January news digest 2025

Corporate Law Practice

The Verkhovna Rada Committee recommends adopting the Draft Law on Factoring

The Verkhovna Rada Committee on Finance, Taxation, and Customs Policy recommends that Parliament adopt Draft Law No. 12306 “On Factoring” as a basis.

The purpose of the draft law is to improve the regulation of factoring activities and update the provisions of the current legislation on factoring services.

Key provisions of the draft law:

• Implementation of international standards. The draft law aligns Ukrainian legislation with the Model Law on Factoring of the International Institute for the Unification of Private Law, bringing the national factoring sector closer to the best international practices.
• Introduction of state registration for the assignment of claims. This measure aims to reduce fraud risks and enhance transparency in the factoring market.
• Clear definition of the subject and content of factoring agreements. The draft law regulates the key provisions of such agreements and establishes the priority of claim assignment.
• Distinction between trade factoring and financial debt operations. Companies engaged in the assignment of claims under consumer credit agreements will operate within the framework of a financial company license.
• The financial activity license will authorize credit provision but will not be compatible with trade factoring services.

The Verkhovna Rada adopts a Law on Business Regulation Reform

On January 9, 2025, the Verkhovna Rada approved Draft Law No. 6013 “On the Specifics of Regulating Business Activities of Certain Types of Legal Entities and Their Associations During the Transition Period.”

The law introduces comprehensive changes in the legal framework governing business activities, including:

• Amendments to the Civil Code of Ukraine.
• The repeal of the Commercial Code of Ukraine.
• The introduction of a transition period for the gradual termination of enterprises as a separate legal form and their transformation into business companies.
• Amendments to several specialized laws to align them with the provisions of the Civil Code.

This draft law represents a crucial step in legislative reform aimed at eliminating duplication of norms and aligning business regulation with European standards.

Minimum Localization Level in Public Procurement of Machinery and Energy Equipment Increased

As of January 1, 2025, the minimum localization level for public procurement of machinery has increased from 20 percent to 25 percent.

From now on, state institutions, enterprises, and local government bodies may only procure machinery products where at least 25 percent of the components are of Ukrainian origin.

The localization requirement was introduced by the Law of Ukraine “On Public Procurement” No. 922-VIII of December 25, 2015, and is regulated by Resolution of the Cabinet of Ministers of Ukraine No. 861 of August 2, 2022.

The regulation establishes a phased increase in localization levels:

• 10 percent in 2022
• 15 percent in 2023
• 20 percent in 2024
• 25 percent in 2025
• 30 percent in 2026
• 35 percent in 2027
• 40 percent in 2028

These requirements apply to procurement in sectors such as:

• Public and railway transport
• Municipal and specialized equipment
• Energy equipment

According to Deputy Minister of Economy Andrii Teliupa, increasing localization in public procurement is not just an economic measure but a strategic necessity in wartime conditions.

The gradual increase in this share allows businesses to adapt and ensures economic stability even in challenging circumstances.

The localization legislation is a key component of Ukraine’s industrial development policy and supports domestic manufacturers within the framework of the “Made in Ukraine” initiative.

Tax Law Practice | Tax Alert

Changes to the taxation of the importation of goods into Ukraine via international postal and express shipments are suggested

On January 20, 2025, the Verkhovna Rada of Ukraine registered draft law No. 12429 “On Amendments to the Tax Code of Ukraine to Align the Taxation of Operations Involving the Importation (Dispatch) of Goods into the Customs Territory of Ukraine via International Postal and Express Shipments with the Requirements of Council Directive 2006/112/EC of November 28, 2006, on the Common System of Value Added Tax”.

This draft law, among other things, suggests to:

1. Introduce a new operation that will be subject to VAT at the rate of 20% – distance sale of goods: supply of goods (except for excisable goods) to individuals in the customs territory of Ukraine using information and communication systems.

For these purposes, non-residents engaged in the distance sale of goods will be considered VAT payers. Persons facilitating such sales and those indirectly involved in distance sales will be equated to them.

It is proposed to apply a special taxation procedure to the distance sale of goods, the total invoice value of which does not exceed the equivalent of EUR 150, if such goods are imported (dispatched) into Ukraine to the address of one recipient – an individual in a single dispatch/shipment from one sender via international postal/express shipments.

This special procedure will stipulate, in particular, the following:

• The tax base for transactions will be determined based on the invoiced value of goods in foreign currency (euros or US dollars), and the VAT amount will also be calculated in foreign currency.
• Persons registered as VAT payers under the special procedure will not form a tax credit, issue tax invoices for distance sales transactions, or be entitled to budgetary reimbursement.
• An authorized person for distance sales of goods acting in the interest of a non-resident will submit a simplified VAT tax return. This tax return will be subject exclusively to a special desktop audit.

2. Exempt from VAT the import of goods into Ukraine (excluding excisable goods) for a single recipient—an individual in a single dispatch/shipment from one sender via international postal/express shipments valued at up to EUR 150, provided that VAT is paid on distance sales of goods and the customs declaration includes information on the individual tax number of the person conducting distance sales of goods and registered as a VAT payer under the special procedure.

3. Remove the rules under which the import of goods into Ukraine valued at up to EUR 150 is not subject to VAT taxation.

• Instead, the importation of goods into Ukraine valued at up to EUR 45 for a single recipient—an individual in a single dispatch/shipment from one individual sender via international postal/express shipments, free of charge, for personal/family use and without commercial purposes, will not be subject to VAT taxation.
• However, this exemption will not apply to excisable goods, as well as specific quantities of perfumes, toilet water, coffee, and tea.

Additionally, on January 20, 2025, draft law No. 12430 “On Amendments to the Customs Code of Ukraine to Align the Procedure for the Payment of Customs Duties with the Requirements of Council Directive 2006/112/EC of November 28, 2006, on the Common System of Value Added Tax and the Law of Ukraine ‘On Postal Services’ Regarding Certain Issues of International Postal Exchange” was registered.

This draft law, inter alia, offers to:

• Establish a declaration procedure for the importation of goods for individuals via international postal/express shipments valued at up to EUR 150.
• Apply a 10% customs duty to the entire value of goods imported into Ukraine via international postal/express shipments valued over EUR 150 and up to EUR 10,000, rather than only to the amount exceeding EUR 150.

The draft law on tax benefits for public-private partnerships was registered

On January 20, 2025, the Verkhovna Rada of Ukraine registered draft law No. 12423 “On Amendments to Article 284 of the Tax Code of Ukraine Regarding Tax Benefits for Social Public-Private Partnerships.”

The draft law suggests introducing tax benefits in terms of land payment for land plots owned by private partners, who implement social public-private partnership projects in accordance with the Law of Ukraine “On Public-Private Partnership”, as well as their affiliated parties.

In particular, local self-government bodies will be able to:

• Set land tax rates and lease payments at a lower rate than the land tax set for a certain category of land paid in the respective territory.
• Exempt land plots from taxation.

It should be noted that similar tax benefits for land payments are provided for land plots located within the territory of industrial parks.

The procedure for maintaining the unified register of storage locations came into force

On January 28, 2025, the resolution of the Cabinet of Ministers of Ukraine No. 68, dated January 24, 2025, “On Approval of the Procedure for Maintaining the Unified Register of Storage Locations” came into force.

The procedure defines the rules for creating and maintaining the Unified Register of Storage Locations (“the Register”) used for the storage of:

• Ethyl alcohol
• Bioethanol
• Spirit distillates
• Alcoholic beverages
• Tobacco products
• Raw tobacco
• Liquids used in electronic cigarettes

The procedure, in particular, establishes:

• The list of information contained in the Register.
• The process for entering, updating, and removing information on storage locations.

According to the resolution, the State Tax Service must ensure that the Register is launched 60 days after the resolution entry into force, i.e. by March 28, 2025.

Litigation Practice

Supreme Court: a motion for review of a court decision based on newly discovered circumstances may be filed no later than three years from the date the decision becomes legally binding

The Supreme Court, in the panel of judges of the First Judicial Chamber of the Civil Cassation Court, in its ruling of December 11, 2024, in case No. 2-747/11, clarified the issue of extending the deadline for filing a motion for review of a court decision based on newly discovered circumstances.

According to the Civil Procedure Code of Ukraine, a motion for review of a court decision based on newly discovered or exceptional circumstances may be filed no later than three years from the date the decision becomes legally binding.

The deadlines established by this Code cannot be extended (Part 3 of Article 424 of the Civil Procedure Code of Ukraine).

Thus, a motion for review based on newly discovered circumstances must be filed within three years from the date the court decision becomes final.

This deadline is absolute (preclusive), meaning it cannot be extended under any circumstances, regardless of the reasons for missing the deadline, which are not subject to evaluation.

Supreme Court: the terms of remuneration in an employment contract cannot be less favorable than those provided in the collective agreement

The terms of remuneration in an employment contract cannot be less favorable than those stipulated in a collective agreement. This principle was reaffirmed by the Supreme Court (Civil Cassation Court) in its ruling dated November 27, 2024, in case No. 182/6943/23 regarding wage recovery.

The plaintiff, a director of a municipal enterprise, was dismissed after the expiration of his employment contract. He filed a lawsuit, claiming that his salary had been underpaid, as it did not include the minimum tariff rate specified in the collective agreement.

The courts of first instance and appeal dismissed the claim, arguing that the plaintiff had agreed to the contract terms he signed. They stated that the remuneration of enterprise managers is determined by contract and can only be changed through additional agreements.

The Civil Cassation Court overturned these decisions, emphasizing that the terms of an employment contract cannot be less favorable for the employee than those stipulated in the collective agreement. The law prohibits including provisions in contracts that worsen employees’ working conditions compared to collective agreements.

Supreme Court: a military ID with a discharge mark is not a sufficient document for crossing the border

The plaintiff filed a lawsuit requesting:

• To declare illegal and annul the decision denying a Ukrainian citizen aged 16 or older the right to leave the country.
• To oblige the competent authorities to grant him permission to cross the state border.

The local and appellate courts dismissed the claim, ruling that the plaintiff had failed to provide documents confirming his right to leave the country, making the refusal lawful.

The Supreme Court (Administrative Cassation Court), in its ruling dated March 9, 2023, in case No. 600/2520/22-a, upheld the decisions of the lower courts.

The Supreme Court emphasized that a military ID with a discharge mark only confirms the fact of removal from military records but is not a sufficient document for crossing the border under martial law.

The courts established that at the border control, the plaintiff presented only a passport and a military ID, which are not enough to grant exit permission. Since he failed to provide evidence of belonging to a category of persons eligible for departure during martial law, the Supreme Court agreed with the lower courts that the plaintiff had no legal grounds to leave Ukraine.

Bill No. 11161 defines the procedure for compensation for destroyed property in temporarily occupied territories or combat zones

The Verkhovna Rada of Ukraine has adopted Bill No. 11161, which significantly simplifies the compensation process for property damaged due to hostilities, Russian aggression, or occupation.

Key changes:

1. Automatic recognition of property as destroyed.
   Property located in an active combat zone or occupied territory will be automatically classified as destroyed. This eliminates the need for on-site inspections, which could be dangerous for property owners and state officials.
2. Simplified application procedure.
   Applications for compensation can be submitted via the “Diia” app without requiring photo or video evidence. Applicants will only need to provide ownership details, the property’s address, and its condition.

Who Can Receive Compensation?
Eligible individuals must be Ukrainian citizens who have resided in Ukraine for at least two years at the time of application and are the owners of the damaged or destroyed property.

On December 30, 2024, the Speaker of the Verkhovna Rada signed the bill and sent it to the President of Ukraine for approval. Once signed and officially published, the procedure will come into effect.

Criminal Law Practice

Criminal liability is established for improper maintenance of shelters or failure to provide free access to them on a 24/7 basis

A law establishing criminal and administrative penalties for neglecting civil defense facility fund maintenance and operation came into force on 1 February 2025.

From now on, failure to properly maintain air raid shelters and ensure 24/7 access to them, resulting in moderate to severe injury or death, shall be punishable by three to eight years of imprisonment.

In addition, the Code of Ukraine on Administrative Offenses has been amended to impose:

• A fine of UAH 1,700 to 3,400 for failure to ensure public access to shelters (UAH 5,100 to 8,500 for repeated violations).
• A fine of UAH 2,550 to 5,100 for violating shelter maintenance and operation requirements, which resulted in their unreadiness for their intended use (UAH 5,100 to 8,500 for repeated violations).

The Supreme Court has defined criteria for imposing a lighter sentence

In a 9 January 2025 decision (case No. 161/8760/22), the Supreme Court clarified the legal framework for assessing the fairness of a sentence and the possibility of reducing it under the Criminal Code of Ukraine.

Under Article 414 of the Criminal Procedure Code of Ukraine, a punishment may be declared unfair if it, although not exceeding the sanction of the article, is too lenient or too severe concerning the gravity of the crime and the person of the accused.

Under Articles 50 and 65 of the Criminal Code of Ukraine, punishment must be necessary and sufficient to correct the perpetrator and prevent new crimes. When imposing a sentence, the court considers:

• The principles of proportionality and individualization.
• Mitigating or aggravating circumstances.

Article 69 of the Criminal Code of Ukraine allows for imposing a sentence below the lowest sanction limit or another, more lenient punishment if several mitigating circumstances exist that significantly reduce the gravity of the crime, considering the perpetrator’s characteristics.

Thus, a lighter sentence requires a combination of two factors:

1. At least two mitigating circumstances that significantly reduce the crime’s gravity.
2. The perpetrator’s characteristics.

The Ministry of Internal Affairs has approved new criteria for identifying economically important enterprises under its management

On 3 February 2025, Order No. 28, dated 20 January 2025, came into force, by which the Ministry of Internal Affairs of Ukraine (MIA) approved the Criteria for determining enterprises, institutions, and organizations under its jurisdiction as important to the national economy.

Enterprises, institutions, and organizations are recognized as being of importance for the national economy if they:

• Provide independent expertise for pre-trial investigation bodies and courts.
• Carry out certification and inspection of products, valuation of property and vehicles.
• Conduct forensic research and keep relevant records.
• Support the MIA’s unified information system and special-purpose digital radio communications.
• Conduct research and development activities in forensic science and criminalistics.

The following are also recognized as critical enterprises:

• Organizations that organize preventive and medical measures for law enforcement officers.
• Institutions that examine officers’ fitness for service.
• Enterprises that provide material and technical equipment for internal affairs bodies, including transport, weapons, and special equipment.
• Educational institutions that train personnel for the MIA and related central executive authorities.
• Enterprises that store law enforcement system archival documents.

A separate category includes institutions that:

• Ensure the continuous functioning of the MIA’s reserve special control center.
• Operate airfields for internal security tasks.