9 e-points

Dear colleagues, partners, friends!

We at Evris value your time, so we have developed a unified monthly online newsletter 9 E-points.

9 E-points is monthly e-digest from Evris:

  • 9 legislative novels which business community should be aware of, to react in proper time
  • 9 business and legal events worth attending, to get new ideas
  • 9 points of interest from Evris lawyers who do their job in a talented and passionate way

Liberalization at the Ukrainian currency market goes on

The matter of amendments

The National Bank of Ukraine (NBU) continues liberalization of limitations at the Ukrainian currency market.

Resolution of the Board of the National Bank of Ukraine No. 128 dated 12 December 2017 “On Introduction of Amendments to Resolution of the Board of the National Bank of Ukraine dated 13 December 2016 No. 410”. The Resolution came into force 14 of December 2017.

Whom it will affect

Ukrainian business that attracted foreign investments.

Consequences

The introduced amendments are aimed at the further liberalization of currency limitations providing the residents with the opportunity to perform payments to non-residents in time and in full.

 

How to prepare / mechanism of the amendments introduction

Namely, NBU expands the list of cases, when the premature loan repayment is allowed (regarding loans received by the residents from non-residents of Ukraine). From now on residents can make premature loans repayments in respect of the loans involving the foreign state acting through its authorized persons.

 

In addition, the NBU has cancelled the limits for foreign currency transfer for transactions of the authorized banks, performed under individual licenses. Prior to introduction of the given amendments, the transfers were limited up to USD 50,000 per one calendar month. Currently, banks can transfer foreign currency for the total amount as specified in the individual license issued by the NBU.

 

How to determine a fake securities emitent

The matter of amendments

New edition of Regulation on Establishment of Criteria of Fakeness of the Securities Issuers and Enlistment of the Respective Securities Issuers came into force.

Resolution of the NSSMC “On Adoption of Regulation on Establishment of Criteria of Fakeness of the Securities Issuers and Enlistment of the Respective Securities Issuers” No. 393 dated 30.05.2017. The Regulation came into force on 7 December 2017.

Whom it will affect

Ukrainian business operating in the form of joint-stock companies.

Consequences

The given amendments shall assist to remove of quasi-public companies from the market and provide higher level of transparency of the governance and activities of the respective companies, protecting Ukrainian and foreign investors.

How to prepare / mechanism of the amendments introduction

The Regulation establishes 13 criteria for the acknowledgement of the securities issuers as fake. Such criteria include, namely, failure to submit regular annual information or quarterly regular information for two consecutive quarters; failure of the joint-stock company to conduct general shareholders meetings for two years; registration of issuer’s office at residential premises; absence of net profit from the sales of products (goods, works, services) as of the end of fiscal year etc. The issuer may be included into the specific list if it meets at least three criteria, given in the Regulation. The enlistment may result in termination of the securities turnover and prohibition to execution of deeds related to the transfer of title to the securities accompanied by the limitations to transactions with the respective securities in a depositary system.

 

Specific fakeness criteria have been established for the corporate investment funds and insurance companies.

 

From now on, it is both easier and more difficult to conduct foreign exchange transactions

The matter of amendments

The National Bank of Ukraine continues to improve the procedure for issuing individual licenses for transfer of foreign currency abroad and makes it easier for banks to conduct a number of foreign exchange transactions.

Resolution of the National Bank of Ukraine No. 130 dated 14/12/2017 that entered into force on December 15, 2017

Whom it will affect

Banks and economic entities that are residents of Ukraine.

Consequences

The changes clearly regulate the possibility of transfer of money as a compensation by a resident borrower to a non-resident guarantor (surety).

In addition, in order to prevent the outflow of capital from Ukraine, the requirements for documents required to obtain an individual license of the National Bank of Ukraine have been tightened.

 

How to prepare / mechanism of the amendments introduction

The National Bank of Ukraine clarified the list of:

  • documents required to obtain an individual license of the National Bank of Ukraine;
  • transactions for the transfer of foreign currency by resident economic entities outside Ukraine, that do not require an individual license from the National Bank of Ukraine;
  • grounds for cancellation of individual licenses of the National Bank of Ukraine for transfer of foreign currency abroad by resident economic entities.

 

New realities at the financial market of Ukraine – escrow accounts

The matter of amendments

A new type of accounts, escrow accounts and accounts of the determined escrow agent, have been introduced in Ukraine for the first time

Resolution of the National Bank of Ukraine No. 133 dated 18/12/2017 that entered into force on December 21, 2017.

Whom it will affect

Banks, individuals and legal entities.

Consequences

Resolution of the National Bank of Ukraine No. 133:

  • will contribute to an increase of the corporate governance level in joint stock companies;
  • will provide a settlement mechanism in the squeeze-out procedure determined in Article 652   of the Law of Ukraine “On Joint Stock Companies”;
  • will regulate the legal relations arising in opening, using and closing escrow accounts.

 

How to prepare / mechanism of the amendments introduction

The National Bank of Ukraine has determined the following for escrow accounts:

  • the procedure for opening and closing such accounts, as well as the list of documents required for this purpose;
  • the exclusive list of transactions;
  • non-resident investors have been granted the right to open escrow accounts to transfer money to beneficiaries;
  • the procedure for opening a type “N” current account by a representative office of the donor organization;
  • foreclosure on the encumbered assets that are the property rights to cash on a bank account through contractual debiting according to the payment request of the encumbrancer.

 

How to conduct currency auctions in a new way

The matter of amendments

The list of information to be published by the National Bank of Ukraine on the results of currency auctions has been extended.

Resolution of the National Bank of Ukraine No. 123 dated 30/11/2017 that entered into force on December 5, 2017.

 

Whom it will affect

Individuals and legal entities or representatives of legal entities.

Consequences

In order to increase the transparency of the policy in the foreign exchange market, the National Bank of Ukraine posts the information provided for by Resolution of the National Bank of Ukraine No. 123 on the website of the official Internet representative office of the National Bank of Ukraine on the day of the auction

 

How to prepare / mechanism of the amendments introduction

Previously, the National Bank of Ukraine published information on the auction currency, the minimum and maximum rates stated by banks for participation in the auction, the total number of requests for the sale or purchase of foreign currency and satisfied requests, UAH exchange rate to the foreign currency based on the auction results.

These data are now supplemented with information on the scope of the auction, the total number of requests accepted for the auction and satisfied requests of banks for the sale or purchase of foreign currency.

 

The list of offshore jurisdictions expands significantly

The matter of amendments

The Ukrainian Government has updated the list of so called “offshore” jurisdictions

The new “List of states (territories) that fall within the criteria set forth in sub-clause 39.2.1.2 of sub-clause 39.2.1 of clause 39.2 of Article 39 of the Tax Code of Ukraine” was adopted by the Ukrainian Government via the regulation of the Cabinet of Ministers of Ukraine No. 1045 dated 27 December 2017.

 

The said regulation enters into force on 01 January 2018.

Whom it will affect

Ukrainian businesses making transactions with companies that are registered in, or are residents of, jurisdictions included in the List.

Consequences

The new List of so called “offshore” jurisdictions features 85 states (territories). Compared to the previous list, the new one features 19 additional jurisdictions, among which are Hungary, Latvia, Estonia, UAE, and Singapore.

 

Transactions with a counterparty that is registered in, or is a resident of, such a jurisdiction are considered ‘controlled transactions’ subject to the transfer pricing rules, if the annual income of the Ukrainian counterparty exceeds UAH 150 million (approx. EUR 4,5 million) and the annual turnover within the transactions between the Ukrainian side and the “offshore” counterparty exceeds UAH 10 million (approx. EUR 0,3 million). If the said limits are not reached, but the Ukrainian business accrues royalties in favor of counterparties from such jurisdictions or purchases goods and services from them, such transactions may trigger tax adjustments.

 

Using companies, that are residents of the relevant jurisdictions, for the purposes of issuing debt securities on a foreign stock exchange to raise financing and extend a loan to a Ukrainian business may deny the Ukrainian side the preferential regime established by the Tax Code of Ukraine for the taxation of interest payments to non-residents (this involves, first of all, such jurisdictions as Ireland, Singapore and Hong Kong).

 

 

More and more IT-related goods and services are released from VAT!

The matter of amendments

The scope of IT-related products and transactions applicable for the temporary VAT exemption available until 01 January 2023 have been expanded

The changes are set forth in the Law of Ukraine “On Amending the Tax Code of Ukraine and Certain Legislative Acts of Ukraine regarding Ensuring the Balance of Budget Revenues in the 2018 Year” No.2245 dated 07 December 2017 (Parliament Bill No.6776-d dated 14 November 2017). New rules regarding the exemption from VAT for IT-related activities enter into force on 01 January 2018.

Whom it will affect

Software developing companies, software sellers/resellers, and software purchasers

Consequences

Until 01 January 2023, VAT exemption will apply to the supply of software as well as to transactions (with software), payments for which are not considered royalties in the Tax Code of Ukraine. The list of applicable “software products” items and the list of payments not considered royalties have been expanded.

In particular, granting access to software (Software-as-a-Service), providing subscription for updates or additional features, distribution of software in physical media or in the electronic form, including activation codes and download links, will also be covered by the VAT exemption. The exemption will cover resale of software as well.

How to prepare / mechanism of the amendments introduction

Software developing companies that used to charge VAT, but from the 01 January 2018 are going to apply the VAT exemption, may need to review their practices of purchasing equipment, goods and services to be used internally within the company. If purchased items are used in the production of the VAT-exempted goods and services, input VAT related to such purchases will not be recoverable (or may be only partially recoverable) because “compensating” tax liabilities will apply.

New rules of payment under syndicated loans to non-residents are introduced

The matter of amendments

Interest payments under syndicated loans to non-residents of Ukraine will be governed by specific rules for application of double tax treaties

The changes are set forth in the Law of Ukraine “On Amending the Tax Code of Ukraine and Certain Legislative Acts of Ukraine regarding Ensuring the Balance of Budget Revenues in the 2018 Year” No.2245 dated 07 December 2017 (Parliament Bill No.6776-d dated 14 November 2017). New rules regarding syndicated loans enter into force on 01 January 2018.

Whom it will affect

Holding companies and enterprises wishing to attract significant amounts of debt financing involving multiple non-resident lenders

Consequences

When paying interest abroad under syndicated loan facilities, a Ukrainian borrower will apply double tax treaties with jurisdictions, of which the lenders (members of the syndicate) are residents. Tax rates, set forth in the relevant double tax treaties, to be applied based on pro-rata participation of each lender within the syndicated loan facility. The new rules will apply irrespective of whether interest is paid directly to lenders or via an agent.

How to prepare / mechanism of the amendments introduction

A tax residency certificate with respect to each syndicate member may be needed to confirm that the syndicate members are the beneficial owners of interest under the syndicated loan facility

About counter injunction – in details

The matter of amendments

The new Rules of the International Commercial Arbitration Court (ICAC) at the Ukrainian Chamber of Commerce and Industry provides for a clear regulation of the institution of interlocutory injunctions.

The new Rules of the ICAC at the Ukrainian Chamber of Commerce and Industry will enter into force on January 1, 2018.

Whom it will affect

All participants in the arbitration process

Consequences

Clear requirements regarding the form and amount of the injunctive relief have been introduced. The President of the ICAC or the Arbitral Tribunal may change or cancel the interlocutory injunctions on the basis of a motivated request of the parties or on their own initiative.

Article 27 of the new Rules of the ICAC provides for the possibility of a counter injunction, which meets the principle of proportionate interlocutory injunctions. The counter injunction may be deposited on the deposit account of the Ukrainian Chamber of Commerce and Industry in the form of cash assets or a bank guarantee, suretyship or other financial security, according to the ruling of the President of the ICAC or the Arbitral Tribunal.

Also, in the event any of the parties to the proceeding applies to a competent state court regarding taking actions to secure the claim filed to the ICAC, such party is obliged to notify the ICAC thereof without delay.

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Evris newsletter #4 in English
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Evris newsletter #4 in English
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Monthly Digest by Evris. Here you will find the 9 most important changes in the legislation of Ukraine for the current month.
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Evris
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