The Ukrainian parliament has approved the first readings of draft laws that provide for introduction of a number of fiscal incentives for development of electric transport in Ukraine. In particular, the draft laws propose exempting equipment and components for production of electric transport (electric cars, electric buses, electric trucks, and special cars) from value-added tax (VAT) and import duties from 2021 to 2028.

The draft laws on amendment of the Tax Code (the draft law No. 3476) and the Customs Code (the draft law No. 3477) to stimulate development of the electric transport industry were adopted in the first reading on Wednesday, the CFTS portal reports, citing the Interfax Ukraine news agency.

The proposed exemptions will not apply to equipment for production of trolleybuses because production of trolleybuses has already been established in Ukraine.

In addition, the draft law No. 3476 provides for exempting electrical industry enterprises selling electric motors for production of electric vehicles (excluding trolleybuses), lithium-ion batteries, and chargers, as well as car industry enterprises selling electric cars of their own manufacture, from payment of income tax until 31 December 2033.

In addition, this draft law provides for extension or expansion of the preferences enjoyed by importers and buyers of electric vehicles.

In particular, it proposes extending the exemption from value-added tax on import and/or supply of electric light vehicles until 31 December 2025 (the exemption is currently valid until the end of 2022).

It also proposes exempting buyers of electric vehicles from mandatory pension insurance contributions until 31 December 2030 and granting rebates on personal income tax from 1 January 2026.

The explanatory note to the draft laws states that Ukraine has sufficient industrial potential for production of electric vehicles. In particular, according to the document, there are five bus factories, one truck plant, and capacity for production of 300,000 passenger cars at three factories in the country.

However, the government currently encourages import of electric vehicles and not their production. In particular, import duty has not been levied on electric vehicles since 1 January 2016, the exemption from value-added tax has been extended until 2022, and the excise rate has been set at EUR 1 per kWh of electric storage capacity.

"The introduction of preferential taxation has increased the import of electric vehicles from 1,706 units in 2016 to 7,542 units in 2019, but the market is dominated by used electric vehicles (93% in 2019)," the authors of the documents state.

Minister of Infrastructure Vladyslav Kryklyi said a day earlier that the Cabinet of Ministers and the parliament should create conditions for widespread use of electric vehicles in Ukraine and development of a proper infrastructure for them.

“About 46,000 electric and hybrid vehicles were registered in Ukraine as of the end of July 2020, including almost 23,000 electric vehicles. The National Transport Strategy until 2030 provides for stimulating the use of electric vehicles, including the use of urban electric transport," he said.