News (#5-6 May-June 2020)

Law digest

Parliament prolonged benefits in force for business and health professionals

The Verkhovna Rada supported in the first reading Draft Law No. 3329-d, intended to extend existing tax preferences and to introduce some additional ones for the period of quarantine, as well as to exempt the salaries of health professionals and other employees combating COVID-19 from taxation until 30 June. A total of 333 MPs supported the relevant decision. Amongst other things, the Draft Law proposes to extend the period of tax benefits currently in force and to decrease administrative management for business as established in previous anti-crisis Draft Laws Nos. 3219, 3220, 3275.

Draft Law No. 3329-d also envisaged a reduction in the minimum authorized capital of banks from UAH 500 million toUAH 200 million and the extension of simplified bank capitalization procedures till 1 August 2024.

Moreover, exemption from fines and penalties for non-payment under consumer loans is continued till 30 June, and exemption in the month of May from payment of the single social payment for private entrepreneurs and persons engaged in professional independent activity.

Parliament supported draft law on banks in first reading

The Verkhovna Rada supported Draft Law No. 2571-d on the improvement of certain mechanisms regulating banking activities in the first reading.

The Draft Law states that the owners and ex-owners of a bank, whose interests have been violated due to withdrawal of a financial institution from the market, can receive compensation only in monetary form.

Moreover, recognition of the decision on a banks withdrawal from the market as illegal cannot constitute grounds for cancellation.

The National Bank of Ukraine has taken 104 banks from the market since 2014. The explanatory note to the law states that some banks taking advantage of an imperfect judicial system are trying to return to the market, which creates systemic risks for financial stability.

In the Draft it is also proposed to include Article 266-1 to the Code of Administrative Legal Proceedings of Ukraine.

This Article stipulates that a court decision cannot be grounds for returning the bank to its ex-owners. Also, the court decision does not restore the banks position, which existed prior to the decision on its liquidation or revocation of license, and cannot be a reason to reverse the decision on its liquidation: A court cannot take any other decision that may result in the suspension/termination of a process of an insolvent banks withdrawal from the market and/or of a banks liquidation.

Rada adopted amendments to state budget

At its extraordinary sitting on 13 April, the Verkhovna Rada supported the anti-crisis budget in the final reading. According to the document, it is proposed to increase the state budget deficit by UAH 202 billion to UAH 298.4 billion (from UAH 96.3 billion), revenues are reduced by UAH 119.75 billion to UAH 975.8 billion (from UAH 1,095.6 billion), expenditure is increased by UAH 82.4 billion to UAH 1,266.4 billion (from UAH 1,184 billion).

The budget also includes a fund to combat COVID-19 to the amount of UAH 64.9 billion.

In terms of revenue, tax proceeds are reduced by UAH 145.4 billion, mainly due to a decrease in domestic taxes on goods and services and VAT on import.

The document also provides for a reduction in a number of spending articles. In particular, expenditures on the payment of benefits and housing subsidies to citizens are reduced, expenditure on support and development of amalgamated territorial communities, on payment of certain types of allowances, compensations, cash support and payment of services to certain population categories are also reduced (deadline for the introduction of increased amounts of some social benefits has been postponed from 1 January to 1 July 2020).

Expenditure on the operations of the Energy Efficiency Fund was reduced by UAH 1.6 billion, statistical observations by UAH 1.2 billion, and UAH 2.3 billion was withdrawn from physical training and sports development. Capital spending for central executive bodies was reduced by over UAH 1 billion.

Moreover, until the end of quarantine and starting from 1 April, the salary of government officials should not exceed UAH 47,000. This is applicable to judges, MPs, prosecutors, the NBU, CEC employees, and many other officials.

According to Ukrinform, the government has revised its macro forecasts for 2020. In particular, the forecast for Ukraines GDP for 2020 has been revised. A decline of 3.9% is now expected compared to growth of 3.7% which was projected prior to the global crisis. The unemployment rate will be 9.4% against the projected figure of 8.1%, and the fall in real wages will be 0.3%.

The average annualhryvnia exchange rate to theUS dollar is expected at UAH 29.5 (compared to UAH 27 per dollar forecast in October 2019). The growth in prices on the consumer market will only temporarily rise to 8.7% (compared to 5.5% in the previous forecast), and it will return to the target figure of 5% in 2021, the Cabinet of Ministers promises.

Reform set to open up land market open in 2021

The Verkhovna Rada passed the Law On Agricultural Land Turnover.

According to the updated version of the document, the moratorium on the sale of agricultural land will be lifted on 1 July 2021.

A reminder that the opening of the land market was one of the requirements set by the International Monetary Fund for continuing cooperation.

According to the law, there will be restrictions on the purchase of land. No more than 100 hectares per customer during the first two and a half years. From 2024, the limit will be up to 10,000 hectares per customer as envisaged in the latest draft.

From 1 July 2021 to 2024, the right to purchase land will be granted only to individuals. Legal entities are prohibited from purchasing agricultural land.

The sale of state and communal lands is prohibited.

The issue on granting foreigners the right to purchase land will be resolved in a referendum. Nevertheless, foreigners are prohibited from purchasing land located closer than 50 km from the state border of Ukraine regardless of the results of the promised referendum.

It is envisaged that a land tenant is granted the preemptive right to purchase. The land tenant will have the opportunity to transfer the respective preemptive right for land purchase to another person, but the owner must be notified of this in writing.

The minimum price shall, until 2030, not be less than the standard monetary sum.

The Ukrainian Journal of Business Law

Subscribe to The Ukrainian Journal of Business Law right now and enjoy the most relevant issues on doing business in Ukraine on your device or in print.

All this for just USD 9.99 a month.


Subscribe now