Ukraine to Lift Duties and VAT on Imports of Energy Equipment

On July 16, 2024, the Verkhovna Rada of Ukraine (Ukrainian parliament) adopted two bills:

• No. 11259 "On Amending Section XXI 'Final and Transitional Provisions' of the Customs Code of Ukraine Regarding Exemption from Import Duty on Goods for the Production and/or Repair of Mechanized Demining Machines"
• No. 11258 "On Amendments to Subsection 2 of Section XX 'Transitional Provisions' of the Tax Code of Ukraine Regarding the Exemption from Value Added Tax on Operations for the Import of Goods for the Production and/or Repair of Mechanized Demining Machines."

These bills exempt from import duties and value-added tax (VAT) certain categories of goods to be used in various sectors of Ukrainian machine building industry especially in manufacturing of unmanned systems, active countermeasures technical reconnaissance, as well as mechanized demining machines.

Additionally, the bills introduce similar exemptions for electrical equipment and goods for commercial and domestic use (for example power conversion devices) to reduce prices, addressing the severe electricity shortages caused by Russian attacks on Ukraine's energy infrastructure. The bills will become law following the President's signature and official publication.

The relief applies to the following goods used in the Ukrainian energy sector according to the Ukrainian Classification of Goods for Foreign Economic Activity (UCGFEA):

• 8406 [Steam turbines and other turbines]
  - except 8406 10 00 00 [turbines for inboard motors]
• 8410 (Only hydraulic turbines and their parts)
• 8483 40 21 00 [Cylindrical and helical gears]
• 8502 20 40 90 [Electric generator sets with spark-ignition piston engines with a power output of more than 7.5 kVA but not more than 375 kVA],
  8502 20 60 90 [Electric generator sets with spark-ignition piston engines with a power output of more than 375 kVA but not more than 750 kVA],
  8502 20 80 90 [Electric generator sets with spark-ignition piston engines with a power output of more than 750 kVA]
• 8411 [Turbojet, turboprop, and other gas turbines] (except turboprop and turbojet engines and their parts)
• 8501 64 00 00 [Electric engines and generators (excluding electric generating sets), alternating current (synchronous) generators with a power output of more than 750 kVA],
  8504 40 84 00 [Electrical transformers, static electrical converters (e.g., rectifiers), inductors and chokes, static converters, inverters with a power output not exceeding 7.5 kVA] (except inverter welding machines)
• 8504 40 88 00 (except inverter welding machines),
  8504 40 90 00 [Electrical transformers, static electrical converters (e.g., rectifiers), inductors and chokes, static converters] (except inverter welding machines)
• 8507 60 00 00 [Electric batteries, including separators for them, rectangular (including square) or any other shape, Lithium-ion] (except energy storage systems with a capacity of less than 300 W of alternating and/or direct current and individual lithium-ion cells with a capacity of less than 200 Ah)
• 8541 43 00 00 [Photovoltaic cells, assembled in modules or made into panels],
  8537 [Boards, panels, consoles, desks, distribution boards, and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numeric control apparatus, other than switching apparatus of heading 8517] (except 8537 10 98 10)
• 8503 00 99 00 [Electric motors and generators (excluding electric generator sets) 8501 and Electric generator sets and rotary electric converters 8502] for wind energy generator installations only.

Goods imported into Ukraine under agreements financed by the Secretariat of the Energy Community will also be exempt from import duties and VAT. The list of such goods, with their UCGFEA codes, will be determined by the Cabinet of Ministers of Ukraine. The Ministry of Energy of Ukraine will confirm that the import of goods is carried out under these agreements, following a procedure approved by the Cabinet of Ministers of Ukraine.

These exemptions are temporary and will last until the expiration or termination of martial law in Ukraine (introduced by the Decree of the President of Ukraine 'On the Introduction of Martial Law in Ukraine' dated February 24, 2022, No. 64/2022, and approved by the Law of Ukraine 'On the Approval of the Decree of the President of Ukraine 'On the Introduction of Martial Law in Ukraine' dated February 24, 2022, No. 2102-IX) or January 1, 2026, whichever occurs first.

Authors:
Oleksiy Feliv, Managing Partner
Serhii Datsiv, Senior Associate

Please note that the information provided in this legal alert does not and is not intended to constitute legal or tax advice; all content of this alert is for general informational purposes only.