On March 2, 2015 the Verkhovna Rada of Ukraine urgently adopted several laws, including the Draft Law on Amendments to Articles 165 and 252 of the Tax Code of Ukraine (registered by the Verkhovna Rada under number 2213) (the “Law”), which changes the rates of rent for mineral resources utilization.  A number of changes to the draft law were introduced in the voting process. The final text of the Law is not yet officially available. Therefore, our brief overview is based on the previous texts subject to press reports on possible amendments.    The Law must be signed by the President of Ukraine and officially published, with changes related to the increase in the rental rates for mineral resources utilization taking effect from the date the Law is published.  The Law provides for the following main changes:  

  • An increase in rent payment from 20% to 70% for the extraction of natural gas extracted from deposits of up to 5000 meters and sold by NJSC “Naftogas Ukraine” for the needs of the population.

These changes shall not influence private extractors selling extracted natural gas to companies other than NJSC “Naftogas Ukraine” and for other purposes. Their rent rate will remain at 55% for the extraction of natural gas extracted from deposits of up to 5000 meters.  

  • However, it is again possible to use the adjustment coefficient of 0.55 with respect to the rent payment for the extraction of natural gas produced not for the needs of the population, including during the pilot operation (geological studies), which is entered in the State Register of oil and gas wells after August 1, 2014 (for two years after the date such wells are entered into Register). The adjustment coefficient shall be applied regardless of the form of ownership of the extractor, customers or consumers. A similar adjustment coefficient was introduced by Law of Ukraine No. 1621-VII “On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts of Ukraine” dated July 31, 2014, which was effective from August 3, 2014 until January 1, 2015. During that period of time the exemption did not apply to gas sold by NJSC “Naftogas Ukraine” for the needs of the population, since the rate applied to such gas was much lower than the rate applied to gas sold for other purposes, in particular, by private extractors. The restoration of the exemption for new projects is due to the necessity to improve conditions for private extractors, many of which have halted their projects because of the extremely high rate of rent.