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Is it possible for single tax entrepreneur to obtain a license on selling alcohol and tobacco products?

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In view of the practice of our company, one of the most popular services among entrepreneurs is obtaining a license for retail sale of alcohol or tobacco products. Even at the stage of preliminary consultation before obtaining a license, our Clients often ask the question: “If my company operates under a simplified tax system and I know that the law prohibits the retail sale of alcohol and tobacco products, can I somehow circumvent this prohibition?”

In this article we will answer the question, whether the single taxpayers are really prohibited from selling alcohol or tobacco products. And if this is true, how can they circumvent this prohibition?

The answers to these questions can be found in the Tax Code of Ukraine, as we are talking about business entities operating as single taxpayers.

Business entities of the Groups I-III that produce, export, import, sell excisable goods (except for retail sale of fuels and lubricants in containers of up to 20 liters and except for activities of individuals related to retail sales of beer, cider, perry (alcohol free) and table wines) may not operate as single taxpayers. (1)

Excisable goods include:

  • ethyl alcohol and other alcoholic distillates, alcoholic beverages, beer (except for authentic fermented kvass);
  • tobacco products, tobacco and industrial tobacco substitutes. (2).
In view of the abovementioned, we can draw a conclusion:

According to the law of Ukraine, single taxpayers are really prohibited from selling alcohol and tobacco products. It is impossible to circumvent this prohibition, because the legal norm is binding.

However, there is an important exception for individual entrepreneurs: they have the right to sell beer, cider, perry (alcohol free) and table wines.

In other words, we can talk about an exception for certain business entities and certain types of alcoholic beverages, rather than about bypassing the law. The exception does not apply to legal entities, regardless of the type of alcoholic beverages they wish to sell. As for the trade in tobacco products, this exception applies neither to individual entrepreneurs, nor to legal entities.

In order for individual entrepreneurs to be able to sell beer, cider, perry (alcohol free) and table wines, they should learn how the legislator defines these types of alcoholic beverages.

Terms and definitions as stipulated by law:

  • Beer shall be understood as a foamy beverage rich in carbon dioxide containing 0.5% alcohol by volume, produced through the fermentation of malt with brewers yeast, and specified in the commodity position UKT ZED 2203; (3)
  • Table wine shall be understood as wine produced through complete or partial wort fermentation. Depending on the sugar content, table wines may be divided into dry, semi-dry and semi-sweet wines; (4)
  • Сider and perry (alcohol free) shall be understood as fermented drinks made exclusively from the fermented fruit, berry and fruit and berry juices containing no more than 8.5% alcohol by volume (without adding alcohol).

Conclusion

Thus, you can sell tobacco products while operating under the simplified taxation system (e.i. being a single taxpayer).

Thus, a single taxpayer can be engaged in retail sale of alcohol under clearly established condition only: only individual entrepreneurs can sell only certain goods: beer, cider, perry (alcohol free) and table wines.

If you want to sell other alcoholic beverages and tobacco products, you can do this as a legal entity that does not operate under a single tax system. And the sale of beer, cider, perry and table wines should be carried out by an individual entrepreneur, because this way you can optimize about one-third of the income from the total sales of alcoholic beverages and tobacco products (taking into account the today’s demand for beer, cider and table wines).

Would you like to obtain the license for retail sale of alcohol and tobacco? Please contact us at: 0 800 330 967 and our lawyers will analyze your case.

References to Laws:

  1. Subclause 291.5.3 of Article 291.5 of the Tax Code of Ukraine;
  2. Paragraph one and two of Clause 215.1 of Article 215 of the Tax Code of Ukraine;
  3. Subclause 14.1.144 of Article 14.1 the Tax Code of Ukraine;
  4. Clause 28 of Article 1 of the Law of Ukraine “On Grapes and Grape Wine” of 16.06.2005.
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