Rada committee supports tax benefits for defense procurement

The Verkhovna Rada Committee on Financial, Tax and Customs Policy has recommended that the Parliament adopt in the first reading and as a whole draft laws No. 15463-1 and No. 15464-1, which expand tax and customs benefits for goods intended for the security and defense forces. The committee chairman, Danylo Hetmantsev, reported this on August 12.

One of the key initiatives concerns components for the production of defense goods. It is proposed to exempt their import from import duty and VAT if the products manufactured from them are subsequently supplied for the needs of the security and defense forces. The benefit is proposed to apply regardless of the procurement financing source — including cases when the products are paid for by foreign states or their authorized bodies.

ATVs to be exempted from three taxes at once

A separate block of amendments concerns ATVs and off-road motorcycles used for defense needs. It is proposed to exempt operations of their import into Ukraine and domestic supply from import duty, VAT, and excise tax.

The explanatory notes to the initiative state that such vehicles are in demand directly in the combat zone. ATVs and off-road motorcycles can be used for reconnaissance, transportation of ammunition, evacuation of the wounded, as well as performing logistical and engineering tasks. Draft law No. 15463-1 provides for benefits for vehicles supplied as defense goods or intended for end recipients established by law.

The proposed changes are expected to reduce the tax burden on procurement of such vehicles and allow purchasing more vehicles within the limits of already planned funding. At the same time, the authors of the initiative seek to eliminate situations where the possibility of applying benefits depends on which specific source finances the defense contract.

Benefits expanded for purchases with foreign funds

The authors explain the need for changes by stating that a significant part of defense products for Ukraine is currently procured not only from state budget funds. Funding may come within the framework of international military and technical assistance, from foreign states, international organizations, and through other legal mechanisms. The current norms do not in all cases allow equal application of tax and customs benefits to such purchases.

Therefore, it is proposed to establish the possibility of exemption from payments regardless of the source and method of defense order financing. The changes should also cover components, materials, assemblies, and equipment for the production of defense goods.

Draft laws No. 15463-1 and No. 15464-1 were registered in the Verkhovna Rada on August 6 as alternatives to previously submitted drafts No. 15463 and No. 15464. Draft No. 15464-1 provides for amendments to the Customs Code, and the related draft No. 15463-1 — to the Tax Code.

The recommendation of the specialized committee does not yet mean that the benefits have already come into effect. The draft laws must receive the support of the Verkhovna Rada and go through the procedure prescribed by legislation. As of August 12, the file of draft No. 15464-1 on the parliament's website indicates that the document has been submitted for consideration by the committee.

Based on materials from: Danylo Hetmantsev, Verkhovna Rada of Ukraine