Verkhovna Rada of Ukraine abolishes restrictions on the use of the hryvnya in foreign economicsettlements

On 20 December 2011 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amending Article 7 of the Decree of the Cabinet of Ministers of Ukraine ‘On the System of Currency Regulation and Currency Control’” (Draft Law № 9488). The Law will take force on the date it is published. Verkhovna Rada adopts the Law of Ukraine “On Amending the Tax Code of Ukraine Regarding Revision of the Rates of Certain Taxes andLevies”

This Law (Draft Law № 9356), which the Verkhovna Rada adopted on 22 December 2011, envisages increasing taxes and levies rates based on the consumer price index and the index of industrial product producer prices. The following taxes and levies will beaffected in particular:

1. excise tax;
2. levy for the initial registration of a transport vehicle;
3. eco-tax;
4. tax on land plots without normative monetary valuation;
5. levy for the use of the radio frequency resource of Ukraine;
6. levy for subsoil use for the extraction of mineral resources;
7. levy for subsoil use that is not related to the extraction of mineral resources;
8. levy for the special use of water;
9. levy for the special use of forest resources.

If the President of Ukraine signs it, the Law will take force on 1 January 2012, except for the amendments regarding the increase of the excise tax on ethyl spirits and other spirit distillates and alcoholic beverages. This excise tax will take force on the first day of the third month following the month of the Law’spublication.

On 22 December 2011 the Verkhovna Rada adopted the Law of Ukraine “On Amending the Tax Code of Ukraine Regarding Provision of Support to the Manufacturers of Agricultural Products” (Draft Law№ 9345-д)

The Law specifies a mechanism for paying compensation to the manufacturers of agricultural products for milk and meat sold toprocessing companies.

In particular, instead of the entire amount of value added tax due being remitted to the special fund of the State Budget of Ukraine, it will be divided and partly paid to a special account that the processing company has opened with the state treasury authority, in the followingproportion:

1. in 2012 – 30% to the special fund of the State Budget of Ukraine and 70% to the special account;
2. in 2013 - 40% to the special fund of the State Budget of Ukraine and 60% to the special account;
3. in 2014 - 50% to the special fund of the State Budget of Ukraine and 50% to the special account.

The tax remitted to the special account must be used to pay compensation to the manufacturers of agricultural products for milk and meat sold. The tax paid to the special fund of the State Budget of Ukraine must be used in a manner established by the Cabinet of Ministers ofUkraine.

If signed by the President, the Law will takeforce on 1 January 2012.

The Law of Ukraine “On Amending the Tax Code of Ukraine and Other Legal Acts of Ukraine Regarding the Simplified System of Taxation, Accounting and Reporting” № 4014-VI dated 4 November 2011takes force on 1 January 2012

For more detailed information on the Law, please see our Tax and Legal Newsletters of 21October 2011 and 16 November 2011.

The Law of Ukraine “On Amending the Tax Code of Ukraine Regarding Promotion of Investments in the Domestic Economy” № 4057-VI dated 17 November 2011 takesforce on 1 January 2012

The Law envisages prolonging until 31 December 2012 the special tax regime for insurance companies that is stipulated by point 8 of sub-section 4 of section ХХ “TransitionalProvisions” of the Tax Code of Ukraine.

For more details please see our Tax and LegalNewsletter of 23 November 2011.

The Law of Ukraine “On the State Land Cadastre” № 3613-VI dated 7 July 2011 takes force on 1 January2012

The Law regulates the maintenance of the State Land Cadastre and envisages a procedure for the state registration of land plots, including thegrounds and terms for their registration.

For the first time an exhaustive list of documents concerning land tenure and land valuation has been introduced. It will serve as the basis for making amendments to the data in the State Land Cadastre. Only the district (city) territorial authorities of the central body of the executive power on land resources will review documentsand record information about land plots.

In addition, the Law establishes the requirements for opening, maintaining and closing the Land Book of the State Land Cadastre, which contains data on a given landplot (its cadastre number, location and designation purpose; restrictions on use; area;normative and expert monetary valuation;information about its owners and users;registered tangible rights to the land plot, etc.)

The Law of Ukraine “On the List of Documents of a Permissive Nature in the Sphere of Business Activity” № 3392-VI dated 19 May 2011 takes force on 1 January 2012

The Law introduces a List of documents of a permissive nature for the conduct of certain actions in business activity. Upon the Law’s enactment executive power bodies and local selfgoverning authorities, as well as organizations authorized to issue documents of a permissive nature, will not have the right to demand that business subjects obtain permits if obtaining them is not stipulated by the law and they are not included on the List.

Documents of a permissive nature envisaged by Ukraine’s international agreements, which are not on the List, will be issued according to the requirements of those international agreements.

The Law will not govern the requirements regarding the list of documents of a permissive nature in the spheres of state export control, state regulation of the finance services markets, protection of the state secrets (conduct of activity related to state secrets), business competition protection and the use of atomic energy.

The Law of Ukraine “On Amending Certain Legal Acts of Ukraine Regarding Intensification of Liability for Non-compliance with Legislation on Personal Data Protection” № 3454-VI dated 2 June 2011 comes into force on 1 January 2012

The Law introduces amendments to the Criminal Code of Ukraine and the Code of Ukraine on Administrative Violations stipulating liability for the breach of legislation on personal data protection. In particular, new norms are introduced that will regulate the following violations:

1. illegal gathering, storage, use, destroying and spreading of confidential information about a person or illegal change of such information;
2. failure to inform or informing in an untimely manner of a person about his /her rights in connection with the inclusion of his/her information in the database of personal data, the purpose for gathering such data and the persons that will receive the data;
3. failure to inform or informing in an untimely manner of the authorized state body in the sphere of personal data protection about the change of information that is being submitted for purposes of state registration of databases of personal data;
4. evasion of state registration of a database of personal data;
5. non-compliance with the requirements of authorized state body officials in the sphere of personal data protection regarding elimination of legislative violations in protection of personal data.

It should be noted that on 21 December 2011 the Verkhovna Rada received a Draft Law (№9624) which envisages changing the Law’s enactment date from 1 January 2012 to 1 July 2012.

The Law of Ukraine “On Amending Certain Laws of Ukraine Regarding Financial Services Markets Regulation” № 3462-VI dated 2 June 2011 comes into force on 9 January 2012

The Law envisages intensification of the liability for violations in the financial services markets and protection of financial services consumers’ interests.

The Law also defines a number of concepts for the purposes of the Law of Ukraine “On Financial Services and State Regulation of Financial Services Markets” and establishes the specifics of information disclosure by financial institutions, including via reports on corporate governance.

Changes in the financial statementssubmission procedure

On 11 November 2011 the Resolution of the Cabinet of Ministers of Ukraine “On Amending the Financial Statements Submission Procedure” № 1223 was adopted. It stipulates that annual and consolidated financial statements should be prepared in accordance with the Principles (Standards) of Financial Accounting or International Financial Reporting Standards(IFRS) in line with the law.

According to the Resolution, IFRS will beobligatory for:

1. public companies, banks, insurance companies – starting from 1 January 2012;
2. entities providing financial services (except for insurance and pension provision) – starting from 1 January 2013;
3. entities performing auxiliary business activities in the sphere of financial services and insurance – starting from 1 January 2014.

In addition, the Procedure is augmented by a regulation that requires entities preparing financial statements according to the IFRS to send relevant information to the state statistics authorities within the terms set for thesubmission of financial statements.

Resolution of the Board of the National Bank of Ukraine “On Approving the Instruction about the Procedure of Preparation and Publication of Bank Financial Statements” № 373 dated 24October 2011

The Instruction envisages a single form for bank financial statements prepared according to the International Financial Reporting Standards (IFRS). The banks must ensure compliance with the requirements of the Instructions, approved by the Resolution № 373, starting from the 1st quarter of 2012 during the preparation, submission and publication of interim (quarterly)financial statements.

The Instruction grants banks the right to prepare annual and consolidated financial statements for2011 in accordance with:

1. Instruction on the Procedure of Preparation and Publication of Financial Statements of Ukrainian Banks, approved by Resolution № 373; or
2. Instruction on the Procedure of Preparation and Publication of Financial Statements of Ukrainian Banks, approved by Resolution of the Board of the National Bank of Ukraine № 480 dated 27 December 2007.

As a reminder, the previous Instruction, approved by Resolution № 480, envisaged a requirement to prepare financial statements according to (і) IFRS, (іі) national standards of financial accounting, and (ііі) normative andlegal acts of the National Bank of Ukraine.

“Amendments to the Procedure of Preparation and Submission of the Report on the Unified Social Security Contribution, Approved by Resolution of the Board of the Pension Fund of Ukraine № 21-1 dated 27 September 2010” take force on 1 January 2012 (amendments approved by Resolution of the Board of the Pension Fund of Ukraine № 32-3dated 25 October 2011)

The Resolution introduced amendments to the Procedure of Preparation and Submission of the Report on the Unified Social SecurityContribution, in particular:

1. Table 1 “On Accrual of the Unified Social Security Contribution” of Appendix 4 was presented in a new edition;
2. Appendix 2 “Table on Conformity of Insured Persons Codes and Codes of the Accrual Basis and Rates of the Unified Social Security Contribution” is augmented with new codes of insured persons (36-39) to reflect temporary disability allowance paid to employed disabled persons;
3. Unified social security contribution paid in excess may be offset against future contribution payments or transferred to another account upon tax payer application in accordance with the Procedure approved by the Resolution of the Board of the Pension Fund of Ukraine № 21-1 dated 27 September 2010.

Resolution of the Cabinet of Ministers of Ukraine “On Approving the Procedure of the State Registration of Immovable Property Rights and its Incumbrances and the Procedure on Provision of Extracts from the State Register of Immovable Property Rights” № 703 dated 22 June 2011 takes force on 1 January 2012

The Resolution defines the Procedure of the State Registration of Immovable Property Rights and its Incumbrances, in particular the procedure for this registration; the list of required documents, rights and obligations of subjects in the sphere of state registration of rights; and the procedure for registration of immovable property that is not owned by anyone.

According to the Procedure, tangible rights to minerals, plants, small architectural forms and temporary, non-capital constructions located on a land plot and that may be relocated without a change of their designation or loss of value, are not subject to state registration.

The Resolution also defines the Procedure on Provision of Extracts from the State Register of Immovable Property Rights, in particular the procedure for issuing such extracts and the list of required documents, rights and obligations of relevant subjects.

Order of the State Committee of Ukraine on Technical Regulation and Consumer Policy № 457 dated 11 October 2010 “On Approval and Cancellation of the National Classifiers”

The Order approved revised statistics classifications and will take force on 1 January 2012, in particular:

1. national classifier of Ukraine DK 009:2010 “Classification of the types of economic activity” (KVED), replacing DK 009:2005;
2. national classifier of Ukraine DK 016:2010 “State Classifier of Products and Services” (DKPP), replacing DK 016-97.