Draft Law No. 7418 On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine to Revise Certain Tax Benefits takes effect on 1 June 2022.
The passage of the Law creates grounds for cancelling the list of critical imports that has been in force since the beginning of russia’s invasion.
When russia’s full-scale invasion of Ukraine unfolded, the NBU made a decision to restrict FX payments abroad, allowing only payments based on the list of critical imports. Said list was approved by Resolution of the Cabinet of Ministers of Ukraine.
The list of critical imports was expanded 18 times to meet the needs of Ukrainian businesses that were resuming their production. Almost all amendments to the resolution on the critical imports were made based on requests from Ukrainian companies. Today the list of critical imports includes almost 90% of all categories of goods.
“The adoption of Draft Law No. 7418 by the Verkhovna Rada of Ukraine allows us to apply an alternative mechanism for balancing the FX outflows and inflows into the country by collecting import duties and taxes. The Draft Law resumes the imports taxation for payers of the unified flat tax of the first, second, and third groups, business entities that are exempt from import duties, and citizens who import cars. After that, the critical imports program can be completed. The economy is developing, requiring more and more imported goods and raw materials. After the NBU lifts restrictions on the purchase and transfer of foreign currency abroad to purchase critical imports, the government, in its turn, will cancel the resolution on the list of critical imports,” said First Deputy Prime Minister and Minister of Economy of Ukraine Yulia Svyrydenko.
According to her, the increase in imports will create additional incentives for businesses to recover, improve the domestic manufacturing performance, and increase the investment attractiveness of Ukraine. The final consumers will also benefit from it, as a wider range of goods will enable them to choose the best ones.
“The law’s enactment creates prerequisites for the NBU to lift restrictions on the purchase of foreign currency and cross-border transfers for imports of goods. On the other hand, iunder martial law, we find it reasonable to keep restrictions on the purchase of foreign currency and cross-border transfers for the import of services,“ said NBU Governor Kyrylo Shevchenko.
The reimposition of import taxes and customs duties is an important step towards restoring the FX market’s capability to self-balance. In particular, it will support further resuming the manufacturing in Ukraine and will allow limiting the growth rate of imports, which puts pressure on the foreign exchange market and Ukraine’s international reserves.
Moreover, monthly budget revenues will increase by UAH 3.5 billion, according to the Ministry of Economy. This will help reduce the financing of the budget deficit by the NBU and, accordingly, diffuse the depreciation pressure.