The Ukrainian National Committee of the International Chamber of Commerce (ICC Ukraine) is urging President Volodymyr Zelensky to sign Law No. 4115-IX, which includes amendments to the Tax Code regarding the revision of excise tax rates on tobacco products. This law was submitted for the President's signature on December 9, 2024.
"The law was adopted by the Verkhovna Rada on December 4, 2024, and it was expected to come into effect on January 1, 2025… Due to the delay in its signing, business representatives lack clarity in planning their business activities for this year, forecasting tax payments in the future, and their overall investment strategy," – believes ICC Ukraine.
The association explains that the bulk of taxation on tobacco products comes from excise tax, making the rate of this tax crucial for the business processes of the tobacco and related sectors of the economy.
Criticism of the delay in signing this law also comes from Yaroslav Zheleznyak, the first deputy chairman of the parliamentary committee on finance, tax, and customs policy.
"The direct failure to comply with the Constitution and the delay in signing the law has already cost the budget 252 million UAH since January 1. In simpler terms: the Office of the President has already gifted the tobacco business a quarter of a billion (and this year has just begun)," – Zheleznyak wrote on Telegram.
As reported, since 2018, Ukraine has had a plan to increase the excise tax on tobacco products by 20% annually, which was supposed to ensure compliance with the EU Directive on minimum excise tax obligations of EUR 90 by 2025. However, due to devaluation, the excise tax on cigarettes under this plan would only amount to EUR 70 in 2025, necessitating a revision of the excise tax rates.
With the aforementioned law, Ukraine revised the schedule for the phased increase of the excise tax on cigarettes, converting the rates from hryvnias to euros and establishing the goal of reaching EUR 90 per 1,000 cigarettes by 2028.
Additionally, the document provides for the differentiation of the tax on electrically heated tobacco products (EHTP): if in 2025 the excise tax on them is set 10% lower than the tax on cigarettes – EUR 70.4 compared to EUR 78 in 2025, then by 2028 the difference will increase to 20% – EUR 72 compared to EUR 90 in 2028.
Considering the excise tax level of 2516.54 UAH, or EUR 57.4 at the time of the law's adoption, the increase in the excise tax on cigarettes in 2025 will amount to 35.8%.
In 2026, the excise tax on cigarettes will be EUR 82, in 2027 it will be EUR 86, and for EHTP, it will be EUR 70.8 and EUR 71.14, respectively.