#01-02 January-February 2014

In focus – International Tax

Ukrainian tax legislation appeared to be changing rapidly throughout the last couple of years. The past year of 2013 was a particularly dynamic period from the international tax perspective.

One of the primary innovations was the introduction of transfer pricing rules. Indeed, the practical implications of new norms are at the forefront of professional discussion among tax advisers of late…

With the support of Tax Regulation

In late 2013, the regulatory framework of legislation of Ukraine in the field of transfer pricing was supplemented with two long-awaited documents.

The Cabinet of Ministers approved the Order of 25 December 2013 No.1042-p with the list of countries (territories), where income tax rates (corporate tax) are 5 or more percentage points lower than in Ukraine. This list includes 73 countries, including Luxembourg, Switzerland, Moldova, Georgia, Cyprus, and United Arab Emirates…

Expert Opinion

Registration, Operation, and Taxation of Representative Offices of Foreign Companies in Ukraine

Larysa V. Vrublevska

Despite the rather severe impact of the global economic crisis on economic processes and the investment attractiveness of Ukraine, foreign companies continue to view our country as an opportunity to expand business and to enter the markets of Eastern Europe. One of the most common options is running a business through a representative office.

Opting in favor of a representative office enables the use of a trademark or a brand name of a foreign company without a licensing agreement, to employ non-resident individuals without obtaining permits from the employment center (just for a given representative office), to exercise direct control over its operation by financing expenses…

In Re

Tax Planning of Foreign Investment into Ukraine

Valeria S. Tarasenko

As in any other jurisdiction Ukrainian legislation contains a number of tax specifics and limitations that foreign investors should keep in mind when structuring their investments in Ukraine.

Investment in Ukrainian companies can be structured either as (i) an equity or as (ii) a debt investment.

Equity investment sets forth establishment of new companies or purchase share capital in existing entities. Upon structuring of equity investment a foreign investor shall consider following tax issues applicable in Ukraine to the return of investment…

The State “Decided” to Determine Market Prices in Transfer Pricing

Vitaliy S. Bakhurinskiy

Recently, the Cabinet of Ministers of Ukraine adopted a number of legal acts in the field of pricing in transferring price. The greatest attention was drawn to two documents that triggered a series of questions and discussions, namely the Direction On Approval of the List of Specialized Businesses Publications for the Purpose of Transferring Prices and the Direction On Approval of the List of the Sources of Information on Market Pricing for the Purpose of Transferring Prices. These orders, according to the opinions of author, give power “in the hand” of supervisory authorities legitimately affecting the price between two counterparties foreign countries that are not accepted…


Financing of Trade Operations Secured by Receivables

Oleh P. Zahnitko, Zoya S. Mylovanova

Financing of trade is a very old but still risky business. Many lenders view loans for trade operations, particularly if secured by inventory purchased using loan proceeds, as a type of unsecured loan — if the borrower can’t sell its inventory, the bank may not be able to either. More risks are involved where the bank finances not only the purchase, storage and transportation of the goods, but also their production.

Besides the current solvency of the borrower, lenders may be too focused on the lien over inventory as their sole security. This is an approach that works as long as the incoming inventory is voluminous and may easily replace as security the goods being sold…


Legal Promotion: Identifying

Alena A. Chernyavskaya

Over the last couple of years the legal business has become very inventive and creative in terms of promoting services, positioning its brands on the market and competing for new clients and projects. For this reason, Yuridicheskaya Practika Publishing initiated the First International Forum for the Promotion of Legal Services that was held on 5 December in Kiev.

Legal practitioners, business development, marketing and PR professionals, representatives of professional media and consultants from different countries came to Ukraine to exchange the latest developments in promoting legal services, share practical experience and discuss emerging opportunities…

Asset-Recovery Strategies in International Litigation

Unstable and high-rate tax legislation in Ukraine remains the main reason for the high interest shown by Ukrainian businesses to use offshore schemes (as well as structures in the “attractive” jurisdictions that are not formally offshore). Moreover, an offshore structure means a foreign owner, and that is why it is also protected by international law. No wonder, the Ukrainian companies are increasingly seeking effective proceedings in the courts of foreign jurisdictions, including English ones.

On 10 December Ilyashev & Partners and their colleagues from Hogan Lovells hosted a joint seminar entitled “International Litigation: Asset-Recovery Strategies in England, Switzerland, Cyprus and BVI”…


Energy Policy Lessons: Creating Opportunities

Dependence on energy import became the fundamental reason for a streamlined policy towards its reduction. The world shale as revolution was followed by a number of production share agreements in the country. At the same time, the renewable side has undergone contradictory legislative changes. The Ukrainian “green” tariff remains one of the highest in Europe. Given the energy saving course, such projects have stumbled on legislative gaps. And finally, a number of energy disputes have arisen…


Alexey Kot

Ukrainian legislation on product sharing agreements provides potential investors with a number of advantages compared to general established legal practice for subsoil users.

First and foremost this refers to certain obligations pursuant to legislation and/or provisions on product sharing agreements. The government provides investors with approvals, quotas, special permits for subsoil use and licenses to carry out the activities of prospecting (exploration) and operation of mineral deposits, mining licenses and other permits… 

Yaroslav Petrov

The recently adopted On Operating Principles of Electricity Market of Ukraine Act of Ukraine, No.663-VII which is effective from 1 January 2014 (the Act), introduces some important amendments to the On Electric Power Industry Act of Ukraine, No.575/97-ВР. Such amendments provide that with effect from 1 January 2015 (i) getting the “green” tariff for electricity produced by electricity generating companies using alternative energy sources (except for certain types of alternative energy sources) with installed capacity exceeding 5 MW, and (ii) financing of 50% of the costs of connection to the grid of electricity generating facilities producing electric power from alternative energy sources will be possible provided that projects for the construction of electricity generating facilities are in compliance with the Ukraine’s unified energy system development plan for the next 10 years (the Plan)… 


Anna Saliy

It is worth mentioning that green legislation in Ukraine is constantly changing. According to the latest changes introduced by the On Operating Principles of Electricity Market of Ukraine Act of Ukraine, alternative energy may be sold in (1) the bilateral contracts market, (2) the day-ahead market, and (3) the balancing market at the prices prevailing in a given market. The obligation to buy, at “green” tariffs, all energy generated from renewable sources, whose obligation shall be valid until 1 January 2030, is imposed on a guaranteed buyer (i.e., a state-owned company designated by, and subordinated to the Cabinet of Ministers of Ukraine) who subsequently sells energy in the day-ahead market…


Nazar Chernyavsky

Large scale energy efficiency projects are usually treated as infrastructure projects, and their financing can ordinarily be afforded only by the state, supranational or large strategic investors due to the lengthy investment return periods. While private companies are more flexible and have better chances to find investors or creditors, the state and municipal sector, which is underfunded in Ukraine, has to come up with some alternative ways to secure financing for such projects…


Markian Malskyy

The number of arbitration cases in the energy sector has indeed grown in our company of late. The majority of such cases relate to price disputes and the supply of energy sources. The peculiarities of the activity of energy companies consist of a challenging business environment, such companies are operating in, the change of regulatory regimes, political and economic inconstancy in the energy sector, shareholder agreements in relation to the energy sector, environmental issues, high-value investments in the energy and high-risk transactions…

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