Renewables Law, Tax Incentives

Aside from the feed-in «green» tariff, as per law of Ukraine available to companies generating electricity from renewable sources, there are additional incentives.

Tax Exemptions available to alternative energy generators

Starting from 1 January 2008 tax credits for alternative energy field came into force, enacted by the Law of Ukraine "On amendments to some legislative acts of Ukraine on the promotion of energy saving" of 16 March 2007 № 760-V. Importantly, the new Tax Code did not eliminate incentives for alternative energy field.

The current Tax Code provides two kinds of benefits for the alternative energy industry: the import privileges and benefits for profits taxation.

Import Privileges

Para 197.16. Article 197 of the Tax Code provides tax exemption of value-added operations for import into the customs territory of Ukraine of:

• equipment that operates on renewable energy resources, energy saving equipment and materials, instrumentation, facilities of control and management of power resources costs, equipment and materials for power production from renewable energy sources;
• materials, equipment, components used to manufacture:

1. equipment that operates on renewable energy;
2. materials, raw materials, equipment and components to be used in energy production from renewable energy sources;
3. energy-saving equipment and materials, products, operation of which provides savings and rational use of energy resources;
4. means of measuring, monitoring and controlling the cost of fuel and energy resources.

Import transactions of indicated goods into the customs territory of Ukraine are exempted from tax, if the goods are used by the taxpayer and if identical products with similar quality indicators are not produced in Ukraine.

Benefits for profits taxation

In accordance with Section 158.1. Art. 158 of the Tax Code, 80 percent of the enterprises’ profits derived from sales of own-produced goods within the customs territory of Ukraine under the list established by the Cabinet of Ministers of Ukraine are exempted from profits taxation:

• Equipment that operates on renewable energy sources;
• Materials, raw materials, equipment and components to be used in power production from renewable energy sources;
• Energy-efficient equipment and materials, products, operation of which provides savings and rational use of energy resources;
• Instrumentation, facilities of controlling and management of energy resources costs;
  Equipment for production of alternative fuels.

This exemption is valid for 5 years after the first profit receiving due to the increase of energy-efficient production. Besides Clause 158.2. Article 158 of the Tax Code provides that 50 percent of revenue resulting from implementation of energy-efficient measures and realization of energy-efficient projects by enterprises is exempted from taxation.

Additional Transitional Tax Holidays and Exemptions

Commencing from 1 January 2011, an additional temporary tax holiday for the period of 10 years is available for income of electric power enterprises (class 40.11, group 40 KVED DK 009:2005) from sales of electric energy generated from renewable energy sources. Funds exempt from taxation must be channeled by enterprises-taxpayers for increase of production output (delivery of services), rehabilitation of material and technical base, implementation of innovative technologies connected with primary activities of the taxpayer, and/or reimbursement of credit used for indicated targets and payment for its interest