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How will the craft beer market change after the adoption of Law 5600?

News for the craft beer market: on November 30, the Verkhovna Rada of Ukraine adopted draft law #5600 on amendments to the Tax Code.

The document provides for the following changes:

  • perpetual licenses for the production of alcoholic beverages;
  • increase in beer excise tax rates.

We are glad that the proposal to introduce perpetual licenses for beer production raised by experts of the Regulatory Policy sector of the Better Regulation Delivery Office (BRDO) has finally been implemented. This aspect will change the lives of beer producers and small brewery owners for the better.

Unfortunately, a significant increase in excise tax for all beer producers (also stipulated by the new law) will negatively affect these small businesses. The increase is very significant: from 2.78 hryvnias per liter to 59.82 hryvnias per liter of 100% alcohol. On the contrary, the BRDO proposed to reduce the excise tax on beer production by 50% of the national excise tax rate for small producers.

In 2020, the Regulatory Policy sector studied the Ukrainian fermented beverages market, as well as held numerous consultations with brewers. Based on the results of the analysis, we prepared a Green Paper.

The proposals of BRDO experts to improve the business environment in the craft beer market served as a basis of draft Laws #5118 and #5119. In addition to the above provisions, we also consider it necessary to:  increase the maximum production to 20 million liters per year for small brewers; revoke wholesale licenses for small beer producers; differentiate fines depending on the annual production volume.

We are waiting for the second reading of the draft laws and hope for their adoption as soon as possible.