewable energy sources, provided by the Draft Law №5600.

– The Energy Community, EBRD, BSTDB, FMO and PROPARCO have jointly written a letter to Parliament Speaker Dmytro Razumkov over the possible introduction of excise duty on renewable electricity. According to them, the latest actions of the state do not lead the country to clean energy technologies and synchronization with the European energy system – ENTSO-E. The information was published on the MFI website “Clean Energy – Healthy Environment”.

– EUEA held a number of meetings for the People’s Deputies of the Verkhovna Rada Committee on Finance, Tax and Customs Policy;

– On July 8, EUEA representatives took part in a meeting of the Subcommittee on Rent Payments, Environmental Tax and Taxation of AIC of the Committee of the Verkhovna Rada of Ukraine on Finance, Tax and Customs Policy regarding Draft Law №5600 on Environmental Tax, Rent Payments and Excise Duty on Green Energy took place; the purpose of the first meeting is to create equal conditions for all electricity producers. At the meeting, a representative of the Ministry of Finance, who commented that the Draft Law №5600 does not violate any guarantees, as the legislation does not change. According to her words, the legislation was adopted in 2015, and that “the abolition of benefits is not a change in legislation”.

EUEA, as an association uniting the largest foreign investors in renewable energy and electricity market participants, continues to monitor the situation with the changing regulatory environment and dialogue with the authorities, in order to prevent deteriorating conditions for doing business in the renewable energy sector.

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The Draft Law 02.06.2021