Investments in Ukraine
The main Regulatory legal act regulating the issues on investment activity in the territory of Ukraine is the Law of Ukraine # 1560-XII “On investment activity”, dated August 18, 1991. Foreign investment regulations in the territory of Ukraine with consideration for its peculiarities is regulated by the Law of Ukraine # 93/96-ĀŠ “On foreign investment regulations”, dated March 19, 1996, (hereinafter – “the Law”).
According to the Law foreign investors are the subjects executing investment activity in the territory of Ukraine, namely:
- Legal entities founded according to other legislation rather than Ukrainian;
- Individuals – foreigners without permanent residents in the territory of Ukraine and are not incapacitated;
- Foreign states, international governmental and non-governmental organizations;
- Other foreign subjects of investment activity confessing those according to the legislation of Ukraine.
Foreign investments are values which are invested in objects of investment activity according to the legislation of Ukraine with the view of income receiving or social effect achieving;
The enterprise with foreign investments is an enterprise (organization) of any legal organizational form founded according to the legislation of Ukraine, foreign investment of which in charter fund is not less than 10%.
The enterprise gains status of the enterprise with foreign investment from the day of the foreign investment placing to its balance.
Foreign investment can be conducted in forms of:
- Foreign currency which is acknowledged convertible by National Bank of Ukraine;
- Currency of Ukraine under reinvestment into the initial investing object or any other investment objects according to the legislation of Ukraine under condition of income (profits) tax payment;
- Any movable and real estate and property rights related to them;
- Shares, bonds, other securities as well as corporate rights (right to possess a fund unit in a charter fund of the legal entity founded according to the legislation of Ukraine or legislation of other countries) denominated in convertible currency;
- Monetary claim and rights to claim execution of agreement obligations which are guaranteed by reputable banks and have value in convertible currency confirmed according to the laws (procedures) of the investor’s country or international customs of merchants;
- Any rights of intellectual property value of which is confirmed in convertible currency, according to the laws (procedures) of the investor’s country or international customs of merchants, and is also confirmed by expert estimation in Ukraine, including legalized copyright laws, invention rights, useful models, industrial patterns, labels for goods and services, know-how and so on;
- Rights to execution of economical activity including rights to use subsurface resources and natural resources given according to the legislation or agreements value of which is confirmed in convertible currency according to the laws (procedures) of the investor’s country or international customs of merchants;
- Other values, according to the legislation of Ukraine.
Foreign investments can be executed in the following forms:
- Fractional participation in the enterprises that are founded jointly with the Ukrainian legal entities and individuals, or purchase of operating enterprise’s part;
- Enterprises foundation that are fully owned by foreign investors, branches and other separate subdivisions of foreign legal entities or acquisition of operating enterprises;
- Acquisition, that is not prohibited by the Laws of Ukraine, of movable and real estate, including houses, cars, possessions, premises, vehicles and other objects of property by means of direct property acquisition and property complex or in form of shares, bonds and other securities;
- Own acquisition or with help of the Ukrainian legal entities and individuals of the rights to exploit land or natural resources in the territory of Ukraine;
- Acquisition of other property rights;
- In other forms, that are not prohibited by the Laws of Ukraine, including cases which are without foundation of the legal entity on the basis of the agreements with subjects of economical activity of Ukraine.
Foreign investments can be invested in any objects, investment in which is not prohibited by the Laws of Ukraine.
The guarantees for the foreign investors are established by the Law of Ukraine. Specifically foreign investments in Ukraine don’t come under nationalization. The government authorities don’t have a right to embargo foreign investments except cases of salvage operations performance in the event of acts of providence, accidents, outbreak and epizootics. In this case the foreign investor is offered adequate and efficient compensation. The foreign investors have the loss indemnity right, including loss of benefit and moral damage caused to them in view of actions, non-activity or not duly performance of obligations by the government authorities of Ukraine or chairpersons prescribed by the Law as to the foreign investor. In the event of discontinuation of investment activity the foreign investor is guaranteed to receive return of his investing in natural form or in currency of investing without customs duty payment and of income from these investments in form of money or goods. The government also guarantees unimpeded and immediate transfer abroad of income and other funds in foreign currency gained on lawful business due to the foreign investments performance. If going forward the guarantees of foreign investments protection specified by the Law hereof are changed by the special legislation concerning foreign investments the guarantees of foreign investments protection, then the guarantees of foreign investments protection specified by the Law will be implemented upon demand by the foreign investor during ten years since the date when such Law comes into effect.
The national treatment for the foreign investor has been established by the Law above-mentioned that is equal terms and conditions for the activity with soviet investors are provided.
The government registration of foreign investments is executed by the Government of Autonomous Republic of Crimea, regional, municipal public administrations of Kiev and Sevastpol within three business days after their registration in order specified by Cabinet Council of Ukraine.
Unregistered foreign investments don’t give the right to gain incentives and warranties prescribed by the Law.
The government registration procedure is prescribed by the Statute on Government Registration Procedure of foreign investments confirmed by the Regulation of Cabinet Council of Ukraine # 928 dated August 07, 1996.
For the government registration of investments the foreign investor or authorized hereby in established order, the body (hereinafter- “the Applicant”) files the following documents to the government registration authorities:
- Informational notification on placement of foreign investment into 3 samples filled in according to the form and in order accordant to addendums #1 and #2 to the present statute marked by the State Tax Incorporate by locus of the investment performance on its factual placement;
- Documents confirming the form of foreign investment performance (constitutive documents, agreements (contracts) on production cooperation, joint production and other types of joint investment activity, concession agreements and so on);
- Documents confirming the cost of foreign investment (in accordance with demands specified by Article 2 of the Law of Ukraine “On Foreign Investing Treatment”);
- Document certifying the placement of payment for the registration by the Applicant.
The government registration of the foreign investment is executed under the registration number assigning to the informational notification on placement of foreign investment;
The refusal for government registration of foreign investment may occur in the event if performance of this investment is contrary to the legislation of Ukraine or if presented documents don’t meet demands of the Statute. The refusal in view of inexpedience of the foreign investment performance is not assumed. The refusal of the government registration is signed up in writing with the reasons mentioned and may be challenged in a judicial procedure.
The new order of passing the border of property foreign investments is initiated by the present Law. It is prescribed by the Articles 18 and 24 of the present Law that contribution of foreign investor to the charter fund of the enterprise with foreign investments and by agreements (contracts) on common investment activity as well is released from the customs duty taxation. The passing of property, which is imported into Ukraine as a foreign investment, is executed on the basis of the promissory bill issued by enterprise to the amount of the entrance customs duty with determent of payment no more than 30 calendar days from the day of the preparation of entrance consignment customs entry. In the case of actual acceptance of the property set forth to the balance of the enterprise in the period when determent of payment is granted confirmed by the tax inspectorate by the locus of the enterprise location, the bill is extinguished and entrance customs duty is not to be paid.
If within 3 years from the moment of foreign investment acceptance to the balance of the enterprise with foreign investments the property, that had been imported into Ukraine as the foreign investor’s contribution into the charter fund of the enterprise set forth, is disposed, including the cases when the enterprise ceases its activity (except the abroad export of the foreign investment), then the enterprise with foreign investments pays the entrance customs duty which is accrued in terms of customs cost of this property converted to currency of Ukraine at the official exchange rate established by the National Bank of Ukraine on the day of property disposal .
The procedure of the bill drawing, accounting and extinguishing that are issued at the moment of import of property into Ukraine as the foreign investor’s contribution to the charter fund of the enterprise with foreign investments as well as per agreements (contracts) on joint investment activity and the entrance customs duty payment in the event of disposal of property set forth is confirmed by the Regulation # 937 of Cabinet Council of Ukraine dated August 07, 1996.
In accordance with the Article #14 of the above-mentioned Law the enterprises with foreign investments define the terms and conditions of their production realization (work or services) on their own. The production of the enterprises with foreign investments is not the subject to licensing or quoting on condition of its certification as the production of own producing in accordance with the order established by the Regulation #1061 “On Order confirmation of the definition of production of own producing of the enterprises with foreign investments” of Cabinet Council of Ukraine dated September 05, 1996. The enterprises with foreign investments pay taxes in accordance with legislation of Ukraine.
The existence of the regulatory legal act that regulates issues on foreign investments protection worth mentioning. It is the Law of Ukraine #1540a- XII “On foreign investments protection in Ukraine” dated September 10. 1991, according to which the issues on foreign investments requisition are regulated, transfer of income gained on the legal grounds to foreign investors is guaranteed and the right for income reinvesting is allocated.
It is established by the Law of Ukraine #1457 “On Discrimination disposal in taxation of subjects of entrepreneur activity founded to use funds and money of soviet origin” dated February 17, 2000, that the national treatment of the currency regulation and recovery of taxes, charges (compulsory payment ) established by the Laws of Ukraine for enterprises founded without participation of foreign investments, is implemented in the territory of Ukraine for the subjects of entrepreneur activity or other legal entities, their branches, departments, separated subdivisions, including constant non-residents presentation founded with participation of foreign investments aside from the form and time of their contribution. The issues on foreign investments implementation in form of state debenture bonds acquisition are regulated by the Decree of President of Ukraine #748 “On some issues on foreign investing” dated July 07, 1998.
It is defined by the Law of Ukraine#977 “On making amendments in some of the Laws of Ukraine in order to stimulate investment activity” dated July 15, 1999, that the operations on the main funds transfer as contribution to charter fund of the legal entity to its holistic property complex in exchange for issued by him corporate rights, including when importing the main funds into the territory of Ukraine, besides prod excise goods or their exporting over the customs territory of Ukraine, are not the subject of the value added taxation.
If any disputes on issues of the government regulation of foreign investments and activity of enterprises with foreign investments arise under execution of foreign investing between foreign investors and the state, then, in accordance with the above-mentioned Law, such disputes are the subject of investigation in courts of Ukraine, if other hasn’t been defined by the international agreements of Ukraine.
All other disputes are not the subject of investigation in courts and/or arbitration courts of Ukraine or in reference tribunal by agreement of the parties, including abroad.
In accordance with the Law of Ukraine #3929-WII “On the legal status of foreigners” dated February 04, 1994 the foreigners have the same rights and liberties and execute the same responsibilities as the citizens of Ukraine. The foreigners are equal in the face of Law aside from origin, social rank, property status, racial belonging and nationality, status, language, attitude to religion, occupation and nature of activity, other obligations. The foreigners have right to run in Ukraine investment as well as foreign economic activity and other entrepreneur activities statutory by legislation of Ukraine. The foreigners may posses in accordance with legislation of Ukraine any property, inherit and entrust it and have non-property rights as well.
The Rules on entrance of foreigners in Ukraine, their exit from Ukraine and transit passage through its territory are defined by the Regulation of Cabinet Council of Ukraine #1074 dated December 29, 1995.
In accordance with the Article 3 of the Law of Ukraine #697-XII “On property” dated February 07, 1991, foreign investors are entitled to possess in the territory of Ukraine houses, buildings and other property of community and industrial purposes. Furthermore, such types of property can be established by the legal acts which cannot be possessed by legal entities of states and international organizations.
The land attitudes in Ukraine are regulated by Constitution of Ukraine, Land Code of Ukraine (hereinafter- “the Code”), as well as passed in accordance with them regulatory legal acts. It is provided by the par.4 in the Article 22 of the Code that lands of agricultural purpose cannot be passed to the ownership of foreign nationals, entities without citizenship, foreign legal entities and foreign states. Jointly with par. 2 in the Article 33 of the Code it is provided that foreign nationals and entities without citizenship may possess land areas and keep peasant farm under lease. It is prescribed by the par. 2 in the Article 35 of the Code that foreign nationals and entities without citizenship may possess land areas to keep individual ad collective gardening under lease.
The Law of Ukraine #161-XIV “On Lease of land” dated October 06, 1998 establishes the possibility of development of such organizational forms in agriculture privately as leased enterprises. Leaseholders can be both Ukrainian and foreign individuals and legal entities.
The Decree of president of Ukraine #817 “On some of measures on deregulation of entrepreneur activity” dated July 23, 1998 is oriented to refine the order of complex control implementation on entrepreneur subjects for the purpose of prevention of governmental authorities and revisal number decreasing. For fulfilling this Decree by the Cabinet Council of Ukraine the Regulation #112 dated January 29, 1999 is adopted which confirmed the Order of coordination of scheduled field audit of financial and economical activity of subjects of entrepreneur activity by controlling authorities.
For enhancing the foreign investments protection, on behalf of Ukraine on April 03, 1998, Washington Convention dated 1965 was signed on order of investment disputes regulation between states and foreign individuals. This Convention was ratified by the Law of Ukraine #1547 dated March 16, 2000 by Verkhovna Rada of Ukraine.
Alongside with that the fact should be mentioned that the Law of Ukraine #2889 came into effect on December 29, 2001 that made amendments in above-mentioned Laws of Ukraine #1560-XII “On investment activity” dated August 18, 1001, “On Discrimination disposal in taxation of subjects of entrepreneur activity founded to use funds and money of soviet origin” dated February 17, 2000, in the Law of Ukraine #168/97ĀŠ “On value added tax” dated April 03, 1997.
In accordance with indicated amendments enterprises with foreign investments lose the right to gain incentives aside from period of foreign investments bringing in and their registration. Also the ceasing of incentives having gained earlier for the indicated enterprises has been provided.
Design and development Avanport-Design
© 2007 "Royal Capital"
All rights reserved