UKRAINE OPEN FOR YOUR BUSINESS
OPENUKRAINE
INVESTMENT PROTECTION MECHANISMS
• Foreign investment registration is notrequired
• Expropriation of investors’ assets is not allowed, unless upon the Decree of CMU and conditioned upon an adequate compensation
• Possibility to further re-invest and return profits into business launched in Ukraine
• Principle of national treatment
• The right to compensation for damages caused by thegovernment structures’ failures
The Law of Ukraine "On the Regime of Foreign - Investments" 1996
State agencies to support investors:
• Board of exporters and investors of Ukraine under theMinistry of Foreign Affairs of Ukraine
•
National Investment Council•
Consulting and advisory bodies to promote pre-trial settlement of disputes between investors and executive authorities (local government)
• Investment departments of cities and regional councilsInternational investment protection instruments:
• 1966 Washington Convention (ICSID Convention)
• 1994 Energy Charter Treaty
• 72 bilateral investment treaties signed by Ukraine (e.g. with the People’s Republic of China)
Limited Liability Company• Flexible corporate governance
• Participants' liability is limited to the amount of their shares
• No requirement to the amount of charter capital and numberof participants
• Corporate agreements
Joint Stock Company • Used when it is necessary to attract financing from banks /
financial institutions, or due to specific statutory requirement• Сharter capital – minimum of approx. EUR 186,000.00
• Issuance of shares shall be registered with the Securities andStock Market National Commission
• The companies shall disclose a relatively large amount of information
Corporate Law
LEGAL ENTITIES
REPRESENTATIVE OFFICE(Does not bear legal personality, operates on behalf of the foreign company it represents, state fee for establishment – USD 2,500.00)
UBO
Real Estate
• Different legal treatment for buildings and the land (incl. different registration procedures and taxation rules)
• "Land Follows the Property" in case of the building acquisition (a right of ownership or right of use of the underlying land plot)
• Extended ban on alienation of agricultural land for 2020 (19th year in a row)
Ownership as well as other proprietary rights to real estate is subject to state registration
Restrictions on Ownership by Foreigners• NO restrictions to obtaining freehold or leasehold title to buildings (except for state-owned or municipal property)
• The land law prohibits foreigners from owning agricultural land in Ukraine
• Foreign companies are prohibited from purchasing land, except for:
— plots of land located within the boundaries of populated areas in the caseof acquisition of real estate facilities located thereon or for the purpose of constructing facilities related to their commercial activities in Ukraine; and
— plots of land beyond the boundaries of populated areas where the plot of land is the site of a building or structure owned by the buyer
Acquisition of Ownership
ASSET DEAL ISSUE SHARE DEAL
Buyer acquires a specific asset solely Debts and liabilities Buyer acquires corporate obligations and debts
Subject to VAT Tax VAT does not apply
Ukrainian legislation only Foreign law regulation Ukrainian or foreign law, arbitration clause is possible
Re-registration of title is required Title transfer Re-registration is not required
All the permission documents, agreements shall be re-executed
Formalities with the agreements No need to re-execute the agreements
A land lease agreement should be concluded with a new owner of property
Land lease title transfer(In case of sale of the property located on
a leased land plot)The title is transferred automatically
Increased Transactional costs Relatively low
Less exposure to hidden liability Pros & cons for business Less disruption to existing business
Types of merger: • Merger
• Acquisition of shares/stakes ≥ 25%
• JV establishment
• Acquisition of control
Exemptions: • JV establishment leading to coordination of competitive
behaviour
• purchase of shares/stakes by securities traders for furtherresale
• intragroup transactions subject to previous antitrust compliance
• acquisition of control by the trustee in bankruptcy
Liability: • up to 5% of annual revenue on a group level for failure to
notify the transaction and/or gun jumping (breach of stand still obligation)
• up to 1% of annual revenue for non-provision /provision offalse/incomplete information
Notification thresholds:Test A:
Euro 4 Mio in either assets or turnover in Ukraine for each of at least two merging parties, and Euro 30 Mio either in assets or turnover worldwide for all the merging parties aggregately or
Test B: Euro 8 Mio in either assets or turnover in Ukraine for the target & seller group (or one of the JV partners groups), and Euro 150 Mio in turnover worldwide for at least one other merging party
• Regular procedure (45 calendar days) • Simplified procedure (25 calendar days)
Antitrust and CompetitionMERGER CONTROL
MERGER CONTROL (NOTIFICATION)
New system of currency regulation under the Law of Ukraine “On Currency and Currency Operations” in force as of February 7, 2019:• maturity date for settlements of foreign economic transactions is extended to 365 days
• limit on repatriation of dividents is abolished
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•
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• registration of loans from non-residents is not required
• limit on early repayments on foreign debt is abolished
• FX supervision of export/import operations up to UAH 150k is canceled
• sanctions in form of ceasing foreign trade activity are canceled
Banking and Finance
no obligatory sale of foreign currency
limitations for payment under decrease of charter capital, sale of the share abroad
within 5 mln EUR per month
Privatization of state and municipal assets
IN 2018 UKRAINIAN GOVERNMENT LAUNCHED COMPLEX PRIVATIZATION OF STATE-OWNED ASSETS IN THE VARIETY OF INDUSTRIES – energy, mining, infrastructure, hospitality, agriculture, etc.
The ability to pre-audit objects of privatization
Permission to participate in the privatization for state companies-non-residents
International arbitration by mutual agreement
On-line monitoring of readiness of objects for privatization privatization.gov.ua
Bank guarantee or cash deposit for bidders
Step-by-step instruction for each potential investor
Personal adviser for each potential investor
Investors from offshore zones, countries from the FATF list and aggressor countries are prohibited from participating in privatization
Dispute Resolution
International instruments for dispute resolution:• 1958 The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
• 2005 Hague Convention on Choice of Court Agreements signed by Ukraine (ratification pending)
Legal assitance in civil and criminal casses:- Agreement between Ukraine and People’s Republic of China on legal assitance in civil and
criminal cases (1992)
NATIONAL COURTS (2 - 3 instances; recognition and enforcement of foreign courts' awards)
INTERNATIONAL COMMERCIAL ARBITRATION (recognition and enforcement of arbitral awards)
ENFORCEMENT:- state enforcement service - prvate enforcement officers
TaxGENERAL TAXES IN UKRAINE RATE
Corporate profit taxThe general rate – 18% (0, 3, 10, 18, 30% - to cer-tain companies/ to the profit from conducting certain business activities)
VAT The standard rate – 20% (0, 7% depending on type of transaction)
Budget subsidies for eligible agriculture companies (VAT payers)
Withholding Tax
Dividends 15% (15%)*
Interest 15% (10%)*
Royalty 15% (0/10%)*
Other income 0% – 20%
Personal Income Tax 18% (0, 5, 9% – to specific types of income)
Military Duty 1,5%
Real estate tax ≤1,5% of the min. wage / 1sq. m
Land tax/Land rent 0.3% - 12%
Unified tax regime
This regime offers tax savings for agricultural com-panies and private individuals, who are doing business without incorporation of a separate legal entity, by registering as a private entrepreneur.
*
New Developments• Transfer pricing rules (since 2013)
• VAT electronic administrationsystem (since 2015)
• Multilateral Convention toImplement Tax-Treaty-RelatedMeasures to Prevent BEPS (MLI)(Signed but not ratified)
• FATCA (Signed but not ratified)
• Automatic Exchange ofInformation (CRS)(Scheduled date – 2020)
• Controlled Foreign Corporation(CFC) regime(Scheduled date – 2020)
corruption
EXPECTATIONS AND TRENDS
Automation of the online services in the field of state registration and provision of services by public
authorities
Development of a clear and transparent system of participation in
tenders, public procurements
Strengthening anti- raidering legislation
Simplification of the procedure of connection of objects to electric
networks and other communications
Improvement and simplification of the processing regime
EXPECTATIONS AND TRENDS
Development of corporate reform
Harmonization of the Ukrainian legislation with the legislation of the European Union, development of technical regulations on different types of goods for simplification
of export
Simplification and increasing transparency of customs procedures
Strengthening anti-corruption measures and mechanisms
Continuation of currency liberalization
ARZINGER IN A NUTSHELL
60+ legalprofessionals
9 Partners
Partners in more than 150jurisdictions worldwide
16 yearson the Ukrainian
legal market
Industrial FocusGerman Desk
Regional coverage: offices in
KyivLviv
Odesa
Global approach
Highly ranked by Chambers, The Legal 500, IFLR 1000,
Who is Who Legal, Best Lawyers, WTR 1000
CONTACTS Key contacts: Timur Bondaryev, Managing and Founding Partner [email protected]
We will be happy to work with you!
Head Office Senator Business Center, 32/2 Moskovska street, 10th floor, 01010, Kyiv, Ukraine Tel.: +38 (044) 390-55-33 Fax: +38 (044) 390-55-40
West-Ukrainian Branch 6 Generala Chuprynky St., Office 1, 79013 Lviv, Ukraine Tel.: +38 (032) 242-96-96 Fax: +38 (032) 242-96-95
South-Ukrainian Branch Pokrovsky Business Centre 33 Zhukovskogo St., 6th Floor, Office 601, 65045, Odesa, Ukraine Tel. / Fax: +38 (048) 711-74-74 [email protected] www.arzinger.ua