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LETTER OF THE STATE TAX SERVICE OF UKRAINE

of March 22, 2012 No. 5258/6/15-1415

About consideration of the letter

The State Tax Service of Ukraine considered the letter concerning the taxation of the profit got from production and sale of biofuel which production and sale is carried out by subjects of managing based on cooperation agreement and reports.

According to item 4 of Art. 176 of the Economic code of Ukraine subjects of managing have the right together to perform economic activity for achievement of the joint purpose, without education of the single subject of managing, on the conditions determined by cooperation agreement.

The procedure for the taxation of joint activities in the territory of Ukraine without creation of the legal entity is determined by Item of item 153.14 of Art. 153 of the Tax code of Ukraine of December 2, 2010 No. 2755-VI, with changes and amendments (further - NKU). Joint activities without creation of the legal entity are carried out based on cooperation agreement.

Account of results of joint activities is kept by the taxpayer authorized on it by other parties according to terms of the contract, separately from accounting of economic results of such taxpayer (subitem 153.14. 1, subitem 153.14.2 of item 153.14 of Art. 153 of NKU).

For the purposes of the taxation the economic relations between participants of joint activities are equated to the relations on the basis of separate civil agreements (subitem 153.14.5 of item 153.14 of Art. 153 of NKU).

According to the item of 15 subsection of 4 section XX "Transitional provisions" of NKU (which is valid from January 1, 2011) it is temporary, till January 1, 2020, the profit, in particular, producers of biofuel received from biofuel sale is exempted from the taxation.

The specified regulation is applied taking into account the item of 21 subsection of 4 section XX of NKU.

According to Art. 1 of the Law of Ukraine of 14.01.2000 No. 1391-XIV "About alternative types of fuel" (further - the Law No. 1391) alternative types of fuel is solid, liquid and gas fuel which is alternative to the corresponding traditional types of fuel and which is made it (is got) from unconventional sources and types of energy raw materials; species of fuel (biofuel) are the solid, liquid and gas fuel made of biologically recovered raw materials (biomass) which can be used in fuel quality or components of other types of fuel.

By article 6 of the Law No. 1391 it is determined that fuel belonging to alternative is confirmed by the document on fuel identification which is issued by authorized body of the executive authority according to the procedure, No. 1307 determined by the resolution of the Cabinet of Ministers of Ukraine of October 5, 2004 "About procedure for issue of the certificate on fuel accessory to alternative".

The certificate is granted for a period of two years by results of consideration by the National agency concerning ensuring effective use of energy resources of the statement for issue of the certificate and the expert opinion on availability of signs of alternative type of fuel which is provided according to the procedure and in form, approved by the order of the State committee of Ukraine on energy saving of 10.12.2004 No. 183.

The fuel species intended for realization as products are subject to obligatory certification according to the legislation. Business entities which sell the products upon the demand of the buyer provide the document which confirms fuel quality and its belonging to alternative types of fuel. Therefore, producers of biological fuel for the purpose of realization shall receive the certificate on fuel belonging to alternative.

Features of the relations in the sphere of production and use of species of fuel are regulated by Art. 8 of the Law No. 1391.

According to regulations of this Article activities in the sphere of production and use of species of fuel can be performed by subjects of managing of all patterns of ownership according to the legislation of Ukraine.

Maintaining the state register of producers of liquid species of fuel and biogases is performed by the body authorized by the Cabinet of Ministers of Ukraine.

Subjects of managing which perform economic activity in the sphere of production, storage and issuance of liquid species of fuel and biogases are subject to entering into the state register of producers of liquid species of fuel and biogases according to the procedure, established by the Cabinet of Ministers of Ukraine. Besides, production of bioethanol is performed by subjects of managing in the presence of the corresponding license.

Considering the above, not all profit of the certain subject of managing who makes biofuel, and only the profit got from sale of biofuel of such producer is exempted from the taxation by the income tax.

At the same time for determination of the subject of managing which profit received from biofuel sale is exempted from the taxation it is necessary to consider the following requirements: the specified subject of managing is entered in the state register of producers of liquid species of fuel and biogases; biofuel has the appropriate certificate; license availability in case of implementation of economic activity on production, storage and realization of liquid fuel from biomass; license availability in case of implementation of economic activity on production, storage and realization of biogas.

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