News (#03 March 2019)

Law digest

State Budget of Ukraine to be planned three years in advance

At the beginning of December 2018 the Verkhovna Rada adopted a law in its second reading on the introduction of three-year budget planning. In particular, Parliament should approve the budget for the next three years by 15 July 2019.

A reminder that at the beginning of January, Ukrainian President Petro Poroshenko signed Draft Law No. 8044 On Amendments to the Budget Code of Ukraine (regarding implementation of mid-term budget planning).

The Ministry of Finance said in comments on the lawТs adoption that from now on all ministries and state institutions would be able to plan reforms taking into account their budget headroom over the long-term.

Ukraine and Switzerland amend convention on double taxation

The Protocol to amend the Convention On Avoidance of Double Taxation concluded between the Government of Ukraine and the Swiss Confederation with respect to taxes on income and capital was signed. Execution of this Protocol is aimed at avoidance of double taxation of incomes of individuals and legal entities on the territories of the two countries. The stated will be achieved both by dividing the taxation rights related to certain types of income between Ukraine and Switzerland depending on where they arose, and by accounting for the amounts of taxes paid in the territory of one state within the tax liabilities of a taxpayer in the other state.

The ProtocolТs provisions comply with the requirements of the OECD Model Convention and BEPS Action Plan (rules to counter base erosion†and†profit†shifting).

The signed Protocol provides for:

Ч an increase in the tax rates on interest and royalty from 0% to 5%;

Ч a new article on improving the mutual coordination procedure (tax dispute resolution) through arbitration;

Ч new wording of the article on information exchange, which establishes significant empowerment of the contracting states as to exchange of information on tax without reservations regarding requirements of national tax interest or banking secrecy;

Ч standards on application of the right to receive benefits Ч benefits will not be provided in relation to the type of income or property if one of the main objectives of any arrangement or agreement between economic entities was the direct or indirect intent to receive such benefits by them. The mentioned rates and provisions comply with the general practice of conclusion of such international treaties on avoidance of double taxation and protocols to them signed between Ukraine and other countries.

Upon execution of the Protocol, Ukraine and Switzerland should implement the internal state procedures necessary for ratification of the Agreement.

Parliament adopted law on protection of economic competition

The document provides for introduction of amendments to fundamental laws in the field of protection of economic competition and are intended to enshrine in them the rights of persons participating in cases considered by the bodies of the Antimonopoly Committee of Ukraine, to guarantee such rights as well as mechanisms for their implementation.

The law determines the time limits, during which the consideration of cases on violation of the Law On Protection of Economic Competition should be performed. The person, against which the case has been initiated, has the right to know what violation he or she is suspected of.

Such person is also entitled to employ the services of an interpreter/translator; to review the case files and all the evidence, on which the Antimonopoly Committee of Ukraine has based its decisions, including settlement of issues related to balancing this right with the right to protect confidential information of other persons in relation to it.

The document provides for improving the institution of hearing of cases, in particular (similarly to the corresponding institution existing in EU competition law), enshrining the right of a person to be heard by the authorized official independent of the investigation, prior to adoption of the decision in the case by a body of the AMCU.

Moreover, it enshrines the fact that the legal entity is granted the right to give comments and remarks to provide explanations for its employees who were not authorized to give any explanations on behalf of such legal entity on issues related to the performance of their official duties.

The law also enshrines the fact that the persons participating in the case have the right to challenge AMCU officials who carry out certain procedural actions when considering a case, subject to the existence of relevant grounds to that effect.

The law also provides for:

Ч perfection of the program on exemption from liability for performance of anti-competitive concerted actions by competitors (cartels) (leniency);

Ч establishment of rules for dispute resolution in cartel cases (settlement);

Ч ensuring confidentiality of relations between a lawyer and a client (legal privilege);

Ч ensuring conditions for effective enforcement by the person, in respect of which the body of the AMCU adopted the decision, of its right to lodge a judicial appeal against such a decision.

To a considerable extent, the document makes possible implementation of the principle of the rule of law, particularly the standards of a fair trial enshrined in Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and the appropriate decisions of the European Court of Human Rights.

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