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 Timur.Bondaryev@arzinger.ua

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 mail@arzinger.ua www.arzinger.ua