The Law No. 1621-VII on changes to the Tax Code of Ukraine and some other regulatory acts of Ukraine was adopted by the Verkhovna Rada of Ukraine on 31 July 2014 and approved by the President of Ukraine. Except for some of the provisions, the Law is effective since 3 August 2014.
The Law in particular previews the following basic changes to the tax legislation with respect to payment for the use of subsoil:
- Temporarily, until 1 January 2015, the rate for natural gas extraction not sold for the needs of the population is to be increased: extracted from deposits that lie entirely or partly at depths of up to 5 km – from 28 percent to 55 percent; extracted from deposits that lie entirely or partly at depths of more than 5 km – from 15 percent to 28 percent.
- The tax base for natural gas not sold for the needs of the population is to be changed, namely, the tax base will not be the average customs value of imported natural gas as it is now, but the ceiling (maximum) price level for natural gas sold to industrial customers which is set by the NERC (and not the average customs value of imported natural gas as it is now). By the Resolution of NERC No. 929 of 27 June 2014 the ceiling (maximum) level of the price of natural gas sold to industrial consumers is set at US$4.724 per 1000 m3 (excluding value added tax, surcharge to the existing natural gas tariff for consumers of all forms of property, levied at the rate of two percent, tariffs for transmission, distribution and supply of natural gas at regulated tariff).
- To the rate for subsoil use for gas extracted from gas wells registered in a State register of oil and gas wells after 1 August 2014 a “lowering coefficient” of 0.55 will apply (during the two years after a new gas well is registered in a State register of oil and gas wells). The State register of oil and gas wells was introduced in 2005, rules of procedure of the said Register is governed by the Order of the State Committee of Nature of 20 April 2005 No. 76. In accordance with the Ukrainian legislation, registered in the Register shall be parametric, search, exploration and exploitation petroleum and gas wells located in areas of oil and gas mineral resources, including those that are not used.
- Temporarily, until 1 January 2015, the following rates for subsoil use for oil and gas condensate extraction are set: 45 percent - for oil and gas condensate from the deposits lying at depth of up to 5 km; 21 percent - for oil and gas condensate from the deposits lying at depth of more than 5 km.
- Temporarily, until 1 January 2015, the rate for subsoil use for iron ore extraction is set at the rate of eight percent of its value based on the content of chemically pure metal. To the rate for subsoil use for iron ore extracted by underground mining method with a depth of over 300 meters for the enrichment of magnetite iron content of less than 35 percent a “lowering coefficient” of 0.25 will apply.