September news digest

Corporate Law Practice

uResidency: Opportunity for Foreigners to Do Business in Ukraine Online

Starting from September 2024, Ukraine launched the uResidency program, an e-residency initiative for foreigners who wish to conduct business within Ukraine’s jurisdiction.

uResidency allows foreigners to register a business in Ukraine, receive income from abroad, and automatically pay taxes (5% on income). The project is implemented by the Ministry of Digital Transformation with the support of the EU and the Estonian e-Governance Academy. The e-residency status can be obtained online without traveling to Ukraine. In the initial stage, the service is available to citizens of Slovenia, India, Pakistan, and Thailand.

The Ministry of Justice and the State Tax Service Updated Regulations on Legal Entities

Starting from September 1, 2024, a new procedure for reporting discrepancies in information about the ultimate beneficial owner (UBO) has come into force. In case of any discrepancies, government bodies or financial monitoring entities are required to notify the Ministry of Justice within 10 business days.

New Law on the Registration of Separate Divisions

On September 3, 2024, Law No. 3257-IX came into effect, which stipulates that the registration of separate divisions will be conducted exclusively through the Unified State Register of Legal Entities. Information about existing divisions will be automatically transferred by the Ministry of Justice.

Changes in Currency Regulation

On September 10, 2024, the National Bank of Ukraine (NBU) eased currency restrictions for enterprises, allowing the purchase of foreign currency for CO2 emission offsets, VAT payments in the EU, and coupon payments for eurobonds. At the same time, the NBU introduced new limits on foreign payments for certain categories of goods and services.

Launch of a Unified Electronic Permit System

On September 18, 2024, the Unified State Electronic Permit System (ePermit) will be launched, allowing entrepreneurs to register declarations of compliance with occupational health and safety requirements online.

Tax Law Practice | Tax Alert

The introduction of a guaranteed excise tax obligation has been suggested

On September 17, 2024, a draft law No. 12038 “On Amendments to the Tax Code of Ukraine regarding certain issues of excise tax administration” was registered in the Verkhovna Rada of Ukraine.

This draft law suggests the introduction of a guaranteed excise tax obligation for producers of ethyl alcohol and bioethanol, which will be calculated based on the maximum productivity of the equipment for the respective product.

Thus, producers of ethyl alcohol and bioethanol, when calculating the excise tax for the corresponding tax period, will be required to consider the guaranteed tax obligation, which is calculated according to the formula defined in the draft law.

If the amount of the guaranteed tax obligation exceeds the amount of excise tax obligations determined by the taxpayer based on the results of operations, they will be required to increase the excise tax amount in the tax declaration by the difference.

The draft law to clarify the procedure for conducting unscheduled documentary audits

On September 23, 2024, the Verkhovna Rada of Ukraine registered draft law No. 12055 “On Amendments to Article 78 of the Tax Code of Ukraine to clarify the procedure for conducting unscheduled documentary audits.”

The draft law suggests defining specific deadlines within which the tax authority must decide to conduct an unscheduled documentary audit of a taxpayer following the submission or non-submission of a response by the taxpayer to a request from the controlling body.

In particular, it is suggested to supplement paragraph 78.4 of Article 78 of the Tax Code of Ukraine with a provision that requires the head of the controlling body to make a decision on conducting an unscheduled documentary audit within 15 working days from the day after the taxpayer’s response to the request from the controlling body is received, provided there are grounds defined in paragraph 78.1 of this article of the Code, or from the day of non-receipt of a response from the taxpayer in the prescribed manner.

Moreover, the decision to conduct such an audit must contain an exclusive list of grounds for its conduction and must be formalized by an order.

Establishing a timeframe for deciding on the audit eliminates the current legislative uncertainty, under which the tax authority could decide to conduct an audit after a significant amount of time has passed since the response to its request was provided.

Updated Procedure for maintaining the Unified Register of Tax Invoices

On September 25, 2024, amendments introduced by the Cabinet of Ministers of Ukraine resolution No. 1088 as of September 24, 2024, to the Procedure for maintaining the Unified Register of Tax Invoices, approved by the Cabinet of Ministers of Ukraine resolution No. 1246 as of December 29, 2010, came into force.

These changes align the provisions of the Procedure for maintaining the Unified Register of Tax Invoices with the Tax Code of Ukraine.

The amendments include provisions that stipulate the following:

• For the period until the cessation or cancellation of martial law:
  • The operational day for registering tax invoices (“TI”) and/or adjustment calculations (“AC”), which is the deadline for their registration, lasts from 00:00 to 24:00.
  • The registration of TI/AC submitted on the deadline day and the issuance of receipts must be completed no later than the next operational day after their submission.
• For the period of export security regime:
  • The registration of TI/AC reflecting the export of goods outside the customs territory of Ukraine under the export security regime and the issuance of receipts must be completed within three operational days from the date of their submission.
  • The registration of the TI/AC mentioned above will be canceled after 30 calendar days from the date of tax invoice registration if no customs declaration for the respective goods has been issued within that period.

Review of Supreme Court practice in administrative cases for August 2024 has been published

On September 18, 2024, the Cassation Administrative Court within the Supreme Court published a review of current judicial practice for August 2024.

In this review, the Supreme Court highlighted positions on the following issues:

• The formation of tax credits based on temporary customs declarations in the context of the application of the “arm’s length principle.”
• Accounting for VAT on expenses that exceed established norms and are not used in business activities.
• The absence of an obligation to account for raw material losses when determining tax liabilities in the processing of specific products.
• The need to consider not only formal technical conditions but also the actual characteristics of a product that may affect its value when determining tax liabilities in controlled transactions.

Litigation Practice

The Ministry of Justice has opened online access to information about debtors in bankruptcy cases

Starting from September 6, 2024, the Ministry of Justice of Ukraine has opened access to a specialized webpage, allowing users to retrieve information about debtors involved in bankruptcy or insolvency proceedings.

Through an electronic request, users can generate a report on the status of entities in bankruptcy. The report can be saved, printed, and includes a mandatory QR code for verification. This service is free, and access is granted after authentication and authorization on the portal.

Starting October 1, the first online auctions will be launched as part of the “Land Bank” project

On October 1, 2024, the first online auctions will be launched within the framework of the “Land Bank” project, providing a transparent platform for leasing state land in Ukraine.

The project offers equal conditions for all participants, aiming to foster the development of agriculture in Ukraine. Currently, 65 auctions for state land leases have been announced across 9 regions, with the most land available in Vinnytsia, Zaporizhzhia, and Cherkasy regions. Farmers and agricultural companies can lease over 4,000 hectares of land, with starting lease prices ranging from 9,000 UAH to 1.14 million UAH.

Explore available lots on the “Prozorro. Sale” electronic trading system or the “Land Bank” website.

Postponement during mobilization granted for half-siblings of deceased or missing defenders

On September 7, 2024, Law No. 3916-IX came into effect, amending the Law of Ukraine “On Mobilization Preparation and Mobilization” and expanding the list of individuals eligible for postponement from military service during mobilization.

The Law grants postponement to military personnel whose half-brothers or half-sisters were killed or went missing during the Anti-Terrorist Operation or military operations against russian aggression in the Donetsk and Luhansk regions. Additionally, the right to postponement is also granted to half-siblings of those posthumously awarded the title of Hero of Ukraine for their bravery during the Revolution of Dignity (2013-2014).

Find more information on the recent changes to the mobilization law on the Ministry of Defense website.

Criminal Law Practice

Procedural guarantees for the accused: amendments are necessary

Continuing the discussion on the “Lozovyi amendments,” attention must be paid to the issue of protecting individuals charged with criminal offenses from prosecutorial arbitrariness. The guarantees of the Criminal Procedure Code of Ukraine (CPC) should be expanded.

In particular, this concerns the extract from the Unified Register of Pre-trial Investigations (URPTI), which documents the entire pre-trial investigation. The CPC briefly mentions the need to submit this extract to the investigating judge but does not specify the required information. This limited extract often lacks critical details about the progress of the investigation, leaving the defense without full access to vital information.

It is crucial to amend the law to mandate the inclusion of full information from the URPTI in motions for preventive measures and upon the completion of the pre-trial investigation. Moreover, the prosecution should be legally obliged to provide the defense with digitized case materials during the disclosure stage, especially during martial law, to prevent procedural delays.

Statute of limitations for criminal prosecution for unauthorized land occupation and construction: Supreme Court position

In case No. 353/999/23, the accused was charged with the unauthorized construction of a garage on arbitrarily occupied land in September 2019, a criminal offense under Section 3 of Article 197-1 of the Criminal Code of Ukraine. The first-instance court dismissed the charges due to the expiration of the statute of limitations, and the court of appeal upheld this decision.

However, in its judgment of September 9, 2024, the Joint Chamber of the Criminal Court of Cassation agreed with the prosecutor’s arguments that the offense under Part 3 of Article 197-1 is a continuous crime. The criminal activity continued until the offense was terminated or interrupted, meaning that the statute of limitations had not expired, and the prosecution remained valid.

The Supreme Court has provided clarity on asset forfeiture

In case No. 183/4229/23, the local court ruled to transfer to the state funds received from the sale of a stolen vehicle. The Court of Appeal upheld this decision.

In its judgment of September 16, 2024, the Joint Chamber of the Criminal Court of Cassation clarified that asset forfeiture, under Articles 96-1 and 96-2 of the Criminal Code of Ukraine, is not a criminal penalty and does not increase the scope of the charge. The court confirmed that the decision to apply asset forfeiture is made in the form of a ruling, in accordance with Part 1 of Article 418 of the CPC of Ukraine.