1081Update: Law No. 3326-IX” On Amendments to the Customs Code of Ukraine and some other laws of Ukraine on countering the illegal circulation of tobacco products” will come into force not from September 1 but from October 1, 2023, as it was published in the “Holos Ukrainy” newspaper on September 2. The transitional provisions of the law specify that it takes effect from the first day of the month following its publication. Given that the illegal trade in duty-free cigarettes is lucrative for unscrupulous economic entities, this postponement of the law’s entry into force may indicate interference by the tobacco industry in delaying its implementation.
On September 30, 2023, the President of Ukraine, Volodymyr Zelenskyi, signed Law No. 3326-IX “On Amendments to the Customs Code of Ukraine and some other laws of Ukraine on countering the illegal circulation of tobacco products.”
Until the end of martial law, the law prohibits the production of duty-free products and the sale of tobacco products and e-cigarette liquids in duty-free shops. The law will enter into force on the first day of the next month, i.e. on September 1, 2023.
The initiator of Law No. 3326-IX, MP Yaroslav Zheleznyak, says that the implementation of the approved norm will help reduce the level of illegal trade in tobacco products and provide additional excise revenues to the budget of UAH 5-7 billion per year.
What exactly are the bans and restrictions established by the law?
Draft Law No. 3326-IX, in particular, establishes:
- the law bans the production in Ukraine of tobacco products and liquids for e-cigarettes for duty-free sale until the end of martial law.
- the law bans the sale of tobacco products and liquids for e-cigarettes produced in Ukraine in duty-free shops until the end of martial law.
Why are these changes needed?
Cigarettes produced in legal tobacco factories have become the main sources of illegal tobacco trade in Ukraine. Experts of the NGO “Life” have emphasised this since 2018 with a recommendation to ban tobacco products in the duty-free trade regime.
Excise duty and other taxes are not paid on tobacco products produced for duty-free sale. In 2023, taxes (state excise, local excise, VAT) will amount to UAH 58.2 per pack (20 cigarettes) of cigarettes priced at UAH 75. Unfriendly business entities try to avoid paying taxes by selling tobacco products produced for the duty-free trade regime on the domestic market.
In order to ensure the elimination of all forms of illegal tobacco trade in Ukraine, it is necessary to ratify the WHO international agreement “Protocol on the Elimination of Illicit Trade in Tobacco Products”, which establishes international control over tobacco distribution chains and prevents illegal sales.