New rules for the use of generators

Entrepreneurs using several generators simultaneously should pay special attention to the following:

-          The total number of electricity generation equipment in the group, in terms of the total volume of fuel reservoirs (balloons), must not exceed 100 litres, regardless of the type of fuel;

-          The minimum distance between generators must meet the requirements of the manufacturer’s guidelines, however, may not be less than one meter;

-          Generators with various types of fuel may not be used within the same group (simultaneous operation of diesel-powered and petrol-powers generators is prohibited);

-          When one generator in a group is filled, all associated units must be turned off;

-          Fire extinguishing devices and sand must be available next to a generator in case fuel is spilled at the place of filling.

Considering these requirements, it should be noted that most of them are easy to follow, while the requirement of the minimum distance of one meter between generators can be cumbersome, as technical premises or a site at which generating units are placed in most cases already exist. 

Hospitals, residential educational facilities (such as summer camps and boarding schools), hotels, spa resorts, and recreation centers. A new system for notifying a fire rescue team has been implemented for them. From now on, such institutions must provide accurate information on the number of persons staying there (including patients, children, guests, and service staff)  by 10 p.m. daily. Apart from that, as residential facilities, they will be required to send a letter to the local State Emergency Service of Ukraine unit on an annual basis, not later than January 10, indicating the maximum number of persons who may stay in such facilities at overnight. 

Business entities buy fuel to fill generators. It is obvious that such fuel must be stored somewhere. The Law of Ukraine  No. 3878-IX of 18.07.2024 stipulates that the locations used for storing fuel used solely for electricity generating units need not be registered as excise warehouses on condition that:

-          The capacity of storage tanks does not exceed 2000 litres. The location of the warehouse on the territory of Ukraine or the business entity’s type of activity does not matter for the effective period of the martial law and 30 subsequent days;

-          The capacity of storage tanks exceeds 2000 litres at warehouses on the territories included in the official List of the territories of hostilities or temporarily occupied territories. Higher capacity of up to 5000 litres is allowed for the period until completion or suspension of hostilities. This concerns business entities that are not engaged in manufacturing, fuel wholesale or retail, or fuel storage  (except storing for own needs and/or industrial processing).

Such an opportunity is available to business entities that:

            -    use fuel for electricity generators exclusively;

-          keep separate record of receipt and use of such fuel;

-          pay for fuel in cashless form.

Although fuel storage location is no longer treated as an excise warehouse, the requirement of obtaining a license for storage of fuel is still in effect. However, there is an exception under the legislation in force: a license for storage of fuel for a generator is not needed if the storage volume does not exceed 2000 liters per facility. 

For larger storage volumes, a license is not required, however, only on condition of filing a declaration of engaging in the fuel storing business to the tax authority (under paragraph 24 of the Final Provisions of the Law of Ukraine No. 3817-IX of 21.06.2024). A business entity storing fuel of over 2000 litres  for a generator has the right for such storage immediately upon filing of the declaration.

Kindly pay attention that an approved form of declaration is not available. Therefore, the declaration is filed in a free form on paper or electronically. If the decision on filing an electronic declaration is made, this will be a letter sent via the taxpayer’s personal account – “Correspondence with the State Tax Service”.

A failure to file a declaration in the event of storing generator fuel of more than 2000 liters is treated by the supervising authority as storing fuel without a license. Such a breach entails liability under article 73 of the Tax Code of Ukraine. Therefore, filing of such a declaration is recommended. 

Standard norms of fuel consumption are not available. Every business entity must develop them independently, based on the data provided in technical documentation for generators. If the decision to determine more accurate consumption is made, fuel consumption for the period of the generator’s operation can be measured. Such consumption should be considered a norm for a specific generator. We recommend that such norms should be formalized by the company order to avoid issues with the tax authority.

Fuel must be written off based on the write-off certificates in a free form. As specific norms must be set for every generator, separate write-off certificates for each generator are needed. The frequency of reports should be determined in the order for the approval of the write-off norm. If a report is drawn up for each generator, we recommend indicating the following in it:

·       Generator model;

·       Date of use;

·       Number of working hours;

·       Norm of fuel consumption;

·       Total volume of fuel subject to write-off.

The records of generators’ working hours must be kept to determine the period and time of generators’ operation correctly. Registers can be maintained in a free form. A table or a log can be used as registers. In order to determine the period and duration of a generator’s operation, the date and time of such generator’s starting and stopping should be indicated, as well as the number of hours worked. The fuel write-off certificate is drawn up based on this data. 

A purchase of generators and fuel obviously increases business costs. Therefore, some entrepreneurs decided to compensate the costs at buyers’ expense. However, they did this incorrectly, by reflecting a certain amount of costs in a fiscal receipt/electronic fiscal receipt in a separate row under the title “generator” or “generator services”. One such case recently caused a stir in the social media and the press.

The word “generator” can only be in a fiscal receipt/electronic fiscal receipt if an individual entrepreneur sells generators alongside other items, that is if generators are sold.  However, if this word is written by entrepreneurs selling other items, or at a coffee shop or a restaurant, this will cause a problem. The word “generator” in a receipt will mean for a tax authority that generators are sold. However, a generator is a complex consumer device,  and all inventory records must be kept in compliance with the effective legislation to sell such devices, while they are actually not sold by such entrepreneurs.

If “generator services” are mentioned in a receipt, the respective codes of types of business must be available in the registration documents of a private entrepreneur or the Register of the single tax payer, allowing the sales of such services. So, this is similarly inexpedient.  

In such a case, either honesty or marketing considerations, unwillingness to raise prices of products or services, will lead to misunderstanding with the tax authority and with buyers. Additional costs must be expensed alongside others, based on which an entrepreneurs calculates a markup for the product or service sold. This will, definitely, lead to an increased retail price of a product, but will not result in penalties and loss of the right to use the single tax system.

Natalia Shcherbak, accounting and tax consultant