On October 22, the Cabinet of Ministers of Ukraine approved a draft law on changing the rules of taxation of electricity transactions. The document provides for exemption of electricity imports from VAT, introduction of a new procedure for tax payment in electricity trade, and establishment of an excise duty of 2.8 euros per megawatt-hour.
This was reported by the Ministry of Finance of Ukraine. The changes are necessary for the integration of the Ukrainian electricity market with the European one and fulfillment of obligations to the European Union.
One of the main innovations is the exemption of electricity imports into Ukraine from value added tax. At the same time, it is proposed to revise the procedure for VAT calculation on domestic and cross-border electricity transactions.
In particular, the place of supply of electricity will be considered the place of its consumption. For transactions with professional market participants, a reverse charge VAT mechanism is provided, under which the obligation to calculate the tax is shifted from the seller to the buyer.
The draft law also introduces new categories of taxpayers — “taxable person” and “taxable dealer”. A separate register is planned to be created for the latter.
The excise tax on electricity is proposed to be set at 2.8 euros per MWh. The draft law defines excise tax payers, taxable transactions, exceptions, as well as the calculation procedure and payment deadlines.
Separate provisions regulate electricity trade at negative prices. Such transactions are proposed to be equated to electricity supply for VAT purposes. This is necessary for applying European rules in the integrated energy market.
The Ministry of Finance explained that the reform should prepare Ukraine for the integration of national and European electricity markets — the so-called market coupling. This mechanism provides for coordinated electricity trading between countries taking into account the available capacity of interconnectors.
The first possible window for market coupling is set for the first quarter of 2029. Therefore, according to the government draft law, the new tax rules should come into force on January 1, 2029, if the document is adopted by the Verkhovna Rada.
At the same time, certain provisions concerning Energy Community states and negative price transactions will remain in force until Ukraine's accession to the European Union.
The developers emphasize that the changes are aimed at implementing step 10.6 of the Ukraine Plan and aligning national tax legislation with European VAT and excise directives.
Adoption of the draft law is also one of the key conditions for Ukraine to receive macro-financial assistance from the EU. However, the government announcement does not specify the exact amount of funding associated with fulfilling this obligation.
The document is planned to be submitted to the Verkhovna Rada for consideration in the near future. Until its adoption and entry into force, the current rules of electricity taxation remain in effect. In particular, the proposed exemption of imports from VAT is not yet in force within the framework of the new reform.
