Investor considerations
- Ukraine is expected to joint the World Trade Organization (WTO) by the end of 2007.
- Goods imported into Ukraine are subject to customs duties, excise tax (if applicable) and value-added tax (VAT).
- Ukrainian customs valuation rules comply with the Agreement on Implementation of Article VII of the GATT 1994.
- Ukraine has a free trade agreement with Russia and other CIS countries.
- The customs authorities scrutinise customs values and the classification of imported goods, and post-entry customs audits are expected to increase.
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Content
5.1 Trends in customs policy
In recent years, Ukrainian customs regulations have gradually evolved towards greater compliance with international practice. Effective from 1 January 2004, Ukraine implemented a new Customs Code. The Code incorporates the main provisions found in international customs conventions and WTO principles, and the customs classifications follow WTO guidelines.
Although the legal framework has developed, many administrative practices remain unchanged. Thus, although Ukrainian law allows customs authorities to conduct post-entry audits to verify compliance with customs and tax legislation, the authorities in practice are still exercising almost all customs control during the initial clearance of goods. Post-entry audits are expected to increase after Ukraine joins the WTO.
5.2 Import restrictions
Import licenses are required for the importation of a number of products, including plant protection chemicals, optical polycarbonate for manufacturing disks of laser reading systems, copper sulphate, ozone damaging substances, printer's ink, paper with water marks, many meat products, livestock and sugar.
There is a compulsory certification procedure to ensure that imported goods comply with national standards. The certification is provided by the Ukrainian certification authorities (UkrSEPRO) in respect to a wide range of imported goods by issuing a Ukrainian Compliance Certificate. If this document is absent, goods cannot be imported into Ukraine.
5.3 Customs duties
Classification of goods
The Ukrainian Classification of Foreign Economic Activities (UC FEA), which is based on the Harmonised Commodity Description and Coding System (1996) and EC Combined Nomenclature (1997/98), is the effective customs classification document in use. UC FEA serves as the basis for Ukraine's Customs Tariff. Ukraine is a member of the International Convention on Harmonised Commodity Description and Coding System.
Valuation rules
Ukrainian customs valuation rules comply with the Agreement on Implementation of Article VII of the GATT 1994. This means that the declared customs value is generally used as the basis for determining customs duties. The customs value should be determined in accordance with the six WTO valuation methods. The customs authority is entitled to assess duties on a higher value in certain circumstances.
Tariff rates
There are two rates of import duty under the Customs Tariff, reduced rates and full rates.
- Reduced rates of duty apply to mist goods originating from countries that have granted Ukraine "Most Favoured Nation" trade status. These countries include most European countries plus China, Turkey and the US.
- Full rates of duty apply to goods originating from other countries, or where the country of origin cannot be determined.
Rates of duty may be ad valorem, specific (in monetary units per unit of goods), or a combination. There are seasonal, special, anti-dumping and countervailing duties. A selection of customs duty rates is provided in Appendix D.
Free trade agreements
In addition to the reduced rates mentioned above, Ukraine has concluded a free trade agreement with Russia and other CIS countries, as well as with Macedonia. These agreements allow goods to be imported into Ukraine duty-free, subject to compliance with rules of origin.
The 2000 CIS Rules for Determining Country of Origin are used to determine whether goods originate sufficiently from a particular country to qualify for duty exemptions under free trade agreements with CIS countries.
Excise tax
Excise tax is payable on cars, alcoholic beverages, tobacco products, beer, petrol and diesel fuel. Rates of excise duty are specific. A list of selected rates can be found in Appendix D.
Value-added tax
VAT is imposed on imported goods at a rate of 20%, unless expressly exempted under the VAT law (see Chapter 12). The taxable base is the higher of the contractual or customs value of the goods, plus the amount of any import duties and excise duties (if any).
Processing fee
Customs clearance of goods is subject to a customs processing fee, calculated as 0.2% of the goods customs value, up to a maximum fee of USD 1,000 per customs declaration.
Payment
Import duties and taxes are payable by the importer in local currency before or upon customs clearance. In certain cases, customs payments must be deposited with customs before the goods cross the Ukrainian border.
5.4 Temporary import relief
Permission for temporary import/export with full conditional exemption from import taxes may be issued for the following items:
- Goods intended for display or use during exhibitions, fairs, conferences and similar events.
- Professional equipment used by mass media or required for making films.
- Containers, pallets, packaging or any other goods imported in connection with commercial transaction.
- Samples of goods and advertising films for non-commercial use, provided they remain in the ownership of an entity or person established outside Ukraine.
- Goods imported for educational, scientific or cultural purposes.
- Personal items of passengers and goods imported for sporting purposes.
- Materials for tourism and advertising.
- Transport vehicles used for moving passengers and goods across Ukrainian border.
- Sea vessels and aircraft imported for repair.
- Equipment and materials designated by non-residents for construction and repair of sea vessels and aircraft.
5.5 Customs duties incentives
Contributions to capital
Property (except for re-saleable goods) contributed by a foreign investor to the capital fund of a Ukrainian entity may be imported free of customs duty, but will still be subject to VAT. Customs duty must be repaid if the property is disposed of within three years of importation.
Toll manufacturing
Raw materials imported into Ukraine for processing under toll manufacturing arrangements enjoy exemption from import taxes and duties provided finished products are re-exported from Ukraine during a 90-day period. The processing should meet the following criteria:
- Raw materials and finished goods must belong to the foreign customer.
- The tariff code must change as a result of processing.
- The cost of the raw materials must be at least 20% of the value of the finished goods.
- The imported raw materials must be the main component at each stage of production.
Finished goods (other than agricultural products) can be sold in Ukraine after tolling. However, such sales will oblige the non-resident owner of the finished goods to register a permanent establishment in Ukraine and pay applicable import taxes and duties.
Representative offices
Representative offices of foreign companies may import goods for official use, not intended for resale, temporarily for up to three years from the date of accreditation of such a representative office. Temporary import can be extended.
5.6 Documentation and procedures
All goods crossing the border are subject to customs control, which includes specific procedures aimed at ensuring compliance with customs rules. The customs authorities may conduct post-entry audits to verify compliance with customs and tax legislation.
In addition to customs control, other types of border control including sanitary, veterinary, phytosanitary, radiological, ecological controls and control over cross-border movement of pieces of art may be conducted.
Registration of importers
Any business entity that is engaged in import operations is required to register with the customs office that serves the area in which the company is located. Customs clearance of goods in another customs office requires permission from the customs office where the entity is registered.
Documentation
Goods crossing Ukraine's border should be declared to the customs authorities, either by the importer or a licensed customs broker on behalf of the importer.
The importation of goods must be supported by complete documentation. The following import documents are required for all shipments to Ukraine:
- Import customs declaration.
- Cross-border contract.
- Invoice.
- Waybill.
- Compliance certificate (if any).
- Certificate of origin.
- Evidence of payment of customs duties and taxes.
- Any other documents as may be requested by Customs.
Missing or deficient documents may cause delays during customs clearance.
Declaration of customs value
The customs value is declared by filing a declaration of customs value, including reference to the valuation method used. The importer must also provide relevant documents to evidence the customs value. If these documents are not available or the customs office has grounded doubts about the data provided by the importer, the customs office may determine the customs value based on information available. This may include information available to the authorities on prices for identical or similar goods.
When the customs value requires review or the importer does not agree with the customs value determined by the customs office, the importer may request the customs office to release the goods for free circulation against payment of import taxes. The importer may then appeal the determination of the customs value by the customs authorities to a higher customs office or to the courts.
5.7 Warehousing and storage
To defer payment of import taxes and duties, goods may be stored in a warehouse of temporary storage (WTS) under customs control for up to three months before they are released under a specific customs regime. The WTS operator must obtain permission of the customs authorities. There are two types of WTS:
- Open WTS, which is available to any users on a contractual basis with the WTS owner;
- Closed WTS, which can be used only by its owner.
Alternatively, imported goods may be stored in a customs bonded warehouse (CBW) under customs control without payment of import duty and taxes, potentially for as long as three years depending on the nature of the goods. Not all goods, however, may be stored in a CBW. As for a WTS, a CBW may be either open or closed. A CBW operator must obtain the license of the State Customs Service of Ukraine.
5.8 Exports
Restrictions
A limited number of exports are subject to licensing and/or quotas. Examples include precious metals and stones, rolled metal products and textile products exported to the US, meat and certain metal products exported to the EU and Russia, and oil or gas of Ukrainian origin.
The Ministry of Economics has established mandatory indicative export prices for certain categories of goods, such as metal products, livestock and raw hides, and sunflower seeds. The Customs authority will not clear the export of goods if the sales price is below these indicative prices.
Registration of exporters
Any business entity that is engaged in export operations is required to register with the customs office that serves the area in which the company is located. Customs clearance of goods through another customs office requires specific permission from the customs office where the entity is registered.
Export duties
Ukraine has no export duties except on natural gas, scrap metal, livestock, raw hides and certain oil seeds.
Exported goods and ancillary services are zero rated for VAT purposes.
Customs processing fee
Customs clearance for exported goods is subject to a customs processing fee, calculated as 0.2% of the goods customs value, up to a maximum fee of USD 1,000 per customs declaration. The fee does not apply, however, to goods re-exported under a toll processing arrangement.
5.9 Protection of intellectual property rights
Owners of intellectual property rights may request Ukrainian customs authorities to register goods containing intellectual property, to prevent the illegal import or export of pirated or counterfeited goods. In this case, customs authorities may hold customs clearance of such goods until it can be proven that no breach of intellectual property rights has taken place. If the importer or exporter does not submit sufficient evidence, the customs office may seize the goods and impose penalties.
