The Verkhovna Rada, Ukraine's parliament, has again exempted natural gas imports to Ukraine from value added tax (VAT), after the exemption was suspended in late 2013.
Most MPs from the Regions Party and the Communist Party voted for the
relevant government’s amendments to the Tax Code (draft law No.
3853-1).
“Natural gas imports to the customs territory of Ukraine (under
foreign economic activity code 2711 21 00 00) are exempted from
taxation,” reads the law adopted.
The government explained the need to exempt gas imports from VAT as
being due to the lack of funds to pay for it at Naftogaz Ukrainy. In
particular, the introduction of such a tax with the subsidized price of
gas for households and heating companies (Hr 779.8 per one thousand cubic
meters with the import price being Hr 2,282.25 per one thousand cubic meters)
and the projected volume of imports for these purposes in 2014 of 8.5
billion cubic meters would lead to a cash break of Hr 3.4 billion.
At the same time, the Cabinet of Ministers said that the average
level of payments by heating companies for gas in the past year was 34 percent,
and the actual debt of the national budget to Naftogaz for loss
compensation for 2008-2013 as of the beginning of this year amounted to
about Hr 20 billion.
Besides, Naftogaz plans in the second or third quarter of this year
to form gas stocks in underground gas storage facilities in the amount
of about 9 billion cubic meters, which, under the introduction of VAT on
imports, will require more Hr 4.1 billion for VAT payment in addition
to Hr 20.5 billion for its purchase.
