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Ukrainian Parliament Grants Tax Incentives for Industries Producing and Utilizing Biofuels

On 21 May 2009 the Ukrainian parliament passed the law "On Amending Certain Ukrainian Laws with respect to Encouraging the Production and Use of Biofuel" (the "Law"). The Law, in particular, provides for the following tax incentives, starting from 1 January 20101:

  • 10-year corporate profit tax exemption for: (1) profit derived by producers from sales of biofuel; (2) profit from simultaneous production of electrical and heat energy and/or production of heat energy using biofuel; and (3) profit derived by producers from sales of machinery, devices and equipment produced in Ukraine and designed for the production and reconstruction of technical equipment, vehicles (including agricultural machinery) and energy production facilities using biofuel.
  • Bonus tax depreciation for new fixed assets until 1 January 2019. In particular, devices using alternative types of fuel and equipment designed for the production of alternative types of fuel may be depreciated at a rate of 50% of their book value upon the end of the first reporting quarter in which such assets were put into operation.
  • 9-year VAT exemption for: (1) supplies of machinery, devices and equipment using alternative types of fuel; (2) import of machinery, devices and equipment designed for the reconstruction of existing enterprises and the construction of new enterprises producing biofuel, production and reconstruction of technical equipment and vehicles consuming biofuel if such machinery, devices and equipment are not produced in Ukraine and do not have equivalents in Ukraine, and import of technical equipment and vehicles using biofuel if such products are not produced in Ukraine.
  • 9-year customs duty exemption for machinery, devices and equipment designed for the reconstruction of existing enterprises and the construction of new enterprises producing biofuel, production and reconstruction of technical equipment and vehicles consuming biofuel if such machinery, devices and equipment are not produced in Ukraine and do not have equivalents in Ukraine, and import of technical equipment and vehicles using biofuel if such products are not produced in Ukraine.
  • Until 1 January 2014, a zero excise duty rate for ethyl spirit used in bioethanol production and bioethanol used in biofuel production.
  • Zero excise duty rate for the production of bio motor fuel and until 1 January 2014 for biofuel that forms a component of motor fuel. Please note that to become effective the Law will need to be signed by the Ukrainian President.

Chambers Europe Award for Excellence 2009 for Central and Eastern Europe:

Salans has been recognised as the leading law firm in Central and Eastern Europe at the annual Chambers Europe Awards ceremony, held in London.

Based on client and peer research by leading independent publisher Chambers and Partners, the award was collected on behalf of the firm by Oleg Batyuk, Managing Partner of the Kyiv office. The firm's Ukraine presence was also singled out for honour in the evening's individual jurisdiction categories.

Footnote

1. Please note that our comments are based on the provisions of the draft law and not on the provisions of the law in final form. The provisions of the law as passed may differ from the provisions of the draft law.

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