Ukraine: new biofuel incentives

Tax and other incentives to promote the use of biofuels are being introduced under legislation passed by Parliament. This now awaits the President’s signature and will come into force once officially published.

The incentives include an exemption from corporate profit tax for 10 years from 1 January 2010 for all profits:

• from biofuel sales by biofuel producers
  
• from co-generation projects or heat generation by biofuel fed power stations
  
• from sales of Ukraine-produced equipment used to make or rebuild biofuel facilities, vehicles or power installations, by the equipment producers

Other incentives being introduced from 1 January 2010 include:

• 9 years’ VAT exemption (for 9 years) for imports of equipment fed by bioethanol fuel and equipment to construct or modernise facilities to produce biofuel and vehicles fed by biofuel (as long as no equivalent equipment is produced or available in Ukraine)
  
• 10 years’ bonus amortisation of up to 50% of the net value of new (unexploited) fixed assets that produce or use alternative fuels
  
• 5 years’ proportionate exemption from excise duty for the biocomponent element of biofuels
  
• 5 years’ zero-rated excise duty for crude ethyl alcohol used to make bioethanol and bioethanol used to make biofuel

Other key measures include:

• a target for alternative fuel (which now includes solid as well as gas and liquid fuel from agricultural products and waste, forestry waste, domestic and industrial organic waste, turf, pellets and briquettes, etc) to achieve a 20% share of national fuel consumption by 2020
  
• compulsory certification for commercial production of biofuel
  
• a licensing regime for bioethanol production, allowing it to be produced from biomass or ethyl alcohol by private businesses as well as by the state
  
• a licensing regime for the production, storage and marketing of biogas and the liquid fuel produced from biomass
  
• compulsory registration for producers of liquid biofuel and biogas (and inclusion in the state register)

Law: the Law of Ukraine “On Introduction of Amendments to Certain Laws of Ukraine as regards Production and Use of Biofuels” dated 21 May 2009