Most recent is the law On the Regime of Foreign Investment effected on 25 April 1996. This law revokes previous legislation in respect of foreign investment.
The fundamental provisions of the new law are as follows:
- the new law in contrast to the previous regulations does not provide for any profit tax privileges for newly established companies with foreign investment. However, in accordance with the 1994 Corporate Profit Tax Law companies with qualifying foreign investment established before 1 January 1995 can continue enjoying a 5 year corporate profit tax holiday;
- the new law defines "enterprise with foreign investment" as any legal form having a statutory capital of which at least 10% belongs to a foreign investor;
- assets (excluding re-sellable and consumable goods) contributed by a foreign investor to the statutory fund of an "enterprise with foreign investment" are exempt from import duties provided that the foreign investment is recorded in the enterprise's books within 30 days of importation, and is not disposed of within 3 years of the date of making the accounting record;
- foreign investments are subject to a state registration procedure which is determined by the Government;
- investors are guaranteed by law the right to repatriate duty free their investment either in kind or in cash if investment activity is terminated. The investor's profits can be repatriated without restrictions provided the relevant taxes have been paid;
- investors can be engaged in development of mineral resources or the use of state property on the basis of concession contracts with the government for a period not exceeding 99 years;
- investors are allowed to enter into investment agreements with domestic entities to carry out operations in Ukraine without establishment of a legal entity (e.g unincorporated joint venture). Investment agreements are subject to state registration;
- the new law does not prohibit the contribution of foreign investment in the form of resellable goods. However, relevant import taxes and duties must be paid upon importation of the goods into Ukraine;
- the new law does not provide special rules for contributions to the Ukrainian Pension Fund in respect of salaries paid by a Ukrainian company to expatriate staff (unlike the previous law). Therefore, no exemptions from these contributions are available when a Ukrainian company employs foreigners.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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