UKRAINE BUSINESS NEWS - TEN ARTICLES
U.S. Delegation to Kyiv, Ukrtelecom Debt, EBRD, VAT, Biofuels, Salans, E&Y
INDEX OF ARTICLES ------
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1. WHITE HOUSE ANNOUNCES PRESIDENTIAL DELEGATION TO UKRAINE
The White House, Office of the Press Secretary, Wash, D.C., Tue, February 23, 2010
2. UKRAINE'S UKRTELECOM SEEKS DEBT RESTRUCTURING
Ukrtelekom third state firm to seek restructuring, sums far smaller than others that shook market
By Yuri Kulikov, Reuters, Kiev, Ukraine, Tue, Feb 23, 2010
3. EBRD SUPPORTS UNICREDIT LEASING UKRAINE
$25 million credit line to provide leases to local small businesses
European Bank for Reconstruction and Development (EBRD), London, UK, Fri, 19 Feb 2010
4. GOVERNMENT TO RESTART VAT REFUNDS TO GRAIN TRADERS THROUGH AGRARIAN FUND
Interfax Ukraine, Kyiv, Ukraine, Mon, February 15, 2010
5. DEVELOPERS TARGET UKRAINE FOR INTEGRATED FEEDSTOCK AND BIOFUEL REFINERY
U.S. Based Biofuel Innovator GreenShift Tapped for Technology Development
GreenShift Corporation, Business Wire, Kyiv, Ukraine, Tue, Feb 23, 2010
6. ISSUES RELATED TO THE STATE BORDER SERVICE OF UKRAINE'S
REFUSAL TO STAMP THE PASSPORTS OF PEOPLE CROSSING THE BORDER
Tax & Legal News Newsletter, Ernst & Young, Kyiv, Ukraine, Tue, 23 Feb 2010
7. SALANS LAW FIRM ANNOUNCES NEW OFFICE IN BRUSSELS
Salans, Brussels, Belgium, Mon, Feb 22, 2010
8. DUTCH COMPANY TO BUILD A RENEWABLE ENERGY & WASTE RECYCLING PARK IN UKRAINE
Ukrinform, Kyiv, Ukraine, Sat, February 20, 2010
9. UKRAINE: TAX AND LEGAL NEWS - TWELVE ITEMS
Ernst & Young, Kyiv, Ukraine, Mon, 22 February 2010
10. AS A BRIDGE, UKRAINE IS STRONGER TO THE WEST
Letters-to-the-Editor by Bohdan Skrobach, Toronto and Vacslav Glukhov, London
RE: "Ukraine Will be a Bridge Between East and West" by Viktor Yanukovych
The Wall Street Journal, NY, NY, Tue, Feb 23, 2010
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1. WHITE HOUSE ANNOUNCES PRESIDENTIAL DELEGATION TO UKRAINE
The White House, Office of the Press Secretary, Wash, D.C., Tue, Feb 23, 2010
WASHINGTON - President Barack Obama today announced the designation of a Presidential Delegation to Kyiv, Ukraine to attend the Inauguration of His Excellency Viktor Yanukovych, President-elect of Ukraine on February 25, 2010
[1] The Honorable General James L. Jones, USMC (Ret), National Security Advisor to the President, will lead the delegation.
MEMBERS OF THE PRESIDENTIAL DELEGATION:
[2] The Honorable John F. Tefft, U.S. Ambassador to Ukraine
[3] The Honorable Melanne Verveer, Ambassador-at-Large for Global Women’s Issues, U.S. Department of State
[4] The Honorable Philip H. Gordon, Assistant Secretary, Bureau of European and Eurasian Affairs, U.S. Department of State
[5] Ms. Kristina A. Kvien, Director for European Economic Affairs and European Union Relations, National Security Council [NSC]
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2. UKRAINE'S UKRTELECOM SEEKS DEBT RESTRUCTURING
Ukrtelekom third state firm to seek restructuring, sums far smaller than others that shook market
By Yuri Kulikov, Reuters, Kiev, Ukraine, Tue, Feb 23, 2010
KIEV - Ukrainian telecoms firm Ukrtelekom is the latest state-controlled company seeking to restructure its foreign debt, a letter from its chairman of the board to the state communications authority showed on Tuesday.
The letter, seen by Reuters, says Ukrtelekom wants to pay $14 million of the $55.6 million due by Feb. 25 on $500 million in debt owed to Credit Suisse First and Deutsche Bank. The rest, it said, it wants to pay within three months of the deadline.
Similar deals for other state companies have prompted broader concerns about Ukraine's debt ratings and finances, although the scale of the restructuring is far smaller than those sought by energy firm Naftogaz and the state railway.
"We are announcing that using our own funds, we plan to repay 25 percent of the the debt owed to Credit and Deutsche on Feb 25...," the letter said.
"Ukrtelekom is conducting talks with the creditors for a delay of the repayment date for 75 percent of the payment...," it said. The debt was issued in 2005 and Ukrtelekom began making twice yearly payments as of 2008.
The company declined to comment.
Ukrtelekom has been slated for privatisation for years but its initial public offering had been delayed by political wrangling and infighting. Estimates of its value have swung anywhere from $3 billion to $1 billion.
The company has been helped by the state with the issue of the country's only 3G license but is weak in the mobile market against competitors such as Russian MTS (MTSI.MM) and Kyivstar, controlled by Russia's Alfa Group and Norway's Telenor (TEL.OL).
Analysts and investors had worried all last year that Ukraine was on the edge of a sovereign default. Although the state never did delay debt repayments, the technical default of ailing energy giant Naftogaz proved some of those fears right.
Naftogaz successfully renegotiated its debts, but it was the unexpected announcement by state railway firm Ukrzalyznitsya that it wanted to restructure $440 million of a $550 syndicated loan that sent European markets reeling, albeit briefly.
Acting Finance Minister Ihor Umansky said earlier this month the state railway will end restructuring talks within a month.
Despite implicit guarantees, none of the restructured loans were found to actually have a state guarantee which meant that negotiations did not translate into a sovereign default. (Writing by Sabina Zawadzki; editing by Patrick Graham)
LINK: http://www.reuters.com/article/idUSLDE61M1QI20100223
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3. EBRD SUPPORTS UNICREDIT LEASING UKRAINE
$25 million credit line to provide leases to local small businesses
European Bank for Reconstruction and Development (EBRD), London, UK, Fri, 19 Feb 2010
KYIV - The EBRD is continuing to support Ukraine’s banking and SME sectors by providing a loan of $25 million to UniCredit Leasing Ukraine. The loan to UniCredit Leasing acknowledges the importance of leasing as an alternative form of financing for smaller businesses that do not have the resources to buy capital intensive equipment straight away. In the current liquidity crisis, channelling long-term funding through leasing companies provides much-needed support to the real economy.
The loan is a part of the $125 million financing package for the UniCredit Group in Ukraine approved by the EBRD Board of Directors in 2009.
Support for leasing operations is crucial for smaller businesses in Ukraine, since currently most of the banks tend to focus on higher margin retail clients and
larger businesses. As a result leasing increasingly remains is the only viable alternative for SME clients.
This transaction is an important part of the EBRD’s response to the impact of the financial crisis on Ukraine. $870 million, or fifty seven per cent of the Bank’s annual commitments in Ukraine, were signed in 2009 in the banking sector thus providing timely subordinated debt and equity funding to a number of banks in order to reinstate market confidence and stability of the Ukrainian banking system.
The European Bank for Reconstruction and Development is the biggest financial investor in Ukraine. As of 1 January 2010, it had committed €4.8 billion through 194 projects. [EBRD Press contact: Anton Usov, Kiev - Tel: +380 44 270 6132; E-mail: usova@ebrd.com]
LINK: http://www.ebrd.com/new/pressrel/2010/100219b.htm
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4. GOVERNMENT TO RESTART VAT REFUNDS TO GRAIN
TRADERS THROUGH AGRARIAN FUND
Interfax Ukraine, Kyiv, Ukraine, Mon, February 15, 2010
KYIV - Ukraine's government plans to again use the model of granting value-added tax refunds to grain exporters through the Agrarian Fund that was utilized in 2009, Agriculture Minister Yuriy Melnyk said.
"We'd like to start using the model that was used last year and proved to be quite effective – this is the reimbursement of VAT to grain exporters through the Agrarian Fund," he told reporters in Kyiv on February 12. He said the Agrarian Fund has currently over 1.5 million tonnes of grain in stock, which could be used for VAT refunds to grain exporters.
As was reported earlier, Ukraine's government in February 2009 approved an algorithm for reimbursing VAT to traders with grain through the Agrarian Fund. The model suggested that the Agrarian Fund should conclude contracts on the agrarian exchange with traders for the sale of grain at average weighted prices calculated on the basis of previous three trading sessions, but they should not be lower than the purchase price together with storage costs. The offset model was handled via the State Treasury's accounts.
According to experts, the state's delayed VAT refunds to grain traders currently exceed UAH 3 billion, being UAH 400-500 million owed to separate companies. This, according to analysts, has a negative impact on grain export dynamics.
USUBC FOOTNOTE: The announcement above about restarting the model of granting value-added tax refunds to grain exporters through the Agrarian Fund is a bad idea once again. This program is not the answer to the major problem created by the government of Ukraine when they refuse to pay back in a timely manner VAT taxes paid by commodity exporters.
In the past the government has proposed to trade grain, valuing the grain at around a 20% higher price than a fair market price, for VAT refunds owed by the government to commodity exporters. Such transactions have not always been transparent in the past and it has been reported consider corruption was involved as to who was chosen to do the swaps. Also the government was always running out of grain and was not able to complete the program. The governemnt collect the funds from the grain exporters and should just refund the money in a timely manner as do most of the countries around the globe.
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5. DEVELOPERS TARGET UKRAINE FOR INTEGRATED FEEDSTOCK AND BIOFUEL REFINERY
U.S. Based Biofuel Innovator GreenShift Tapped for Technology Development
GreenShift Corporation, Business Wire, Kyiv, Ukraine, Tue, Feb 23, 2010
KYIV, Ukraine - Alternativa (IOM) Limited and GreenShift Corporation (OTC Bulletin Board: GERS) today jointly announced that they have entered into an exclusive supply and cooperation agreement for the purpose of designing and developing sustainable integrated feedstock and renewable energy production facilities.
The companies will initially focus on selected geographies throughout the world that have both abundant undeveloped biomass-derived feedstock resources and the downstream supply-chain infrastructure needed for robust distribution and use of renewable energy and other biomass-derived products at scale.
The first planned facility is planned for Ukraine, and will be designed to process rapeseed into substantial quantities of renewable fuels, edible oils and animal feed in an environmentally-friendly fashion. While the development of the Ukrainian project is at an advanced stage, Alternativa is evaluating several additional sites for development of similar facilities in Russia and Canada.
Each site will be designed to cost-effectively refine undeveloped first-generation biomass resources into value-added carbon-neutral products, but also to include fully-integrated applications of innovative second- and third-generation feedstock production and refining technologies, such as GreenShift's patented and patent-pending oil extraction and Cellulosic Oil(TM) technologies.
Richard Spinks, founder of Alternativa commented: "Alternativa was formed for the prime purpose of developing feedstock growing and sourcing relationships, in Ukraine and elsewhere, ensuring reliable, long-term supplies to an established network of renewable energy projects. Alternativa's team is excited at the prospect of working with the cutting edge technologies available from GreenShift.
"Our team has deep experience in the production of Biofuels Feedstocks and, with the proprietary technologies that GreenShift brings to our projects, we are confident that we can be a leading low-cost producer of biofuels with best-of-class production facilities."
Greg Barlage, GreenShift's Chief Operating Officer added, "Alternativa has a strong business model and a team with the skill-sets needed to successfully develop projects in difficult environments. Alternativa's team is very experienced in Ukraine, Russian and other Central and Eastern European markets, with a strong understanding of the local business climate.
"The Ukraine project has the potential to pioneer Ukraine's move to renewable energy, while providing economic stimulus, increased employment and a valuable contribution to addressing the challenges posed by global climate change. We are excited to have the opportunity to partner with Alternativa in its development of this and future projects."
Spinks concluded: "GreenShift focused on feedstock development years before the rest of the market, and has since invented and commercialized technologies that have created the first scalable large-quantity, second-generation feedstock model world-wide -- a model the U.S. EPA recently predicted will contribute an incredible 680 million gallons per year of feedstock to the renewable fuels industry by 2022.
"We are excited to have GreenShift's experience and support at the start as we build facilities that we hope will set a new standard for the sustainable production of renewable energy products."
About Rapeseed
Rapeseed oil is an excellent feedstock for biodiesel, with applications in transportation, heating and energy production. Rapeseed oil is the preferred biodiesel feedstock in most of Europe, partly because rapeseed produces more oil per unit of land area compared to soybean and other oilseeds.
The natural oil content of rapeseed is approximately 42%, among the highest of biodiesel feedstocks. Extracting oil from rapeseed leaves a valuable rapeseed meal by-product, a high-protein animal feed that is mostly used for cattle feeding, but also for swine and poultry.
The market for rapeseed in the European Union ("EU") is strong, and is characterized by high prices resulting from significant localized demand for rapeseed oil for food and biofuel uses. The volume of rapeseed production has grown substantially in recent years within Ukraine, as the Ukraine government has focused on renewable fuel production.
Alternativa's Ukraine project can be expected to provide a strong, stable base of local demand that Ukraine growers can rely on to increase rapeseed crop production to serve the domestic requirements of Ukraine as well as exports into the EU. Alternativa has already entered into a long term agreement with a major producer of rapeseed towards providing the feedstock for its first planned Ukraine project.
About Alternativa
Alternativa (IOM) Limited is the latest company to be established by British businessman Richard Spinks, the former Chief Executive Officer of Landkom International PLC (LSE:LON), a company he founded in 2005 and built to become one of Ukraine's leading rapeseed growers and the first to achieve a listing on the London Stock Exchange in November 2007. Mr. Spinks has been successfully founding and growing businesses in the Central and Eastern European markets since 1989.
His vision has been and remains to develop and bring fully integrated Agricultural and Renewable Energy Production Assets to the market, thus bridging the gap between reliable feedstock supply and reliable energy production. Mr. Spinks has assembled Alternativa's highly capable development team with proven leaders from 7 countries with strong Finance, Legal and Operational backgrounds, priming Alternativa to establish itself as a leading low-cost producer of renewable energy products with best-of-class production facilities.
About GreenShift Corporation
GreenShift Corporation /quotes/comstock/11k!gers (GERS 0.00, 0.00, 0.00%) develops and commercializes clean technologies designed to address the financial and environmental needs of its clients by decreasing raw material needs, facilitating co-product reuse, and reducing the generation of wastes and emissions. Additional information on GreenShift and its technologies is available online at www.greenshift.com.
Safe Harbor Statement
This press release contains statements that may constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Those statements include statements regarding the intent, belief or current expectations of GreenShift Corporation and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those in forward-statements include fluctuation of operating results, the ability to compete successfully, and the ability to complete before-mentioned transactions. The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
SOURCE: GreenShift Corporation, Phone: 212-994-5374, Fax: 646-572-6336; Email: investorrelations@greenshift.com, www.greenshift.com.
LINK: http://www.marketwatch.com/story/developers-target-ukraine-for-integrated-feedstock-and-biofuel-refinery-2010-02-23?reflink=MW_news_stmp
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6. ISSUES RELATED TO THE STATE BORDER SERVICE OF UKRAINE'S REFUSAL TO STAMP THE PASSPORTS OF PEOPLE CROSSING THE BORDER
Tax & Legal News Newsletter, Ernst & Young, Kyiv, Ukraine, Tue, 23 Feb 2009
KYIV - The State Border Service of Ukraine officials have recently started to refuse to stamp the passports of people who are crossing the border. Enterprises may therefore face difficulties with legally deducting business trips expenses and per diem expenses.
If an employee’s foreign passport is not stamped at a border control checkpoint when he or she takes a business trip outside of Ukraine, he or she cannot be remunerated for per diems (according to the Instruction on Business Trips Within Ukraine and Overseas, adopted by the Order of the Ministry of Finance of Ukraine No. 59 dated 13 March 1998).
Moreover, under para 5.4.8 of Article 5 of the Law of Ukraine “On the Corporate Profit Tax,” per diem expenses cannot be deducted in the absence of supporting documents that confirm the business trip overseas. In practice, the Ukrainian tax authorities could challenge deduction of per diems.
The State Border Service explains that it has not been stamping passports in accordance with recent amendments to Ukrainian legislation, in particular to the Law of Ukraine “On the Border Control” No. 1710-VI dated 5 November 2009, effective 8 December 2009.
According to para 3 of Article 12 of this Law, Ukrainian citizens’ passports should not be stamped unless they specifically request it.
We strongly recommend that you personally request a stamp when you cross the border.
If the Border Service official refuses to stamp your passport upon request, we recommend that you write down his/her full name and official ID number and inform the border control shift’s senior request officer and/or the Dovira Center of the State Border Service of Ukraine hotline at +380 (44) 527 6363. Inform them that the official has refused to perform his duty in violation of the Law of Ukraine “On the Border Control.”
Contacts at Ernst & Young: Tel: +380 (44) 490 3000; Email: kyiv@ua.ey.com
NOTE: Ernst & Young is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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7. SALANS LAW FIRM ANNOUNCES NEW OFFICE IN BRUSSELS
Salans, Brussels, Belgium, Mon, Feb 22, 2010
BRUSSELS - International law firm Salans announces that it will open a new office in Brussels, Belgium, with the recruitment of a seven-person team who will join from Mayer Brown. The opening in Brussels will be Salans’ 22nd office, with an effective start date of 1 March 2010.
The Brussels team will be led by partner Edward Borovikov, a recognised leading trade lawyer. The combination of his practice, which includes trade law and policy work for EU, Russian, Chinese, Turkish and US clients, with Salans’ global footprint ensures that the new Brussels office will be a compelling attraction to both Salans’ and the new team’s clients, given the strategic importance of a Brussels presence to Salans’ global competition, EU regulatory and trade practice.
Salans’ Global Managing Partner, Dariusz Oleszczuk, comments, “Our new team in Brussels, headed up by Edward, fulfils the firm’s recognised need to have a highly-regarded EU competition and trade practice in Brussels which meets our clients’ needs from both inside and outside the EU.
“The Brussels team’s experience in the EU, Russia and China in the areas of international trade and competition, and its strong contact with major corporates, governments and government agencies, provide the perfect fit for Salans in terms of its existing capabilities with its Global Competition Group, its global reach across both developed and emerging markets, and its priorities for future development.”
Together with Borovikov, Rudi Leleu joins as Director of International Trade and both Bogdan Evtimov and Charles De Jager will join as Of Counsels. The new Brussels office will offer trade, customs, antitrust, regulatory and government affairs advice in multiple languages including English, French, Bulgarian, Chinese, Dutch, German, Russian and Spanish.
NOTE: Salans has a major law office in Kyiv, Ukraine and is a member of the U.S.-Ukraine Business Council, Washington, D.C., www.usubc.org.
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8. DUTCH COMPANY TO BUILD A RENEWABLE ENERGY & WASTE RECYCLING PARK IN UKRAINE
Ukrinform, Kyiv, Ukraine, Sat, February 20, 2010
KYIV - The Netherlands-based Next Care Invest B.V. has signed a protocol of intentions with Zhytomyr authorities on the implementation of a project, entitled 'Renewable Energy and Waste Recycling Technology Park,' the local authorities said in a statement Thursday.
The project is a set of the waste management complex with the lines of separation of solid waste and further recycling of paper, plastic and glass installation; the unit for purified gas production from organic waste and biomass; the cattle farm for 5,000 animals in the area of 10,200 ha and the farm on planting biomass (10,000 ha) and forestry (24,000 ha).
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9. TAX AND LEGAL NEWS
Ernst & Young, Kyiv, Ukraine, Mon, 22 February 2010
KYIV - Tax and Legal Newsletter:
Contents
[1] The 180-day rule has been recalled
[2] The case about whether Resolution No.895 of the Cabinet of Ministers of Ukraine complies with the Constitution of Ukraine has been terminated
[3] Taxpayers will receive only general tax clarifications
[4] Non-resident creditor remuneration of tax withheld in Ukraine is prohibited
[5] The Cabinet of Ministers of Ukraine discusses the “tacit approval” principle
[6] Financial institutions are prohibited from changing the interest on loan agreements
[7] The land sale moratorium has been extended until 1 January 2012
[8] Monetary evaluation of land shall be indexed at a 3.2 rate
[9] Budget refunds in connection with acquisition of fixed assets: the STAU generalizes
[10] Transportation and forwarding services: remuneration of the forwarding agent
[11] Certain issues related to international private law in Ukraine
[12] Strategy for reforming the taxation system
[1] The 180-day rule has been recalled
On 11 February, Law No. 1814-VI of 20 January 2010, which recalls the 180-day rule for settlements under foreign economic contacts, took force. Readers will remember that this term decreased to 90 calendar days at the end of 2009. The amendments will take effect starting with the tax period during which Law No. 1814-VI is promulgated
[2] The case about whether Resolution No. 895 of the Cabinet of Ministers of Ukraine complies with the Constitution of Ukraine has been terminated
On 13 January 2010 the Constitutional Court of Ukraine (CCU) adopted Ruling No. 2-уп/2010, by which it terminated the proceedings that the President of Ukraine initiated about the validity of Resolution No.895 of the Cabinet of Ministers of Ukraine “On Regulation of Some Issues Related to Administration of Corporate Profit Tax.” The CCU said that the issues in question were beyond its jurisdiction.
Please recall that on 26 August the Cabinet of Ministers issued Resolution No. 895, which changed the tax accounting procedure for exchange rate differences under foreign currency loans. In particular, it provided that in the tax reports generated for nine months of 2009, the amount of negative profit tax received from recalculating debt in foreign currency may be deducted only in case of debt repayment.
The same procedure governs deducting negative corporate profit tax incurred as a result of recalculating foreign currency in taxpayers’ bank accounts or belonging to their cash offices (see the Newsletter of 2 September 2009).
CCU emphasizes that the Resolution No. 895 applied only to the tax returns for nine months of 2009; it is now void. At the same time, the Court’s authority covers only effective legal acts; the case should therefore terminate. The CCU ruling raised questions about the necessity of complying with the Resolution in filing both profit tax reports for nine months of 2009 and annual tax returns.
[3] Taxpayers will receive only general tax clarifications
The Cabinet of Ministers of Ukraine has obliged the State Tax Administration, the State Customs Service, the State Pension Fund of Ukraine and the general state social insurance funds to provide only general tax clarifications/clarifications of other controlling authorities and to approve them with orders (Resolution No. 86 of 27January 2010).These authorities should also bring earlier clarifications into compliance with this Resolution within a three month period.
Resolution No. 86, which took effect on 12 February 2010, substantially limits taxpayers’ rights to appeal to the tax authorities for tax clarifications. There are also doubts about the extent to which this document complies with current legislation.
[4] Non-resident creditor remuneration of tax withheld in Ukraine is prohibited
In Letter No. 14086/5/22-5016 of 18 November 2009, the State Tax Administration states that making gross up payments for the benefit of non-resident creditors in amounts that compensate for the taxes withheld in Ukraine violates the norms of Ukrainian legislation.
The STAU refers to para 18.2 Art. 18 of the Law “On the Corporate Profit Tax,” which prohibits including in contracts with non-residents tax gross up clauses that provide that income-paying enterprises will pay non-residents’ income taxes.
[5] The Cabinet of Ministers of Ukraine discusses the “tacit approval” principle
The Government of Ukraine has published Resolution No. 77 of 27 January 2010 “Some Issues Related to Application of the Tacit Approval Principle.” As readers will recall, the “tacit approval” principle was included in licensing system legislation within the framework of the Law of Ukraine “On Introduction of Amendments to Some Ukrainian Laws on Simplifying the Conditions of
Business Activities in Ukraine” No. 1759-VI of 15 December 2009.
Resolution No. 77 provides that engaging in business activities without obtaining a permit shall be allowed in 10 working days after the period established for the issuance of this document. This rule will apply if the business entity has not received either the permission document or a refusal within the established time period (10 working days as of the date on the copy of the list of the received documents).
Nevertheless, neither Resolution No. 77 nor any legislative acts directly answer whether the right to engage in certain types of business activities without permission documents is temporary or if an applicant must make certain efforts to obtain the permission document within a certain period of time. Nor does it discuss what happens if an applicant receives a refusal after the 10-day term has ended.
It is logical to assume that an entity that received no answer from a licensing authority can do business during the period for which a license would have been issued. Law No. 1759 says that a license for carrying out certain business activities is issued for an unlimited period. Limiting this period is possible only in the case of certain business activities defined by the Cabinet of Ministers (in these cases the minimum term is five years).
[6] Financial institutions are prohibited from changing the interest on loan agreements
Law No. 1822-VI of 21 January 2010 prohibits financial institutions from changing interest on loan agreements unilaterally (previously this provision applied to banks only). In addition, financial institutions are prohibited from demanding early repayment of the underpaid debt and from terminating the valid loan agreements unilaterally should the borrower disagree with the institution’s proposal to raise interest or any other payment.
Law No. 1822-VI took force on 10 February 2010 and applies to all credit agreements that were concluded or remain in force after that date.
[7] The land sale moratorium has been extended until 1 January 2012
On 2 February 2010, Law No.1783-VI of 19 January 2010 took effect. It states that until at least 1 January 2012 a moratorium on the following will be in force:
а) purchase and sale of agricultural land plots in state and community ownership, except for their seizure (buyout) for public use;
b) purchase and sale or other disposal of land plots and change of designated purpose (usage) of: land plots owned by individuals or legal entities for agricultural commodity production; land plots allotted in kind (afield) to the owners of land plots (shares) for individual husbandry;
c) land plots (shares).
This rule does not apply to their bequeathal, to the cases when one land plot is exchanged for another in line with the Law or to seizure (buyout) of land plots for public use. Please recall that under paragraph 15 Section X of the “Transition Provisions” of the Land Code of Ukraine, the following parts of agreements (including powers of attorney) signed during the moratorium will be deemed invalid as of their signing (authorization): the parts concerning
purchase and sale or disposal in any other way and the parts concerning the transfer of rights to disposal for these land plots and any land plots (shares) in the future.
[8] Monetary evaluation of lands shall be indexed at a 3.2 rate
STAU Letter No. 135/7/17-0317 of 12 January 2010 says that normative monetary evaluation of land of inhabited localities that was performed based on original observations as of 1 April 1996, and monetary evaluation of agricultural land performed as of 1 July 1995, will be subject to indexation at a 3.2 rate as of 1 January 2010. This is of particular importance when it comes to withholding land tax and rental payment for land plots in state and community ownership.
[9] Budget refunds in connection with acquisition of fixed assets: the STAU generalizes
STAU Letter No. 1366/7/07-1417 of 27 January 2010 provided clarifications about obtaining a budget refund if taxable transactions during the last 12 months were less than the declared amount of budget refund and if the tax credit was recognized as the result of acquisition or construction (building) of fixed assets.
The STAU believes that there is a right to a budget refund in such a situation only if the arrival (acquisition, creation) of the fixed assets has been recorded to the enterprise’s balance sheet. If the taxpayer has targeted the built object for sale, it will be recorded to the balance sheet as a commodity (i.e., it is not a fixed asset). As a result, the taxpayer will not have the right to a budget refund.
[10] Transportation and forwarding services: remuneration of the forwarding agent
STAU Letter No. 1120/6/16-1515-26 of 5 February 2010 clarifies VAT treatment of transportation and forwarding services in foreign economic operations.
Overall, the STAU supports the approach that previous clarifications put forth (see Letter No. 10191/7/16-1517 of 18 May 2009). The resident forwarding agent’s remuneration is subject to 20% VAT regardless of the cargo’s route (export/import of services), the status of the consumer (resident/non-resident), the buyer of the services (owner of commodity or carrier) or the carrier (resident/non-resident).
Unfortunately, the Letter does not give a clear answer about determining the tax base in the indicated operations. However, following the document’s logic in general, it is possible to assume that only the forwarding agent’s fees should be taxed.
In other words, while determining the VAT base, the taxpayer should not take into account the expenses incurred in paying for the services of other individuals involved in executing the agreement governing transportation forwarding, in paying the fees (mandatory payments) related to executing the transport forwarding agreement, etc.
[11] Certain issues related to international private law in Ukraine
On 5 February 2010 the President of Ukraine signed the Law “On Introduction of Amendments to Some Legislative Acts of Ukraine with Regard to Regulation of Issues of International Private Law” No.1837 of 21 January 2010. The Law provides for Ukrainian courts to ask international courts to
execute court orders and for the enforcement of international courts’ decisions and orders.
The Law says that decisions of a foreign court will be recognized and exercised in Ukraine if an international treaty says they must be or based on the reciprocity principle.
At the same time, Ukrainian courts execute foreign court orders that were transferred to them according to international treaty, or, in the absence of an international treaty, using diplomatic channels. The officers of the diplomatic representative office or of the Ukrainian consulate in the respective country can also execute court orders.
Court summonses or other documents shall be handed to an individual in person, or to an individual’s representative on receipt. Should the individual refuse to accept the document, it will be marked accordingly and considered handed to the individual. Law No.1837 became effective on 16 February 2010.
[12] Strategy for reforming the taxation system
The Cabinet of Ministers has approved the Strategy for taxation system reform (Regulation No. 1612-р of 23 December 2009).
The Strategy states that the key methods for reforming the tax system will be putting emphasis on indirect taxes instead of direct taxes, eliminating double taxation, reducing and rationalizing tax benefits, simplifying reporting and administration of taxes, etc.
In particular, the Strategy makes the following changes to the structure of taxes and duties: [1] It removes certain fees from the tax and duty list (non-tax payments such as state duties, for example, or inefficient and obsolete payments); [2] It changes the status of certain taxes and duties (in particular, it puts natural gas, electric and thermal energy in the excise duty sphere and cancels special purpose charges; [3] it also introduces a fee for the use of subsurface resources); [4] It introduces a uniform social contribution; It introduces a real estate tax.
Value Added Tax should become the principle source of budget revenues. Given this, plans are to reduce VAT exemptions, to comply with the “first event” rule, to improve the tax procedure for some transactions, to provide for submission of tax reporting in electronic form, etc. The following is planned for the corporate profit tax: Implementation of a matching income and expenses concept; Special rules for taxing entities that invest in countries with harmful tax competition (treaty shopping);
Termination of exemptions;
Introduction of “thin” capitalization;
Improved transfer pricing rules;
Staged reduction of the CPT rate.
Reforming the individual income tax will mean improving the tax exemptions system, changing the procedure for taxing self-employed individuals, unifying the rates of resident and non-resident taxes and harmonizing the principles that govern taxing legal entities and individuals.
The Strategy also provides for improving the following: the collection system and the mechanism for paying excise duty; subsurface resource and rental payments; the ecology tax; and payments to the state social security funds. In addition, plans are for a complex reform of the simplified system of taxation, accounting and reporting for small business entities.
Tax system reform will happen in three stages. In the first stage (2010 to 2011) plans are to adopt a Tax Code of Ukraine, reduce the number of taxes and duties, introduce a real estate tax, etc. The second stage (2012 to 2013) will see a gradual reduction of the CPT, reduction of exemptions and regulation of transfer pricing. The third stage (2014 to 2018) will see a higher individual income tax rate.
Ernst & Young LLC, Mykhailivska Street 7 | 01001 Kyiv | Ukraine, Phone: +380 (44) 490 3000, Fax: +380 (44) 490 3030, Website: www.ey.com/ukraine.
NOTE: Ernst & Young is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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10. AS A BRIDGE, UKRAINE IS STRONGER TO THE WEST
Letters-to-the-Editor by Bohdan Skrobach, Toronto and Vacslav Glukhov, London
RE: "Ukraine Will be a Bridge Between East and West" by Viktor Yanukovych
The Wall Street Journal, NY, NY, Tue, Feb 23, 2010
TORONTO: Letter from Bohdan Skroback: With the election of Viktor Yanukovych, the debate about which direction the new Ukrainian president will take his country has begun, such as with Mr. Yanukovych's own oped "Ukraine Will Be a Bridge Between East and West," Feb. 17. The opposite question also needs to be asked. In what direction will Ukraine make Mr. Yanukovych turn?
A place to look for this answer is the issue of Ukraine joining a customs union with Russia, Belarus and Kazakhstan. Mr. Yanukovych had indicated interest in joining such a union during his campaign, but could Ukraine today realistically do so? Ukraine has become a member of the World Trade Organization.
All the existing members of this other union are not. In disputes within the union, the existing members could engage in any actions they wished, including protectionism. Ukraine would be held to the rules of the WTO, barring it from taking the same actions as Russia, Belarus, and Kazakhstan could. Ukraine would then be at a disadvantage.
The political realities of Ukraine will also have an influence on how Mr. Yanukovych governs in Kiev. Ukraine today is a genuine democracy. It has moved politically away from countries that still are a one-person states. Mr. Yanukovych will not be able to use the same tactics that politicians in such states do.
He has to deal with an open and free media that he cannot attempt to silence. Ukraine is becoming a very different society than the other countries in the former Soviet Union. Mr. Yanukovych will have to govern by these new rules.
Mr. Yanukovych says that Ukraine will be a bridge between East and West. For a bridge to be strong, its pillars must also be. Today, as a bridge, Ukraine would be attached in the West to a pillar that is robust in terms of individual freedoms and democratic rule, the same foundation that Ukraine is being built on. In the East it would be attached to a pillar that remains weak in these attributes. A bridge with a weak support could collapse Mr. Yanukovych's vision.
Bohdan Skrobach, Toronto
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LONDON, Letter from Vacslav Glukhov: Mr Yanukovych unfortunately fails to convince those who want to believe in the possibility of modern, prosperous, vibrant Ukraine. Rather, it seems we should expect more of the same. Like his predecessor Viktor Yushchenko, Mr. Yanukovych does not appear to seek a thriving social, cultural and political landscape, but to "unite" elites for the sake of saving the country—presumably with a mind to the unity of elites that has already been achieved in Russia.
And like Mr. Yushchenko's predecessor President Leonid Kuchma, Mr. Yanukovych does not want Ukraine to make "false choices between the benefits" of the West and of the East. Like his predecessors, instead of championing the rule of law, property rights, market deregulation, better security and governance, and the freedoms to think, to trade and to produce—the only known path to a modern, prosperous nation—Mr. Yanukovych offers ages-old populist slogans.
It is doubtful that more populism is the answer to Ukraine's problems: unrealistic entitlements, a bloated and inefficient public sector, corruption in the judiciary and in all levels of the government, and a national addiction to natural gas from the East.
Also, it is unclear how Mr. Yanukovych will accomplish his stated goals to "create jobs," "stabilize prices so that people can afford the necessities," and ensure "adequate wages and pensions," since the constitution of Ukraine does not give him the necessary power to do so.
Seeing a prosperous, predictable, vibrant, free, and governable Ukraine capable of finding friends all over the world is in the interests of its neighbors, and in the interests of the European Union and the United States. Mr. Yanukovych fails to make convincing arguments that his presidency will bring the country closer to this objective.
Vacslav Glukhov, London
LINK: http://online.wsj.com:80/article/SB1000142405274870 4188104575083042012305312.html?mod=googlenews_wsj
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Promoting U.S.-Ukraine business relations & investment since 1995.
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