October news digest

Corporate Law Practice

The National Bank Strengthens Corporate Governance Requirements for Financial Payment Service Providers

The National Bank of Ukraine (NBU) has established new requirements for corporate governance, internal control, and risk management systems for financial payment service providers, with corresponding resolutions effective from October 29, 2024.

Payment service providers must designate specific divisions responsible for performing internal audit, risk management, and compliance functions (Internal Audit Divisions), or assign these roles to an internal auditor and chief risk officer.

Additionally, the risk officer is to be granted veto power on decisions made by the executive body that impact:

• the business model of non-banking financial payment service providers
• the internal control system and risk management framework
• the pricing policy of the financial payment service provider
• established risk appetite and/or approved risk limits
  Key requirements for internal policies and approaches to operational risk management have also been updated. Full compliance with the updated requirements by financial payment service providers must be achieved by January 1, 2025.

The Cabinet Restores the Option for Extended Deferrals for Military Reservists

Employees who had deferred status as of May 31, 2024, can extend their deferral term. This decision, adopted by the Cabinet of Ministers on October 25, supports the stable operation of strategic industries, including the defense sector.

New Services in “Diia”

Minister of Digital Transformation Mykhailo Fedorov announced the launch of new services in “Diia,” with a focus on business-related services such as eExcise, aimed at enhancing transparency. Testing for eExcise is scheduled for spring 2025, with full implementation planned for 2026.

Additionally, the e-Entrepreneur service has already been launched, allowing users to register a new business, open a bank account, switch to a simplified tax system, and access other essential services in one place. The upcoming Diia.Signature for legal entities will further streamline document signing and company authentication within the system.

15% Purchase Rebate for Equipment

The Ministry of Economy has approved an initial list of Ukrainian-manufactured equipment for which the state will reimburse 15% of the purchase price.

On September 24, 2024, the Cabinet of Ministers launched the “Made in Ukraine” program, approving a decision to provide partial reimbursement for the cost of energy, automotive, construction, and specialized equipment produced by domestic enterprises (localization level over 40%).

To participate in the program, applicants must prepare information on localization level, cost calculations, technological operations, and the calculated share of labor expenses, and submit an electronic application to the Ministry of Economy.

Buyers of goods purchased by December 1, 2024, can receive a rebate this year.

Agricultural Notes Launch to Attract Investment

In early 2025, a new financial instrument—agricultural notes—will be launched in Ukraine. The National Securities and Stock Market Commission has prepared the regulatory framework to ensure the effective functioning of this instrument. On January 1, 2025, a separate Registry of Agricultural Notes will be created to guarantee transparency and security in operations with this financial tool.

The introduction of agricultural notes opens up new funding opportunities for the agricultural sector, providing investors with the means to invest in promising agricultural projects. Our law firm is already preparing to work actively with this new tool, developing guidance on legal regulation and issuance conditions for these securities.

Tax Law Practice | Tax Alert

The Regulation on the State Tax Service of Ukraine has been updated

On October 22, 2024, the Resolution of the Cabinet of Ministers of Ukraine No. 1185, dated October 18, 2024, came into force, clarifying the powers of the State Tax Service of Ukraine as stipulated by the Regulation on the State Tax Service of Ukraine (the “Regulation”), approved by the Resolution of the Cabinet of Ministers of Ukraine No. 227 dated March 6, 2019.

These changes align the Regulation with the Tax Code of Ukraine. Specifically, the following rights of the tax authorities are added:

• to conduct the compliance activities—a system of measures and procedures undertaken by the tax service to increase taxpayers’ voluntary compliance with tax and other obligations and to reduce the probability of tax risk (compliance risk);
• to receive free information from taxpayers, banks, and other financial institutions regarding compliance with deadlines for settlements on export and import transactions set by the National Bank of Ukraine;
• on the basis of a court decision to receive information on the amount and turnover of funds/electronic money on accounts with a bank/non-bank payment service provider, electronic wallets.

The Procedure for blocking and registering tax invoices and adjustment calculations has been updated

On October 18, 2024, the Cabinet of Ministers of Ukraine adopted Resolution No. 1187, “On amendments to the Procedure for suspending the registration of tax invoices/adjustment calculations in the Unified Register of Tax Invoices”.

The amendments provided establish the criteria for the unconditional registration of tax invoices/adjustment calculations for transactions subject to the export security regime and clarify the mechanism for their automated monitoring.

Such changes made to the Procedure are another necessary step to ensure the functioning of the export security regime.

It is worth noting that to prepare for its implementation, the following steps have already been undertaken:

• approved the procedure for determining minimum export prices for certain agricultural products, as we wrote in our August news digest;
• updated tax invoice forms, VAT reporting forms, as mentioned in our tax news digest;
• updated the procedure for maintaining the Unified Register of Tax Invoices, a brief overview of which can be found at this link.

The amendments to the Procedure will take effect on November 21, but the actual functioning of the changes introduced will be possible only after publication and entry into force of the decision of the Cabinet of Ministers of Ukraine on the implementation of the export security regime.

The Procedure for taxpayer registration has been changed

On October 22, 2024, the Ministry of Finance of Ukraine published Order No. 470 dated September 27, 2024, regarding amendments to the Procedure for the registration of taxpayers (the “Procedure”), approved by the Order of the Ministry of Finance of Ukraine No. 1588 dated December 9, 2011.

The amendments to the Procedure mainly provide for bringing it into line with the requirements of the legislation regarding electronic trust services, online communication with taxpayers, tax administration during martial law for taxpayers with a high level of voluntary compliance with the legislation, etc.

Among other things it is envisaged: the introduction of certain technical changes, peculiarities of filling out forms; the necessity for a non-resident to register at a non-main place of registration at the location of its permanent establishments; specification of features of deregistration of self-employed persons, etc.

Additionally, the order makes certain changes to the annexes of the Procedure and approves the new versions of the following forms:

• No. 20-OPP “Application on taxable objects or objects related to taxation or through which activities are conducted”;
• No. 34-OPP “Certificate of registration of a taxpayer, whose information is not subject to inclusion in the Unified State Register”;
• No. 30-OPP “Information on the absence (presence) of tax debt”.

The Procedure for forming and publishing the list of taxpayers with a high level of voluntary tax compliance has been approved

On October 22, 2024, the Ministry of Finance of Ukraine published Order No. 495 dated October 7, 2024, “On approving the Procedure for forming and publishing the list of taxpayers with a high level of voluntary tax compliance”.

As a reminder, the provisions of the legislation regarding taxpayers with a high level of voluntary tax compliance, among other things, determine that the list of such taxpayers is formed and approved by the State Tax Service of Ukraine. In order to implement the above, a procedure has been developed that regulates the formation of a list of taxpayers with a high level of voluntary compliance with tax legislation (the “List”).

The Procedure for forming and publishing the List outlines:

• algorithms for calculating the average indicators for including taxpayers in the List;
• algorithms for calculating the criteria for inclusion in the List;
• procedures for forming and approving the List;
• procedures for publishing the List by the State Tax Service of Ukraine on its official website;
• procedures for notifying a taxpayer about its inclusion in/exclusion from the List;
• procedures for a taxpayer to submit a request to refuse the publication of its data;
• procedures for removing a taxpayer’s information from the published List if the appropriate request to refuse the publication of its data was submitted.
  Additionally, the forms, in particular, of the following notifications were published: notification of inclusion of a taxpayer in/exclusion from the List, notification of refusal to publish data on a taxpayer in the List.

Litigation Practice

The Supreme Court published a digest of court practice in war-related cases

The digest contains legal conclusions that demonstrate the most relevant approaches of the Supreme Court to the resolution of various categories of disputes under martial law: regarding compensation for damage caused by the armed aggression of the russian federation, forced seizure/alienation of property under the legal regime of martial law, regarding passage and release from military service (deferral from conscription, financial support for military personnel), crossing the state border, etc.

In particular, in disputes related to compensation for damage caused as a result of armed aggression of the russian federation, the Supreme Court expressed important positions regarding the procedure for compensation of damage, the proper defendant and judicial immunity of the russian federation in the specified category of cases.

In more detail, the positions of the Supreme Court can be found at the link.

The Cabinet of Ministers has introduced a re-examination of the status of critical enterprises, institutions and organizations

On October 24, Cabinet of Ministers Resolution No. 1204 of October 22, 2024, came into force, amending The Criteria and Procedure for Determining Enterprises, Institutions and Organizations Critical to the Functioning of the Economy and the Life of the Population in a Special Period, as well as to Meet the Needs of the Armed Forces and Other Military Formations.

It is established that the body that made the decision to recognize an enterprise, institution or organization as critical may, if necessary, verify compliance with the criteria set forth in paragraph 2 of these Criteria and Procedure.

Based on the results of the inspection, the authority makes one of the following decisions:

1. on non-compliance with the criteria and revocation of the criticality status;
2. on compliance with the criteria and confirmation of criticality status.

New deadlines for the appearance of conscripts at the TCR: changes in the order of conscription during mobilization

From now on, conscripts and reservists living in regional centers must appear at the Territorial center of recruitment and social support (hereinafter also referred to as the TCR) within seven days from the day of sending the summons by postal means by registered list with a description of the attachment and notice of delivery. For residents of other settlements, this period is ten days.

Previously, the day of appearance at the summons of a reservist or conscript was determined no earlier than the fourteenth day from the day the summons was sent by postal means by registered letter with a description of the attachment and a notice of delivery.

Amendments to paragraph 34 of The Procedure for Conducting Conscription for Military Service during Mobilization in a Special Period were approved by Resolution No. 1134 of October 1, 2024, which entered into force on October 4, 2024.

Criminal Law Practice

The Criminal Code of Ukraine has been amended following the ratification of the Rome Statute of the International Criminal Court and amendments to it

On October 24, 2024, a law came into force aligning Ukrainian legislation with the Rome Statute. Key amendments to the Criminal Code of Ukraine include:

• Introduction of an article criminalizing crimes against humanity within the meaning of Article 7 of the Rome Statute;
• Increased penalties for crime of aggression and public incitement to genocide;
• Establishment of criminal liability for military commanders (or those effectively acting as such) for war crimes, genocide, crimes against humanity, and crimes of aggression committed by subordinates if these crimes fell within the commander’s actual responsibility and control;
• Extension of Ukrainian jurisdiction over foreign nationals and stateless individuals not permanently residing in Ukraine, holding them accountable for war crimes, genocide, crimes against humanity, and crimes of aggression. This applies if such individuals are within Ukraine and are either ineligible for extradition or if extradition requests are refused.

The procedure for concluding plea agreements has been enhanced

On November 1, 2024, a law came into force allowing plea agreements in criminal cases involving corruption and corruption-related offenses.

Under this law, plea agreements can be reached in the following circumstances:

• If a corruption criminal offense or a corruption-related criminal offense was committed in complicity, a plea agreement is possible when the suspect (or accused) exposes other persons in the commission of these offenses and fully or partially compensates for the damage or losses incurred (if such damage or losses were caused);
• If there are no signs of complicity in the commission of a corruption criminal offense or a corruption-related criminal offense, a plea agreement may be concluded when the case materials confirm no involvement of other persons and the suspect (or accused) fully or partially compensates for the damage or losses incurred (if such damage or losses were caused).
  
  A plea agreement in criminal proceedings concerning corruption criminal offenses or corruption-related criminal offenses must be approved by the chief prosecutor of the prosecutor’s office. For example, in criminal proceedings concerning a grave offense, the pre-trial investigation of which is carried out by detectives of the National Anti-Corruption Bureau or which has been submitted to court by prosecutors of the Specialised Anti-Corruption Prosecutor’s Office, such an agreement must be agreed with the Deputy Prosecutor General – Head of the Specialised Anti-Corruption Prosecutor’s Office (person performing his/her duties) or his/her first deputy or deputy.
  
  The most important novelties of this law are the amendments to the section of the Criminal Code of Ukraine on the imposition of punishment. From now on, a person who is convicted of a corruption criminal offense or a corruption-related criminal offense based on an agreement may be sentenced to:
  • A milder penalty than that provided by law, i.e., the primary punishment is lower than the lowest limit established in the sanction of the article of the Criminal Code of Ukraine;
  • A fine even if it is not provided for by the sanction of the article of the Criminal Code of Ukraine.
  • In addition, when entering into an agreement in this category of criminal proceedings, the parties may agree on the discharge from punishment of imprisonment for a term not exceeding eight years or another milder punishment, as well as agree on the discharge from punishment on probation. In this case, additional penalties may also be imposed, including, forfeiture of property.
  • Another nuance of the amendments to the Criminal Code of Ukraine is the consequences of the court’s refusal to approve the agreement. Thus, if the court refuses to approve the agreement initiated at the pre-trial investigation stage, the court proceedings shall continue in the general procedure with the consent of the parties to the criminal proceedings.
  • In case the court refuses to approve the agreement initiated at the stage of court proceedings, the latter shall continue in the general procedure.
  • The parties have the right to initiate changes and conclude a new agreement until the court is retired to the deliberation room.
  • The agreement with the same suspect (or accused) in the same criminal proceedings may be re-applied once if the grounds on which the court refused to approve such an agreement are eliminated.