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SDM Partners concerning the Tax incentives for large investors, The law on financial leasing was signed and Plans to expand the powers of State Labor.

23 Nisan 2021


 Nisan 23, 2021

Member of the Union of Industrialists and Businessmen of Turkey and Ukraine “TUSIB” – law Firm SDM Partners has prepared some clarifications on new issues:

Tax incentives for large investors

On March 28, 2021, the Laws of Ukraine No. 1293-IX and 1294-IX (previously: draft laws No. 3761 and 3762) entered into force, providing implementations of tax incentives for large investors.

Thus, the legislator seeks:

(i)           until 01.01.2035 to exempt from taxation of import duties and VAT operations on import within the framework of an investment project with significant investments into the territory of Ukraine in the mode of importing equipment that was not in use and was manufactured no earlier than three years before such import, by the list and volumes established by a special investment agreement with the relevant investor,

(ii)          exempt from taxation of corporate income tax until 01.01.2035 within the first five consecutive years from the date the investor submits the relevant application, but not earlier than the commissioning of the facility built as part of the investment project.

In addition, until 01.01.2035 local governments are authorized to establish for land plots involved in investment projects with large investments the rates of land tax and rent for state and communal land in an amount less than the amount of land tax established by the decision of the relevant local government for a certain category of land, which is paid in the relevant territory, or completely exempt significant investors from paying land tax.

Moreover, such benefits can be applied subject to certain reservations:

(i)           the amount of funds released through the application of the above tax incentives is included in the total amount of state support provided to a large investor (according to Law of Ukraine No. 1116-IX, this amount cannot exceed 30% of attracted investments),

(ii)          the investor is obliged to carry out a corresponding increase in his tax liabilities in the amount of funds released from tax incentives in the event of the alienation of such equipment earlier than five years after its import, or in case of early termination of the special investment agreement due to the investor’s failure to fulfill obligations in terms of the volume of attracted investments or terms of project implementation,

(iii)         such incentives, regardless of the time periods given, will only be valid for the duration of the relevant special investment agreement.

Recall, that an investment project with large investments is considered to be one, the implementation period of which does not exceed five years, and within the framework of which,

(i)           the investments exceed € 20 million,

(ii)          more than 80 new jobs are created with wages exceeding the average in this area and region by more than 15%,

(iii)         construction or modernization of facilities in the field of processing industry, processing / enrichment of minerals, waste management, transport, warehousing, postal and courier activities, logistics, education, scientific and scientific and technical activities, healthcare, art, culture, sports, tourism and resort and recreational areas, as well as the purchase of equipment.

The law on financial leasing was signed

03.09.2021 The President signed the Law of Ukraine No. 1201-IX (previously: Bill No. 1111), which introduces an updated legal regime for financial leasing. At the same time, such novels are provided, in particular:

(i)           a financial lease is the transfer to the lessee for possession and use as an object of financial leasing of property that belongs to the lessor by right of ownership and acquired by him without prior agreement with the lessee, or property specially acquired by the lessor from the seller (supplier), if at least one of the following conditions:

–             the financial lease object is transferred for a period during which at least 75% of its initial cost is amortized, and the lessee is obliged, on the basis of a financial lease agreement, or another agreement specified in a financial lease agreement, to acquire a financial lease object from the subsequent transfer of ownership from the lessor to the lessee at the price and on the terms provided for by such a financial lease agreement or other agreement determined by the financial lease agreement,

–             the amount of lease payments at the time of the conclusion of the financial lease agreement is equal to or exceeds the initial cost of the financial lease object,

–             the book (residual) value of the financial lease object at the time of the expiration of the financial lease agreement provided for by such an agreement is no more than 25% of the initial value (price) of such a financial lease object as of the beginning of the financial lease agreement, etc.,

(ii)          there is a ban on financial leasing of land plots and other natural objects,

(iii)         regulation and supervision of the financial leasing market is entrusted to the National Bank,

(iv)         the procedure for termination of a finance lease agreement for late payments has been established.

The law will come into force on June 13, 2021.

Plans to expand the powers of State Labor

The Ministry of Economy has drafted a bill to expand the powers of labor inspectors. In particular, they will be empowered to

(i)           access at any time of the day to non-residential premises in which there are natural persons in respect of whom there are reasonable grounds to believe that they are in an employment relationship or are subject to forced labor,

(ii)          request from individuals in respect of whom there are reasonable grounds to believe that they are performing work duties, identity documents,

(iii)         based on the results of the inspection visit, recognize the relationship as labor, regardless of the self-identification (for example, by the name of the contract) of the relationship by the parties.

Along with this, it is planned to increase the size of the fines:

(i)           for admission to work without an employment contract – from 10 to 15 times the minimum wage (i.e. from 60’000 to 90’000 ₴), and

(ii)          for non-observance of the minimum guarantees in the labor sphere – from 2 to 5 times the minimum wage (i.e. from 12’000 to 30’000 ₴).

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