Crackdown on Illegal Tobacco Trade in Ukraine: Key Developments

Key highlights:

The Ukrainian State Tax Service is collaborating with law enforcement agencies to increase efforts to combat the illegal circulation of tobacco, in response to the issue of the black market accounting for 12.6% of the market.

Since the beginning of 2025, there have been 1069 inspections conducted, resulting in fines exceeding $260,000, revocation of 312 business licenses, and seizure of illegal products worth $60,000.

The plan for an electronic consumption tax will begin testing in March, with full implementation slated for January 2026.

According to a report by Aspi on February 25, the head of the Ukrainian State Tax Service, Ruslan Kravchenko, stated during a meeting with representatives of the "Ukrainian Tobacco" Association and international tobacco production companies that the Tax Service and law enforcement agencies are increasing efforts to crack down on the circulation of illegal tobacco products.

Experts estimate that the current black market for tobacco in Ukraine has reached a share of 12.6%, causing significant losses to the country's fiscal revenue and creating an unfair competitive environment for legal businesses. Some companies pay taxes in accordance with the law, while others profit from smuggling and counterfeit products.

We are actively cooperating with law enforcement agencies to reduce the size of the black market. We are increasing inspection efforts and implementing new regulatory mechanisms, especially in the use of electronic consumption tax targets.

The National Tax Agency has launched several initiatives since the beginning of 2025, including:

A total of 1,069 inspections were conducted on tobacco markets, resulting in fines exceeding 11 million grivnas ($260,000 USD). 312 business licenses were revoked, with 167 of them for operating outside of their registered location. Illegal products worth 2.6 million grivnas ($60,000 USD) were seized.

Inspections will continue in areas where violations have already been found.

Attendees also discussed the launch plan of the electronic consumption tax target, but manufacturers expressed concerns about whether the system could be online in a timely manner. Krawczyk emphasized, "The testing of the electronic consumption tax target will begin in March to assess the market's adaptability, and the system is planned to be officially implemented in January 2026. Currently, we are working together to develop relevant laws and regulations, especially regarding the order of packaging labeling.