UKRAINE 2010/2011

The Ukrainian presidential election in 2010 followed by the assumption of power by new political figures ushered in economic, political and social reforms in Ukraine aimed at recovering Ukrainian economy from negative effects of crisis, establishing of unified and permanent policy and consequently improvement of people’s social protection. Thus the period of 2010 and 2011 has been recognized as a period of significant increase in legislative activity in Ukraine.

On January 01, 2011 the Tax Code of Ukraine came into force and replaced the previous tax legislation.

From	Till	Tax rate
April 01, 2011	December 31, 2011	23%
January 01, 2012	December 31, 2012	21%
January 01, 2013	December 31, 2013	19%
January 01, 2014	-	16%

Under the Tax Code, a new rate of value-added tax of 17% will be effective as of January 01, 2014. The current rate is 20%.

The Tax Code also provides the real estate tax as a new category of tax which is to be effective as of January 01, 2012.

Additionally, the Tax Code establishes a number of temporary tax preferences for certain kinds of business activity (e.g. import of facilities for aircraft industry, import of some sorts of wood and leather, etc.) as well as for some of legal entities which activity is conducted in compliance with certain requirements (e.g. publishers, producers of paper and carton, producers and distributors of national films).

At the end of 2010 the National Bank of Ukraine (NBU) issued an official clarification on application of certain currency regulations as to effectuating payments under surety agreements between Ukrainian companies and foreign creditors.

In particular, the NBU clarified the regulations in the way that a Ukrainian company that is not qualified as a bank or financial institution and that issued a surety in favor of a non-resident creditor is required to obtain an individual license of the NBU in order to effectuate payment to the non-resident creditor in the event of default under the underlying obligation. Such position of the NBU is different from the previous one where no license was required.

The clarification would create complexity for foreign creditors as such license could not be obtained before the surety is issued since the term of the validity of such a license may not exceed 90 days.

On February 15, 2011 the Verkhovna Rada of Ukraine (Ukrainian Parliament) adopted the Law of Ukraine “On Amendments to the Certain Laws of Ukraine Regarding Banking Regulations”. The Law is effective as of June 17, 2011. The amendments inter alia refer to the increase of the minimum charter capital amount of banks (from UAH 75 million to UAH 120 million), changes in the registration procedure of banks, requirements and powers of NBU regarding good standing of senior officers, founders and persons with considerable interest in a bank, etc.

Many of the requirements and limitations established by the Law of Ukraine “On Amendment of Certain Laws of Ukraine for the Purpose of Overcoming the Negative Consequences of the Financial Crisis” dated June 23, 2009 have been removed recently, namely:

On May 18, 2010 a new Law “On Prevention and Counteraction to the Legalization (Laundering) of Proceeds from Crime and Terrorism Financing” came into effect. The Law introduces a two-level system of financial monitoring: the initial level and the state level. New subjects of the initial financial monitoring have been introduced by this Law, namely:

· Notaries, attorneys, auditors, audit companies, individual entrepreneurs who render accounting services, business entities which provide legal services;

· Individual entrepreneurs and legal entities executing financial operations with goods (performing works, rendering services) for cash in the event the amount of such financial operation is equal to or exceeds UAH 150, 000 or its equivalent in foreign currency;

· Other legal entities which are not financial institutions but render certain financial services.

The subjects of the initial financial monitoring are obliged to identify and examine their customers, to detect financial operations subject to financial monitoring as well as to provide registration of such operations.

In autumn 2010 the Constitutional Court of Ukraine in its ruling annulled amendments to the Ukrainian Constitution which had been introduced in December 2004. Under the ruling, considerable powers were returned back from the Verkhovna Rada to the President of Ukraine. In fact, the ruling would mean that the Constitution of 2010 reverted back to its original format of 1996 with the extended presidential powers.

On December 09, 2010 the President of Ukraine issued a Decree “On Optimization of the System of Central Authorities of Executive Power”. The President’s Decree may be considered as a first step forward for the administrative reform in Ukraine.

The Decree has been issued with the aim of optimising the existing system of central authorities, eliminating a duplication of their powers and improving effectiveness of state administration.

According to the Decree, some of the state authorities will be liquidated or reorganised by way of merger and division, number of executive personnel will be cut down and administrative expenses will be reduced.

On August 03, 2010 the Law “On Judicial System and Status of Judges” came into effect..

The Law provides for the establishment of the Supreme Civil and Criminal Court of Ukraine, which pari passu with the Supreme Administrative Court of Ukraine and the Supreme Economic Court of Ukraine will operate as cassation instance court in Ukraine.

At the same time, the powers of the Supreme Court of Ukraine were limited to reviewing cases on the grounds of (i) different application of the same rules of substantive law by the cassation courts, which resulted in different judgments in similar legal relations; (ii) determination by international judicial institution, jurisdiction of which is recognized by Ukraine, of the breach of international obligations of Ukraine in deciding the case by the court.

The Law reduces the number of judges of the Supreme Court of Ukraine from twenty five to twenty persons and liquidates the military courts.

Also the Law has enhanced a criminal responsibility for the failure to execute a judgment as well as increased categories of people who may be brought to such responsibility.

The Law “On Regulation of the City Planning Activity” was adopted on February 17, 2011 and became effective as of March 12, 2011.

The Law provides for the improvement of all stages of city planning activity: from planning documentation to putting the completed projects into operation; reduction in the number of approval procedures; reduction in time for passing the relevant procedures and the volume of required documents.

The Law also stipulates the personal responsibility for the negative consequences caused by the committed violations of construction standards.

However, still for the practical implementation of the rules provided by the Law, certain legislative acts should be adopted and elaborated accordingly.

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