On 7 December 2017 the Ukrainian Parliament adopted draft law 6776-д introducing significant changes to the Tax Code of Ukraine*.

Companies producing natural gas in Ukraine from “new wells” will substantially benefit from some of the changes outlined below.

We expect that these measures will boost domestic natural gas production in Ukraine and draw international investors’ attention to Ukrainian natural gas assets, as the new rates of tax make Ukraine’s fiscal regime for gas production quite competitive compared to other European jurisdictions.

The Tax Code will now also contain a 5-year stabilisation clause stating that the rate of the royalty on gas from new wells will remain stable from 1.01.2018 to 1.01.2023. In particular the rate of the tax cannot be increased, adjusted or corrected in any way by the Tax Code or any other laws, that might or could lead to an actual increase of the producers’ tax obligations for the royalty tax as compared to the 12%/6% rates as calculated on 1 January 2018. If there are further changes to the legislation that governs tax incentives for natural gas production, the companies will have a right to opt in to any such new tax incentives.

The law will become effective once it is signed by the President and published in the official media.