News (#4 April 2018)


Draft Law on Supreme Anti-Corruption Court adopted in first reading

The Draft Law On the Supreme Anti-Corruption Court (SACC) No.7440, submitted by the President of Ukraine, has been adopted in its first reading.

SACC territorial jurisdiction will extend to the entire territory of Ukraine, but the Draft does not stipulate its actual location.

The courts jurisdiction will be corruption and corruption-related crimes if the amount of the target of crime or damage caused by it is 500 times or more than the subsistence minimum for able-bodied persons established by law at the time of the crimes commission. Other courts cannot consider criminal proceedings for crimes related to SACC jurisdiction.
The exception will be proceedings related to corruption crimes committed by SACC judges or employees, and cases where it is impossible to gather the required composition of the court. In such a situation, a court hearing of criminal proceedings in the first instance will remain with the Court of Appeal, whose jurisdiction extends to the city of Kiev.

Code of Ukraine on Bankruptcy Procedures

The Draft Code of Ukraine On Bankruptcy Procedures No.8060 has been submitted to Parliament.

It is envisaged that this Code will come into force three months after its official publication. From the moment the Code enters into force, the Law of Ukraine
On Restoring the Debtor's Solvency or Declaring it Bankrupt will no longer be valid.

In the Draft, procedures for reorganization and restructuring are described in more detail. Restructuring of the debtors liabilities is defined as a judicial procedure in the event of bankruptcy of an individual, applied to restore the debtors solvency by changing manner and procedure for fulfilling obligations under the debtor's liabilities restructuring plan. The state authority on bankruptcy sets an approximate form of reorganization or restructuring plan.

The reorganization plan may include the following: division of creditors participating in reorganization into categories, depending on tahe type of claims and availability (absence) of security for claims of such creditors, various conditions for satisfying the claims of creditors of different categories, arrangements for obtaining loans or credits and other conditions.

Following the results of reorganization plan performance, the debtor or the administrator (in case of the latter appointment) submits an application to the Economic Court for approval of a report on the performance of the reorganization plan, to which the report on the reorganization plans performance is attached, as well as proof of sending of copies of the application and the report to creditors participating in reorganization, investors and the debtor (if the application is filed by the administrator).

The Economic Court must consider the application for approval of report on performance of the reorganization plan within ten days of the date of its receipt. A decision on appointment of a court session for consideration of this application is sent to creditors participating in reorganization, investors, the debtor and the administrator.

The ruling of the Economic Court on approval of the report on the reorganization plans performance or on refusal to approve the report is adopted. The ruling of the Economic Court on approval of the report on the reorganizations plan performance cancels all measures established by the court.

The following court bankruptcy proceedings are applied to the debtor: i) disposal of the debtor's property; ii) reorganization (solvency recovery) of the debtor; (iii) liquidation of a bankrupt. Thus, an amicable agreement is excluded from the list of judicial procedures (although it is stipulated in Article 149).

Appealing against the procedures does not suspend proceedings in a bankruptcy case.

Also, the issues related to the bankruptcy of an individual are regulated. When adopting a ruling on completion of procedure for debt repayment of the debtor and on completion of proceedings in a bankruptcy case, the Economic Court adopts a decision on debt relief of the debtor who is an individual. Within five years of the individual being declared bankrupt, this person must specify this fact when registering as an individual entrepreneur. During this period, individuals declared bankrupt cannot be involved in independent professional activity as lawyers, private notaries, insolvency officers, private contractors, etc.

Reform in the field of dumping and trade investigations

On 7 March of this year the Government submitted a whole package of draft laws developed by the Ministry of Economic Development and Trade. The draft laws are related to protecting domestic manufacturers from dumping, subsidized imports and other negative phenomena (No. 8102, 8103, 8104, 8105, 8106).

The documents were developed due to the need to bring provisions of effective legislation in the field of trade protection into line with provisions of the World Trade Organization agreements and international practice.

The explanatory note to the Draft Law On Protective Measures states that it was developed to take into account interests of all stakeholders in the context of changes in the economic environment, since domestic manufacturers, importers and consumers (users), whether large companies or small and medium-sized enterprises, should have convenient and effective tools at their disposal when rising imports inflict losses on them or they are threatened with the prospect of protective measures being adopted.

Draft Law on tax on withdrawn capital presented

Ukrainian President Petro Poroshenko has presented the Draft Law of Ukraine On Amendments to the Tax Code of Ukraine Regarding the Tax on Withdrawn Capital.

So, the Tax Code is supplemented with Section III Tax on Withdrawn Capital. According to Article 133, resident taxpayers are business entities legal entities that carry out economic activities both on the territory of Ukraine and abroad (except for non-profit enterprises and legal entities using a simplified tax system).

A taxable item is a transaction on capital withdrawal related to the following:

  • payment of dividends to a tax non-payer in the amount determined by the rules established by Article 136 of this Code;
  • payments in cash and/or in a form different from cash repayment (payment) of contributions to the owner of corporate rights a tax non-payer or a tax non-payer who provides property for trust management or joint activity in the amount determined by the rules established by Article 136 of this Code;
  • payments in cash and/or in a form different from cash payments, carried out by a state unincorporated, public or municipal enterprise for the benefit of the state or local government, respectively, in connection with transfer (after deduction) of a part of the net profit of such enterprise in the manner and terms established by the Cabinet of Ministers of Ukraine or local self-government authorities, in the amount determined by the rules established by Article 136 of this Code.

Also, taxation items are transactions having equal status with capital withdrawal transactions (Clause 134.1.2).

Article 139 provides for three tax rates depending on the tax base: 5%; 15%; 20%. Article 140 establishes the procedure for calculating the tax on withdrawn capital and special rules for preventing tax evasion. If a taxpayer carries out transactions that are subject to tax on withdrawn capital at the expense of the capital withdrawn abroad, which previously fell under withdrawn capital taxation, no tax liabilities for such transactions arise and such transactions are not reflected in tax reporting.

In accordance with the amendments, dividends are defined as payments in cash and/or in a form different from cash payments (including by offsetting counterclaims, assignment of rights or transfer of debt) carried out by a legal entity issuer of corporate rights, investment certificates or other securities, to the owner of such corporate rights, investment certificates and other securities certifying the investor's ownership right to the stake (share) in the issuer's property (assets), on the basis of a decision to pay dividends by the legal entity management, adopted in accordance with the law and the constituent documents of a legal entity.

Some changes are related to transfer pricing (TP). It is envisaged that a taxpayer should submit to the supervisory authority written information in an arbitrary form indicating the data on all persons related to a taxpayer who participated in the chain on the sale of such goods (to the first related counterparty) before 1 October of the year following the reporting year (and not before 1 May as it is now).

Recognized transactions with states (territories), where company income tax rate (corporate tax or similar, or a tax with equal status) is 13% or lower, or which provide economic entities preferential tax treatment will be controlled within the TP framework.

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