Comment to the Energoreform of the Chairman of the Board of ASEU, Vladyslav Sokolovsky, regarding the introduction of the cash method of tax liability for RES generation.
Many energy market experts followed the passage of draft law No. 7428-2, although changes were made to Section XX of the transitional provisions of the Tax Code of Ukraine.
The name of the new legislative act was: “On making changes to ensure the stable functioning of the natural gas market during martial law and subsequent recovery.” On August 19, this draft law entered into force and became law numbered 2480 of July 29, 2022.
Among other things, the law regulated the issue of taxation of VAT and income tax, the so-called burden reduction services.
The transmission system code establishes that all operative commands and orders of the transmission system operator must be carried out without question.
Failure to comply with the dispatcher’s command is a gross violation of operational-dispatch discipline.
The war significantly increased the number of cases of RES producers receiving instructions to stop generation.
This is due to the destruction of energy infrastructure facilities and a decrease in consumption. Green losses from dispatch restrictions can be compensated by NPC Ukrenergo on the basis of joining a public agreement on load reduction and connection to the RES restrictions management system.
Calculations for the load reduction service are performed extremely poorly.
Prior to the adoption of Law No. 2480, green power plants in the case of providing services had to charge VAT even before receiving payment from Ukrenergo. A similar situation was with the calculation of income tax.
Consequently, the payment of these tax obligations was an additional burden on RES producers in cases where they cannot refuse NPC to provide the service. And this is not taking into account the situation with debt under the green tariff!
Changes to the Tax Code have now made it possible for green power plants to determine the date of occurrence of tax liabilities and tax credit from the load reduction service using the cash method.
Thus, it is necessary to pay VAT after receiving money from Ukrenergo. This benefit will be valid until January 1, 2026.
Income taxation will also be eased. Until August 19 of this year, the date of receipt of payment from the sale of electricity at the green tariff and/or the provision of load reduction services did not affect income tax.
After the changes, this tax will not be calculated on such transactions, if payment has not been received at the end of the reporting period. This benefit will be valid from January 1, 2022, to January 1, 2024.
Law No. 2480 will partially solve the problem of additional financial burden on stations of the RES sector, and will also help green generation to escape from shutdowns and insolvency.