May news digest

Corporate Law Practice

Plan to approve the Rules for Drawing up and Filing an Application for a Trademark and for International Registration of a Trademark

The Ministry of Economy of Ukraine has developed a draft order establishing the rules for filing trademark applications and their international registration and the procedure for examining these applications. This document is intended to regulate the processes related to trademark protection and to enable the National Intellectual Property Authority to perform the functions provided for by the Madrid Agreement and its Protocol. The Order defines the criteria for trademarks, conditions of their legal protection, requirements for applications and their registration, examination procedures, and opposition and international registration procedures. The draft also provides an electronic format for filing documents and requirements for electronic signatures. The previous Order of 1995 is recognized as invalid.

National Bank of Ukraine significantly eased currency restrictions

On May 3, 2024, the National Bank of Ukraine approved the largest package of easing for foreign currency transactions since the beginning of the full-scale invasion of Ukraine by Resolution No. 56.

Starting from May 13, 2024, Ukrainian businesses will be able to pay dividends to non-residents in the amount of EUR 1 million per month.

Since the mentioned Resolution restored the possibility to purchase foreign currency and transfer it to non-residents to pay for any goods and services, the Resolution of the Cabinet of Ministers of Ukraine No. 153 “On Certain Issues of Ensuring Imports” dated 24.02.2022 has lost its relevance.

The NBU has also made it possible to service loans received by Ukrainian businesses from non-residents. The purchase of foreign currency to pay interest accrued for using funds has been unblocked, up to EUR 1 million per quarter and 12% per annum.

In addition to that:

• Transfers under leasing and rental agreements have been unblocked (previously, only payments for leasing and rental of vehicles were allowed);
• Restrictions on the transfer of funds by representative offices in favour of parent companies have been eased;
• For loans received earlier, the term of use before interest payments is reduced from 3 years to 1 year.

The amendments introduced by the resolution came into force on May 13, 2024.

Ukraine starts accepting applications for investor insurance against military and political risks

The Export Credit Agency of Ukraine (hereinafter referred to as “ECA”) started accepting applications for investment insurance against military and political risks, as provided for by the Law of Ukraine No. 3497-IX dated 22.11.2023 “On Amendments to the Law of Ukraine “On Financial Mechanisms for Stimulating Export Activity” regarding the insurance of investments in Ukraine against military risks”, which entered into force on 1 January 2024. 

The ECA offers two types of insurance products: direct investment insurance for investors and investment credit insurance for banks. War risk insurance covers military conflicts, violent government changes, terrorist acts, sabotage, occupation, and annexation. 

The National Securities and Stock Market Commission cancelled any certification of specialists

In accordance with the new legislation, the National Securities and Stock Market Commission (hereinafter referred to as “NSSMC”) is completely abolishing its regulations on specialist certification. From now on, employees of all professional capital markets participants do not need a certificate to obtain a license or to carry out professional activities, not only during martial law but also after its termination. 

Tax Law Practice | Tax Alert

Proposal to increase excise tax rates on fuel: new draft law 

On 28.05.2024, the draft law No. 11256-1 “On Amendments to the Tax Code of Ukraine on Adaptation of the Provisions of the European Union Legislation in the Part of the Fuel Excise Tax” was registered in the Verkhovna Rada of Ukraine.

The draft law proposes increasing the excise tax rates on fuel and establishing a five-stage raising of such rates starting from 01.10.2024 and until 01 January of the third year following the year of Ukraine’s accession to the European Union. 

Also, it provides for setting certain peculiarities of excise taxation of heavy distillates, biodiesel, liquefied gas, butane, and isobutane.

Draft law on clarification of the procedure for determination of land rent payments

On 24.05.2024, the draft law No. 11287 “On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Clarification of Certain Provisions Related to Determining the Amount of Rent Payment for Land” was registered in the Verkhovna Rada of Ukraine.

The draft law proposes to clarify that the rent payment amount for the lease of land plots is set out in the lease agreement and calculated as a percentage of the normative monetary valuation of the land, expressed in monetary equivalent as of the date of the lease agreement conclusion.

As a reminder, the effective legislation establishes that the rent payment amount is set out in the lease agreement upon the parties’ consent. However, there is no requirement to calculate such an amount as a percentage in relation to the normative monetary valuation.

Submission of information from the State Register of Individuals – Taxpayers via the Diia Portal: new draft order

On 28.05.2024, the State Tax Service of Ukraine published a draft order of the Ministry of Finance of Ukraine “On Approval of Amendments to the Regulation on Registration of Individuals in the State Register of Individuals – Taxpayers”.

The said regulation is proposed to be supplemented, in particular, with the following provisions:

• an individual, when receiving public (electronic public) and other services, may submit data on the individual taxpayer number to state authorities, local self-government bodies, legal entities, and individuals, whose information systems are connected to the Diia Portal, by means of the Diia Portal;

• an individual can submit electronic copies of information from the State Register generated using the Diia Portal, in particular, on the sources and amounts of accrued income, accrued (transferred) tax and military duty, which are available in the State Register.

The State Tax Service of Ukraine updated the plan-schedule of conducting documentary scheduled audits for 2024

On 24.05.2024, the State Tax Service of Ukraine on its website published an updated schedule of conducting documentary scheduled audits of taxpayers for the year 2024.

According to the current version, Sections I and II of the schedule were amended.

As a reminder, from 01.12.2023 until 31.12.2024, changes to the schedule can be made on a monthly basis, taking into account force majeure circumstances and the presence/absence of safe conditions for audits.

The updated schedule shall be published no later than the last day of the month in which such updated schedule was approved.

At the same time, from 01.12.2023 until 31.12.2024 inclusively, only certain taxpayers can be included in the schedule of conducting documentary scheduled audits for the year 2024 (taxpayers operating in the field of production/sale of excisable goods, gambling, providing financial and payment services; non-residents operating through separate subdivisions/permanent establishments, separate subdivisions, permanent establishments of a non-resident that meet certain criteria; other taxpayers that, based on the indicators resulting from the 2021 year, meet certain criteria).

Actions of a business entity in case of impossibility to restore primary documents: clarification of the State Tax Service of Ukraine

The State Tax Service of Ukraine (“STS of Ukraine”) has published the clarification regarding actions of business entities in case their offices are destroyed and, accordingly, their archives and primary documents cannot be restored within three months.

The STS of Ukraine states that if, as a general rule, a taxpayer submits to the tax authority notification of loss, damage, or preterm destruction of documents within 5 days from the date of such event, the terms for the relevant tax audits are subject to postponement until the date of restoration and submission of the documents for the audit, however, for a period not exceeding 120 days.

In case the documents are not restored, it is assumed that the taxpayer did not have such documents at the time of tax reporting or compliance with customs, currency, and other legislation.

However, special rules are applicable to taxpayers that operate in the territories of active hostilities or temporarily occupied territories and cannot present primary documents. Such taxpayers shall submit to the tax authority a notification in a random form about the impossibility of transportation and/or losing primary documents. 

If the tax authorities make a decision to apply the said special rules based on the results of consideration of the notification, such taxpayers are not subject to audit by the tax authority in respect of the tax (reporting) periods specified in the notification.

In addition, legal entities must conduct an inventory as of the first day of the month following the month in which the obstacles to access to assets, primary documents, and accounting registers have disappeared and reflect the results of the inventory in the accounting records of the relevant reporting period.

Labor Law Practice

The Cabinet of Ministers of Ukraine amended the deferral procedure for persons liable for military service. 

By its Resolutions № 520 dated May 08 and № 555 dated May 14, 2024, the Cabinet of Ministers of Ukraine amended the deferral procedure of persons liable for military service according to the:

List of Persons Liable for Military Service during Martial Law dated January 27, 2023. N 76.

The resolutions provide for the following changes:

• From now on, the Ministry of Defense will approve the lists of persons liable for military service proposed for deferral for the mobilization period. Previously, such powers were exercised by the General Staff of the Armed Forces of Ukraine;

• Specified the Procedure for deferral of employees of enterprises, institutions, and organizations engaged in the production of goods, execution of works, and provision of services necessary to meet the needs of military formations formed under the laws of Ukraine, as well as employees of enterprises in the fuel and energy complex, enterprises servicing life support systems, and enterprises, institutions, and organizations designated by the Ministry of Strategic Industries as critically important for the functioning of the economy in a particular period in the defense industry, and engaged in the production of goods, execution of works, and provision of services of defense purpose, including development, manufacture, repair, modernization, and disposal of weapons, military and special equipment, ammunition, and their components.

Litigation Practice

Law Strengthening Responsibility for Violating Military Registration and Defense, Mobilization Preparation, and Mobilization Legislation Comes into Force

On May 19, 2024, the Law “On Amendments to the Code of Ukraine on Administrative Offenses Regarding the Improvement of Responsibility for Violations of Military Registration Rules and Legislation on Defense, Mobilization Preparation, and Mobilization” came into force.

The law increases the fines stipulated in Articles 210 and 210-1 of the Code of Ukraine on Administrative Offenses.

From now on, violations of military registration rules during a particular period will incur fines ranging from 1,000 to 1,500 non-taxable minimum incomes of citizens (as of 2024, this amounts to 17,000 to 25,500 UAH).

For violations of legislation on defense, mobilization preparation, and mobilization during a particular period, citizens will face fines ranging from 1,000 to 1,500 non-taxable minimum incomes of citizens (as of 2024, this amounts to 17,000 to 25,500 UAH), while officials will face fines ranging from 2,000 to 3,500 non-taxable minimum incomes of citizens (as of 2024, this amounts to 34,000 to 59,500 UAH).

The Government Approved a New Form of Military ID and Its Issuance Procedure

By Resolution No. 559 of the Cabinet of Ministers of Ukraine dated May 16, 2024 (from now on also referred to as Resolution No. 559), the following were approved:

• The Procedure for the creation and issuance of military registration documents for conscripts, military personnel, and reservists;
• The form of the military registration document.

Resolution No. 559, which came into force on May 18, 2024, ensures the continuity of your military registration documents. It was established that documents issued before the enactment of this resolution are considered valid throughout Ukraine until the new form of the military registration document is issued.

The resolution stipulates that the military registration document is to be created and issued (replaced):

In paper form – on a form approved by Resolution No. 559 at the Territorial Center for Recruitment and Social Support (TCR) at the place of military registration;

With the implementation of Resolution No. 559, you can now access your military registration document more conveniently – through the Electronic Cabinet for conscripts, military personnel, and reservists, the State Web Portal of electronic public services in the field of national security and defense, and the Unified State Web Portal of electronic services (from now on – Diia Portal), including through the Diia mobile application (subject to technical implementation).

The Cabinet of Ministers of Ukraine Approved the Procedure for Conscription of Citizens for Military Service During Mobilization in a Special Period

By Resolution No. 560, dated May 16, 2024, the esteemed Cabinet of Ministers has officially approved the Procedure for the Conscription of Citizens for Military Service During Mobilization in a Special Period.

This Procedure defines, among other things:

• The mechanism for the implementation of powers and interaction between local state administrations, local self-government bodies, enterprises, institutions, organizations, military management bodies, police system bodies, and units, and TCR officials in organizing the conscription of citizens for military service during mobilization in a particular period;
• The Procedure for notifying conscripts and reservists of their arrival at the Territorial Centers for Recruitment and Social Support (TCR);
• The Procedure for verifying citizens’ military registration documents, updating the personal data of conscripts and reservists, and making relevant changes to military registration documents;
• The Procedure for granting conscripts and reservists a postponement from conscription for military service during mobilization in a particular period and its documentation;
• The organization of medical examinations for conscripts and reservists;
• The Procedure for processing conscription for military service during mobilization in a particular period;
• The mechanism for sending conscripts and reservists to places of military service.

Criminal Law Practice

Amendments have been introduced to the provisions of the Criminal Procedure Code of Ukraine concerning the court’s composition in first-instance trials.

On May 16, 2024, the law came into force, requiring that only one judge shall preside over criminal proceedings in the High Anti-Corruption Court.

However, the trial, which began before the law came into force and is conducted in the court of first instance by a three-judge panel, continues and shall be completed by a panel.

In addition, the law provides additional cases of mandatory collegial consideration of criminal cases in the first-instance courts. More specifically, in the court of first instance, criminal proceedings are handled by a three-judge panel, but only if the accused files a motion and has a status of:

• the President of Ukraine, whose powers have been terminated;
• a Member of Parliament of Ukraine;
• the Prime Minister of Ukraine;
• a Member of the Cabinet of Ministers of Ukraine;
• the Prosecutor General, the Deputy Prosecutor General – Head of the Specialized Anti-Corruption Prosecutor’s Office;
• the Head of the Security Service of Ukraine;
• the Director of the State Bureau of Investigation; 
• the Director of the National Anti-Corruption Bureau of Ukraine;
• the Head of the National Agency for the Prevention of Corruption;
• the Head of the Antimonopoly Committee of Ukraine;
• the Ukrainian Parliament Commissioner for Human Rights; 
• the Chairman and judges of the Constitutional Court of Ukraine; 
• the Chairman of the Supreme Court, chairmen of higher specialized courts;
• the Chairman of the High Council of Justice and others.

Participation in the defense of the country, as well as the protection of its independence and territorial integrity, may now lead to parole, according to the new law.

On May 19, 2024, a law came into force, allowing courts to grant parole to individuals who are serving sentences of restriction of liberty or fixed-term imprisonment to perform military service under contract during mobilization or martial law.

However, parole shall not be applied to persons convicted of:

• crimes against the national security of Ukraine;
• the intentional murder of two or more persons, or committed with special brutality, or coupled with rape, or sexual abuse;
• the particularly grave corruption criminal offenses;
• criminal offenses against sexual freedom and sexual inviolability of a person (Articles 152-156-1 of the Criminal Code of Ukraine);
• criminal offenses related to terrorism (Articles 258-258-6 of the Criminal Code of Ukraine);
• the violation of the traffic safety rules or operation of transport by persons driving vehicles under the influence of medicines, where they caused the death of several people (part 4 of Article 286-1 of the Criminal Code of Ukraine);
• the trespass against the life of a law enforcement officer, a member of a community formation for the protection of public order, or a military servant (Article 348 of the Criminal Code of Ukraine);
• a criminal offense by persons who, under subpart. 1, para. 3 of the note to Article 368 of the Criminal Code of Ukraine held a responsible position.

A court may grant parole for military service under a contract if the convicted person has expressed a willingness to perform military service under a contract and meets the requirements for military service under a contract as defined in Article 21-5 of the Law of Ukraine.

The Criminal Code of Ukraine has also been amended to include a crime related to evasion of enlistment for military service under a contract by a person who was released on parole for military service during mobilization and/or martial law.

Efforts have been made to enhance the functioning of the officials overseeing the rights and well-being of detainees.

On April 19, 2024, the law came into force, requiring the appointment of one or more officials responsible for the well-being and rights of detainees within the pre-trial investigation body including a subdivision of the pre-trial investigation unit.

However, this law stipulates that investigators, inquiry officers, heads of pre-trial investigation bodies, heads of inquiry bodies, other employees of the pre-trial investigation body’s unit, and operational units cannot be responsible for the detainees’ stay and ensuring their rights.

Among the novelties regarding the status of an official responsible for the stay and observance of the rights of detainees, it is worth noting that from now on, this official is obliged to:

• explain to the detainee the grounds for his/her detention, rights, and obligations;
• conduct a questioning about the circumstances of detention, use of coercive measures by the authorized official, conduct a personal search and seizure of property, the notification the detainee of the grounds for detention and his/her rights, the notification the third parties of the fact of detention, and the detainee’s health status;
• in case of violations of the detainee’s rights, torture, cruel or inhuman treatment, immediately take measures to stop them and report to the head of the body, which includes a unit of the pre-trial investigation body, and notify the prosecutor in writing.

Criminal prosecution of members of a collegial body under Article 368 of the Criminal Code of Ukraine as per the latest position of the Supreme Court

In the decision dated April 23, 2024, the Criminal Court of Cassation of the Supreme Court (hereinafter – the SC) has provided clarification on the circumstances in which members of a collegial body can be held liable under Article 368 of the Criminal Code of Ukraine.

The essence of the criminal proceedings is that the person, as the head of the sector of investigation, analysis, and accounting of accidents and occupational injuries of the State Labor Service in Chernivtsi region and the chairman of the commission for a special investigation, received an undue benefit for signing and issuing a favorable opinion of the commission for a special investigation of the accident of the death of the director of the State Enterprise “Beregomet Forestry and Hunting Farm” and recognizing it as related to production.

The first-instance court found the person guilty of committing a criminal offense under part 3 of Article 368 of the Criminal Code of Ukraine. The court of appeals upheld the verdict.

Disagreeing with the decisions of the courts of previous instances, the convict filed a cassation appeal, reasoning it, among other things, with the fact that as the head of the commission for special investigations, he had no authority to render decisions independently. In addition, in his opinion, the courts did not pay attention to the SC ruling in case No. 243/1573/17, according to which the qualification of actions under Article 368 of the Criminal Code of Ukraine is excluded if the decision-making is within the competence of a collegial body.

The SC, when examining the complainant’s arguments, observed that a member of a collegial body may be held accountable under Article 368 of the Criminal Code of Ukraine, even if the issue for which an illegal benefit was received is resolved by the collegial body through a unanimous decision following a vote. Furthermore, the outcome of any decision made by a collegial body, whether it is favorable or unfavorable to the party involved in the illegal benefit exchange, is inconsequential. This is due to the fact that Article 368 of the Criminal Code focuses on specific actions, such as receiving unlawful benefits, without requiring the provider to have achieved their intended result.

Moreover, the SC deemed the Supreme Court’s decision on January 13, 2021, in case number 243/1573/17 as irrelevant. The case specifically addressed the issue of the deputy mayor’s lack of authority in determining which municipal property could be privatized.

Thus, members of a collegial body who receive an undue benefit for making decisions or performing actions within the competence of such a body are subjects of relevant corruption offenses.