Since 2020, the Law of Ukraine “On State Support of Investment Projects with Significant Investments in Ukraine”, No. 1116-IX (hereinafter referred to as the “Law on State Support of Investment Projects“), has been in effect in Ukraine. This law aims to provide state support to both Ukrainian and foreign investors who commit a total investment of 20 million euros or more.
The forms of this support are defined by the law, which include the possibility of obtaining tax benefits, offering adjacent infrastructure facilities from the state for investment projects, granting preferential land use rights to state-owned or communal land plots for project implementation, and securing investor guarantees through direct contracts with the government of Ukraine. The law also outlines the extent of state support, which should not exceed 30% of the total investment in the project. Furthermore, it delineates the sectors eligible for assistance. These sectors encompass enterprises engaged in the processing industry, transportation, education, scientific and technical industries, healthcare, arts, culture, sports, tourism, resort, and recreation spheres. Additionally, the establishment of a specialized government-authorized institution is envisioned. This institution will be responsible for supporting investment projects and assisting investors from project inception to its completion.
On August 9, 2023, the Verkhovna Rada of Ukraine adopted draft law No. 8138 as of October 19, 2022, on amendments to the Law on State Support of Investment Projects. In the second reading, the draft law underwent quite significant changes, so it is worth once again outlining the main innovations.
First of all, it is worth noting the expansion of sectors within which the supported enterprises should operate. These sectors have been extended to include electronic communications and the production of biogas and biomethane (including liquefied or compressed forms).
Secondly, the minimum required investment amount for projects to qualify as meeting the criteria for an investment project with significant investments, eligible for state support, has been reduced. As of now, such investments must exceed an equivalent of 12 million euros.
Thirdly, an investor is now permitted to commence the project even before the conclusion of a special investment contract provided that the investment occurs no earlier than 18 months before the submission date of the application to the authorized body. Furthermore, this investment should not surpass 30 percent of the total volume of significant investments needed for the implementation of the investment project.
Fourthly, the qualifications for mandatory job creation during the investment project’s implementation phase have been revised. These qualifications now vary based on the wage amount and correspondingly, the number of jobs to be established. If the actual average salary for the relevant activity in the region surpasses it by 50 percent, 10 new jobs should be created. If it surpasses 30 percent, 30 jobs should be created; and if it surpasses 15 percent, 50 new jobs should be created, respectively.
Currently, the draft law is undergoing the final stages of adoption and convocation, we expect it to enter into force shortly.
In general, we positively evaluate the introduced changes as those that increase the range of potential investors who may be interested in Ukraine and simplify some investment procedures for them under the mechanisms provided by the Law. We hope that these changes meet the demands of investors and will have a wide range of practical applications in Ukraine.