LEGISLATION
0697 On Property
07.02.91
The Law establishes the basic principles of relations in terms of possession, use, and disposal of assets and their state support. According to the Law, the following forms of ownership exist in Ukraine: private ownership, collective ownership, and state ownership. Every form of ownership enjoys equal rights. Ukraine provides equal conditions for the development and protection of each form of ownership (Article 2)
The subjects of ownership in Ukraine include: the people of Ukraine, individual citizens, legal entities, and the state, other countries and their legal entities, joint ventures, international organizations, citizens of other countries, as well as stateless persons. Assets may be owned jointly (on a share or collective basis) by citizens, legal entities, and the state. It is allowed to merge the assets owned by citizens, legal entities or the state and to establish joint ownership including joint ventures with the participation of legal entities and citizens of other countries. Citizens, legal entities, and Ukraine may possess assets on the territory of other countries. (Article 3)
The land and its bowels, the airspace, the water, and other natural resources of the continental shelf and territorial waters are in the exclusive ownership of the Ukrainian people, which is realized via the Verkhovna Rada (the Parliament) of Ukraine and the local Radas of People's Deputies. (Part II)
Part III of the Law establishes the right of private ownership. According to it, subjects of private ownership are Ukrainian citizens, citizens of other Soviet republics, foreign citizens, and stateless persons. Objects of private ownership are assets used for the consumption or production and products of intellectual work. Citizens of Ukraine are entitled to receive land for the following purposes: farming; individual supplementary farming; construction and maintenance of dwelling premises; construction of farmer's building; gardening; construction of week-end houses (dachas) or garages. Plots of land shall not be transferred to the possession of foreign citizens or stateless persons. ( Articles 11-14)
Subjects of collective ownership are as follows: working collectives of state-run companies, lessee collectives, collective companies, co-operative companies, joint-stock companies, business associations, business societies, trade unions, political parties, other public associations, religious and other organizations established in the form of legal entities. Subjects of collective ownership to land are collective agricultural companies, agricultural co-operatives, gardener's establishments, agricultural joint-stock companies, including those established on the basis of former sovkhozes (state farms), and other state-run agricultural companies. (Part IV)
In Ukraine, state-owned property may take forms of property of the state (national property) and property owned by administrative territorial units (communal property), Part V regulates the right to state-owned property.
The property right of other states, their legal entities, joint ventures, and international organizations is determined by Part VII of the Law.
Protection of the property right is established by
Part VII.
0698 On Entrepreneurship
07.02.91
The present Law regulates general legal, economic, and social principles for conducting entrepreneurial activities (entrepreneurship) by individuals and legal entities on the territory of Ukraine; determines guarantees for the freedom of entrepreneurship, and its state support.
Subjects of entrepreneurial activities (entrepreneurs) can be citizens either of Ukraine or other countries, whose legal capability is not restricted by law; legal entities of any form of ownership, specified in the Law of Ukraine "On Ownership". The following groups of individuals may not be engaged in entrepreneurial activities: military men, officers of public prosecution bodies, courts, state security service, interior, state court of arbitration, public notary offices, as well as of bodies of state power and administration which are assigned with the task to supervise the activities implemented by enterprises. Also, restrictions can be imposed on entrepreneurial activities of persons established by courts (Article 2)
Some kinds of activities, which are determined by the Law can be realized only by state organizations. Also, the Law defines the kinds of entrepreneurial activity, which influence people's health, environment and state security, and require state licensing.
The state registration of subjects of entrepreneurial activities is conducted by executive committees of a city or city district Radas of People's Deputies, or by the city or city district (in case of the cities of Kyiv and Sevastopol) state administration offices, with regard to the place of business or residence of the subject in question, unless otherwise stipulated by legislative acts of Ukraine. The procedure for registration and company's operation are determined by Part II.
In order to conduct entrepreneurial activity the
entrepreneur has the right to conclude agreements with individuals
for employment of their labor. Concluding labor agreements (contracts),
the entrepreneur shall under obligation to provide for the adequate
working conditions, ensure remuneration of labor not lower than
the minimal level of payment, determined in the republic, as well
as other social guarantees, including social and medical insurance
as well as social security, in accordance with the effective legislation.
(Articles 9-10)
0872 Banks and Banking Activities
20.03.91
This Law sets up legal foundations for banks, procedure for establishment thereof, and basic principles for their activities.
The banking system is a two-level structure formed by the National Bank of Ukraine and commercial banks of different types and forms of property.
The Law defines banking operations (Article 3), and also stipulates that commercial banks are prohibited to operate in the spheres of material production, trade, and insurance. A commercial bank may own realty with the total value not exceeding 10% of the bank's statutory fund (this limit doesn't concern the premises of the bank's departments that operate, as provided in this Article). Banking operations shall be prohibited for legal persons, excluding banks, if otherwise is not provided by legislative acts of Ukraine. (Article 3)
The Law also defines the principles for the activity of the National Bank of Ukraine (Part II). According to it, the National Bank is the central bank of the republic, its money-issuing center that shall carry out the single state policy in the fields of money circulation, credit, consolidation of the monetary unit. The National Bank organizes inter-bank accounts, co-ordinates the activities of the banking system as a whole, fixes the rate of the monetary unit to other countries' currencies.
Commercial banks of different types and forms of property shall be organized on the principle of share-holing (Part III). Founders, shareholders of commercial banks may be represented by legal and physical persons, except for Radas of People's Deputies of all the levels, their executive bodies, political, and trade-union organizations, unions and parties, as well as public funds. The share held by a founder or shareholder shall not exceed 35% of the statutory fund of the commercial bank. The amount of the statutory fund shall be fixed by the bank founders (share-holders), provided that it is not less than the amount fixed by the National Bank.
Part IV regulates savings activity in Ukraine.
Part V indicates control and licensing functions of the National Bank
Part VI determines the principles of protection of client's interests.
0887 On enterprises in Ukraine
27.03.91
This Law sets up types and organizational forms of enterprises, rules for their establishment, registration, reorganization and liquidation, organizational mechanism for business undertakings in conditions of a transition to the market-oriented economy. This law establishes equal legal conditions for activities of enterprises, regardless their forms of ownership and organizational forms.
According to forms of ownership, as established by the Law of Ukraine "On Ownership", enterprises may be presented in the following forms:
- individual enterprises, based on private property of a physical person and his own labor;
- family enterprise, based on the property and labor of citizens of Ukraine - members of one family living together;
- private enterprise, based on the property of a citizen of Ukraine, with a right to use hired labor;
- collective enterprise, based on the property of a working collective of an enterprise, co-operative, other statutory association, public or religious organization;
- state municipal enterprise, based on the property of administrative-territorial units;
- state enterprise, based on the all-state (republican) property;
- joint enterprise, based on the basis of property of different owners (mixed form of property). Founders of a joint enterprise may be represented by legal persons and citizens of Ukraine, republics, other countries;
- enterprise, based on the property of legal persons and citizens of the Union republics and other countries. Establishment of such enterprises is regulated by a separate legislation of Ukraine.
According to the volume of economic turnover of the enterprise and the number of employees (regardless of the form of ownership), the enterprise may be included into the category of small-sized enterprises, peculiarities of the establishment and activity of which shall be set up by the legislation of Ukraine.
Small-sized enterprises include newly established and operating enterprises with the following parameters:
- in industry and construction - with number of employees up to 200;
- in other productive spheres - with number of employees up to 50;
- in science and scientific service - with number of employees up to 100;
- in the non-productive sector - with number of employees up to 25; and
- in retail trade - with number of employees up to 15.
In addition to small-sized enterprises, other forms of enterprises may operate in Ukraine, including leased enterprises, provided that their establishment and activities do not contradict to the legislative acts of Ukraine.
An enterprise shall be recognized as such and acquire the rights of a legal person from the date of its state registration. Establishment and Registration Procedures for enterprises are defined in Part II.
Part III describes enterprise property, its formation and application, the enterprise's right to possess and use natural resources, and the right of an enterprise to issue and sell its own stocks and securities.
In Part IV, the principles of enterprise management are established, as well as rules for work of labor collectives at these entities. It is determined that labor and economic relations between the working collective and the enterprise administration, questions concerning labor protection, social development, participation of producers in the use of profit of the enterprise are regulated by the document called Collective Agreement which shall be concluded in all enterprises, which use hired labor, between the owner and the authorized body. The text of this document shall be in agreement with legislation of Ukraine in force.
Part V regulates some aspects relating the profits of a business, internal economic activity, and social activities of enterprises.
Part VI of the Law defines the principles of the inter-relationship between enterprises and the state, including accounting and reporting requirements and the relationship between the business and local Rada of People's Deputies.
Part VII addresses procedures for liquidation and
reorganization of enterprises and requires the establishment of
a commission to exercise supervision over such shutdowns. Part
VII also provides for the establishment of meetings of creditors
and satisfaction of their debts during the wind-down process.
0959 On Foreign Economic Activities
16.04.91
The Law establishes the procedures and the rules governing foreign trade activity by entities operating on the Ukrainian territory. The definition of foreign activity includes joint ventures between foreigners and domestic entities.
Part I defines the kinds of foreign economic activity, subjects of foreign economic activity and their registration procedures with the Ministry of Foreign Trade as a pre-requisite and provides detailed procedures for signing contracts related to international trade. This Part also defines the applicable laws to settle disputes related to such contracts.
Part II deals with the government's regulation of foreign economic activity and defines the roles of various ministries and local bodies created for this purpose. This Part contains taxation regulations for foreign trade entities and ensures the guaranteed stability of the number and rates of taxes that shall be guaranteed by the state for the term no less than 5 years.
Other subject matters with which this extensive piece of legislation deals include: customs regulation, insurance of foreign economic activities, import-export licensing and quotas, banned exports and imports, procedures for applying health and safety standards, special import procedures, antitrust measures, record-keeping and reporting, and the availability of information for foreign business enterprises.
Part III defines the concept of special legal regimes of foreign economic activity and procedures for establishment of special economic zones.
Responsibilities of participants of foreign economic activities and sanctions for violation of this law are described in Part VI.
Part VII governs controversies and dispute resolution. The available forms of dispute resolution include:
- Ukrainian courts of law if one of the parties is a natural person.
- Courts of Arbitration if both parties are business entities.
- Arbitration panels or other forums as may be agreed to by the parties.
- Disputes with the Ukrainian government shall be
settled in keeping with procedures determined by Ukrainian courts.
1201 On Securities and Stock Exchange
18.06.91
This Law determines the terms and procedures of issuance of securities, and regulates intermediary activities in the circulation of securities in Ukraine's territory.
Part I determines issuers, kinds of securities, procedures for registration and circulation thereof. In Ukraine, the following types of securities may be issued and circulate: shares; internal republican and local bonds; bonds of enterprises; Treasury bonds of the Republic; savings certificates; bills of exchange; privatization securities.
Part II defines the principles of establishment and functioning of Stock Exchanges. The Law determines that a Stock Exchange shall be a joint-stock company mediating demand and supply of securities, helping in the formation of prices for securities, and acting in accordance with this Law, other legislative acts of Ukraine, and the Exchange's Statute and Standing Orders. The Stock Exchange shall be formed by at least 20 founders [stock-holders]. The founders shall be security dealers and hold a permit to conduct business transactions and operations of commission, involving securities, provided that each founder contributes at least 10,000 tax-free minimum citizens' incomes to the authorized fund.
The Stock Exchange shall discontinue its operations once its membership number is less than 10. If the membership equals 10, the Stock Exchange shall be terminated when no other members are admitted for 6 months. The Stock Exchange shall be terminated in keeping with Ukraine's legislation on joint-stock companies and other economic associations.
Control over the issuance and circulation of securities,
except privatization securities, shall be exercised by the State
Committee for Securities and Share Market and its territorial
offices. Control over the circulation of privatization securities
shall be exercised by the State Property Fund of Ukraine.
1251 On Taxation System
25.06.91
This Law determines the principles of the tax system in Ukraine, along with procedures of collecting taxes and fees (mandatory payments) payable to budgets and state targeted funds, and the rights, duties, and liabilities of taxpayers.
Part I declares that taxation is the exclusive right of the Ukrainian Republic exercised through the Parliament. Local taxes may be imposed, however, within specified rate limits. Part I defines the principles of the tax system, procedures for establishment of tax rates, offsetting of taxes, and keeping records of taxpayers.
Objects of taxation include revenues, added value of products (works, services), cost of products (works, services), including their customs value or physical indicators, special use of the natural resources, property of entities and individuals, and other such objects as may be determined by the tax laws of Ukraine.
This Part I also determines rights, duties, and responsibility of taxpayers.
Part II determines the state taxes and fees (mandatory payments); local taxes and fees (mandatory payments).
State taxes include the following taxes and fees (mandatory payments):
1) value added tax;
2) excise tax;
3) enterprise incomes tax;
4) individual incomes tax;
5) duty;
6)stamp tax;
7) real estate tax;
8) payment (tax) on land;
9) rent payments;
10) tax on owners of transport vehicles and other self-propelled engines and mechanisms;
11) trade tax;
12) fee for geological survey works performed at the expense of the state budget;
13) charge for special usage of natural resources;
14) dues for environmental pollution;
15) deductions to the Chornobyl Remedy Fund;
16) duty for mandatory social security;
17) duty for mandatory state pension insurance;
18) deductions to the State Innovation Fund; and
19) fees for trade patents for certain types of entrepreneurship activity.
Local taxes include:
1) advertising tax;
2) communal tax.
Local fees (mandatory payments) include:
1) hotel charge;
2) collection for motor transport parking;
3) public market-place duty;
4) fee for issuance of apartment warrants;
5) health-resort collection;
6) collection for participation in hippodrome races;
7) collection for winning in hippodrome races;
8) collection from persons who participate in totalizator game in hippodrome;
9) collection for the right to use local symbols;
10) collection for the right to movie and TV;
11) collection for conducting local auctions, tenders and lotteries;
12) toll for transit motor traffic through the territory of frontier regions;
13) collection for permission to arrange trade and servicing outlets;
14) collection from owners of dogs.
Part II also determines tax payment procedures and
regulates procedures aimed at avoiding double taxation. The section
of the Law relating to income tax states that foreign investors
are obligated to pay a tax at the time of repatriation of profits
to their home country. Additionally, foreign entities who have
no business representative offices in Ukraine, are not under obligation
to pay tax on incomes derived from passive investments in Ukraine
(dividends, interest, license fees, copyrights, lease payments,
or other indirectly earned incomes). Additionally, citizens of
Ukraine residing on its territory are liable to paying taxed on
all their incomes, irrespective of the borders. Non-resident Ukrainian
citizens shall pay taxes only on incomes generated in Ukraine.
In order to prevent double taxation, legislation provides that
taxes paid abroad shall be deducted from the amount of taxes due
in Ukraine.
1540a On Protection of Foreign Investments in Ukraine
10.09.91
The Law determines that investments, profits, legal rights, and interests of foreign investors within the territory of Ukraine are protected by Ukraine's laws.
Besides, the state cannot expropriate foreign investments, except in cases of natural disasters, accidents, epidemics, and epizootics. The compensation paid to foreign investors in such cases should be adequate and prompt.
Foreign investors are hold guaranteed right to transfer
their profits and other sums abroad which have been acquired legally,
whether in hryvnias or in foreign currency. Foreign investors
may reinvest their profits on the territory of Ukraine.
1560 On Investment Activity
18.09.91
This Law establishes the general principles governing investments in Ukraine by made all entities, including foreigners. The definition of investment is as broad as possible, including the whole range from cash to intangible property. Investment may be made in any economic sphere; however, except for those that do not comply with health, ecological or similar regulations. Investors are given full control and benefit of their investment subject. (Parts I-II)
This Law outlines government control over all kinds of investment activity (Part III)
The Law also guarantees equal protection for investors,
including foreign investors, irrespective of the form of investment
or ownership. ( Part IV)
1576 On Economic Associations
19.09.91
Economic associations according to this Law are enterprises, establishments, organizations established on the basis of an agreement with legal entities and citizens by merging their property and entrepreneurship activity in order to receive profit
Joint-stock companies, limited-liability companies, companies with extended liability, full liability companies, limited companies are the forms of economic associations (Part I)
Part II gives more details as to all categories of economic associations. The Law determines the rights and liabilities of an entity, the rights and liabilities of the parties with respect to each other, internal structure and management of the entities, and liquidation procedures. This Part II also contains detailed information on the capital fund of an entity, various reserve funds that must be created, and net profits calculation.
Foreign persons and entities may participate in and
be members of all the categories of economic associations.
2146 On Enterprises and Organization Income Tax
21.02.92
Income taxpayers include:
a) economic entities, that are legal entities (except for the National Bank of Ukraine, excluding its self-financing branches), including enterprises with foreign investments, their divisions and branches, having independent balances and banking accounts, international non-governmental organizations and associations, carrying out economic, business, and other commercial activity on the territory of Ukraine;
b) located in Ukraine branches, departments, other detached divisions of enterprises with the headquarters outside Ukraine, which for the purpose of paying taxes have separate balances and open accounts in banks; and
c) organizations not financed by the state but receiving profits from economic (commercial) activity and paid services,
The object to taxation shall be the gross income of the enterprise, including incomes from realization of goods (works, services), other material values and property (including basic funds of production), non-material assets, broker places (excluding the realization in exchanges) and profits from non-trading operations decreased by the amount of expenses for these operations. (Article 2).
Investments, shares, and other-purpose financial resources at the expense of money retained at the disposal of the enterprises and united on the contractual basis for financial capital investments, aimed at increasing the volumes of production, fulfillment of joint programs, shall not be considered as incomes of the enterprises or other economic entities, organized for the fulfillment of the tasks thereof, and shall not be subject to taxation.
For the purpose of accounting of income tax, the gross income of the enterprise shall be decreased by the amounts of material and other expenses and obligatory payments (Article 3).
Article 4 determines income rates:
1. Incomes of enterprises, except those which are determined separately in the Law, shall be liable to tax at the rate of 22%.
2. Incomes of joint ventures, established on the territory of Ukraine with the participation of foreign investors in the industrial, agricultural spheres, provided that the investment into the statutory fund exceeds 30%, and the enterprises with 100% foreign interest, shall be liable to tax at the rate, as specified in this article, item 1 reduced by three points.
Branches (departments, representative offices of companies with foreign investments) and also their subsidiaries shall be liable to tax at the rate, as specified in this article, item 1.
3. Incomes of research plants and enterprises and organizations of the agro-industrial complex rendering services to agricultural production shall be liable to tax in the amount of 50% of the tax rate, provided in article 4, item 1.
4. Incomes, including incomes from lease and other activities (casino, video saloons, offering the rent of video and audio cassettes, gambling clubs with money winnings, concerts and shows at the open stages, stadiums, sports facilities, other halls with a number of seats exceeding 2,000) shall be liable to tax at the rate of 70%.
5. Incomes of enterprises engaged in intermediation activity, received as a result of realization of works (services) under contracts and fulfilled by temporary working groups or citizens, shall be liable to tax at the rate of 65%.
6. Incomes of enterprises engaged in intermediary activity (auction-exchange, trade-purchase and others) and their participation at the payments and additional incomes of enterprises from sales through auction of goods, products, property shall be liable to tax at the rate of 75%.
7. Incomes received by enterprises (excluding foreign legal entities) from their shares, bonds, and other securities, as well as incomes of the Ukrainian partners received from shares in joint ventures and other enterprises shall be liable to tax at the rate of 15%.
8. Incomes of foreign partners resulting from dividing the income of joint ventures, where they are transferred abroad, shall be liable to tax at the rate of 15%, if otherwise is not established in international agreements of Ukraine concerning taxation. The tax amount, where incomes are transferred abroad, shall be paid in the currency, that is transferred.
9. The taxes, specified in items 7 and 8 of this article, shall be referred to income reserves. The enterprise paying the tax and also the foreign partner of the joint venture shall be responsible for tax payments.
Incomes received by enterprises from shares they hold, bonds and other securities, issued by the enterprises located outside Ukraine, as well as incomes from shares in joint ventures, shall be liable to taxation at the places of their location, provided that the above-named taxes are not liable to tax for the establishment of income reserves.
10. Foreign legal entities receiving incomes not connected with their activity in Ukraine shall pay income tax on dividends (interests), copyrights and licenses, freight, lease payments and other incomes, whose sources are in Ukraine and which are not connected with their activities in Ukraine through their representative offices, at the rate of 15% (excluding the income from freight), if otherwise is not provided in international agreements of Ukraine concerning taxation.
The income amounts from freight, paid to foreign legal entities for international shipments, shall be liable to tax at the rate of 6%.
The tax on the above-named incomes of the foreign legal entities shall be taken by the enterprise, organization, paying to a foreign legal entity in the currency of payment from the total income amount at every payment.
Part I determines also tax exemptions and procedures of calculation and tax payment.
Part II regulates income tax payable by banking establishments and insurance organizations.
In banks, object of taxation shall be gross income, received as a result of credit activities and payment operations, operations with securities, use of broker places, payments for services rendered to the customers and to the population, incashment, and other activities.
In insurance organizations, object of taxation shall be income received in the form of insurance payments under insurance and re-insurance contracts, except for obligatory state insurance payments, revenues from payment reserves for long-term types of insurance, insurance pension fund, reserve fund for risk-covering types of insurance, and other returns.
Article 11 is devoted to tax calculation. Income earned from banking and insurance activities shall be calculated in accordance with Articles 10 and 11 of this Law. These incomes shall be liable to taxation at the rate of 55 per cent, except for up to 10 per cent to be directed to provide technical basis for introduction of electronic payments.
Incomes earned by organizations and institutions from shares, bonds, and other securities held by them, and incomes from shared participation in joint ventures shall be liable to taxation at the rate of 15 per cent.
Part III gives more details as to taxation of foreign legal entities' incomes from their activity in Ukraine.
Part V contains special regulations, relating taxation of foreign legal entities.
Part VII establishes the responsibilities of payers
and control over legislation on taxes compliance.
2163 On Privatization of State Property
04.03.92
This Law governs the legal, economic, and organizational principles of privatization of state property owned by the Autonomous Republic of the Crimea, in order to institute the market-oriented economy in Ukraine.
The Law defines that privatization of government interests in foreign joint ventures shall be accomplished in accordance with civil law in force and the statutory documents of the joint venture.
The Law determines an annual privatization program proposed by the Cabinet of Ministers for each fiscal year. Property owned by local governmental shall be subject to their privatization programs.
The State Property Fund and its regional departments is primarily responsible for the implementation of the privatization program with local administrative territorial units carrying out local privatization programs. The Autonomous Republic of Crimea is responsible for privatization on its territory.
Buyers of state-owned assets are individuals and legal persons from Ukraine, as well as individuals and legal entities from abroad.
The State Property Fund may impose additional restrictions on the participation of buyers in the privatization process.
Commercial trusts, associations, holding companies, and other intermediaries may also participate in the privatization process.
Part II of the law determines procedures and methods of privatization. This section of the Law provides information on a four-step process beginning with a submission of an application requesting privatization of a particular entity. The application may be initiated either by the State Privatization Fund or any buyer or a group of buyers.
The application must be reviewed and a decision must made by the appropriate privatization agency within 30 days.
Within one month after the approval, a committee shall be established consisting of buyers' representatives, privatization agency representatives, local deputies and labor union. This committee shall prepare a privatization plan within a 60-day time-limit. This privatization plan shall include the date for sale of the asset, the form of payment, and other re-organization-related issues that may be applicable to the entity. .
Any party that disagrees with the privatization plan may appeal to the State Property Fund within ten days.
The Law defines various methods for selling assets:
- sale at auction,
- public tenders (commercial bidding where buyers must meet given specifications for the sale and may include a variety of conditions),
- sale of shares in the enterprise at auction, by public offering,
- purchase of leases by lease-holders,
- purchase of the enterprise by workers' collectives, and
- other forms of sales.
The Law describes procedures for the sale of shares in an entity which is converted into a joint-stock company by the state wherein it is the shareholder which thereafter issues for public sale as a part of a privatization plan.
Part III deals with financial issues of the privatization process. First of all, these issues concern determination of the initial offering price for assets.
Buyers may use personal funds or privatization certificates (Ukrainian citizens only) as the means of payment. Borrowed money may be employed; however, the money cannot be borrowed from banks in which the government owns more than 25% of the equity.
Foreign investors must use hard currency at the exchange rate established by the National Bank of Ukraine.
The Law describes criminal and civil liabilities for persons who are guilty of violating of privatization legislation.
Buyers who do not pay the purchase price within 60 days after the execution of the purchase and sale agreement, must pay a penalty equal to 20% of the purchase price.
2171 On Privatization of Small-sized State-owned Enterprises (Small Privatization)
06.03.92
Small privatization program includes three types of sales:
- buy-out by workers of the enterprise,
- sale at auction, and
- sale through a public tender or bidding.
The sellers and buyers of the property are the same entities as defined in the Law on Privatization of State Enterprises. Similar restrictions exist on the sources of funding, except that disclosure of source of funds must be made only if the price exceeds a minimum wage by a factor of 50.
Part II of the Law defines the privatization process of small scale enterprises. It is similar to large-scale privatization, wherein the authorities will determine initial offering of price. The process of privatization may be initiated by the buyers as well as by the state, and the decision must be made within 30 days. The law describes the personal and financial information that applicants must file with the privatization agency together with registration fee in order to initiate the process.
Part III of the Law outlines the procedure for sale of small privatization units by means of buy-out, the advertising procedure that must be observed, and the procedure for determination of the initial price.
The Law regulates sale of privatization units at auction or public tender and details on the information that must be published if these methods are utilized. Public auctions and tenders shall have at least three participants; each participant must pay a registration fee. If the unit is to be sold for hard currency (to a foreign investor), the registration fee is $200.00 US
A 10% deposit of the initial offering price must be made by the bidder. Potential buyers must file their applications prior to the auction or public tender.
During the auction process, the auctioneer may reduce the purchase price only by 30%. If there is no bidders, then the property is removed from the market and re-advertised for sale.
Public tenders require the creation of the committee which consists of 5 - 9 persons. Once these specifications are approved, the bids are submitted for the committee's consideration in a closed session. After a winner is announced, other bidders have 5 days to submit secondary bids, at which time, the final successful bidder is selected.
Privatization bodies may decide that certain auctions may be open only to privatization certificates or local currency. Other sales may be driven hard currency only.
An auction or public tender may be suspended at the
request of any of the participants or by the privatization body
only under limited circumstances and awards may be set aside for
similar grounds only within 30 days after the award by means of
a lawsuit.
2173 On Privatization Certificates
06.03.92
This Law defines the kinds of privatization certificates, conditions and procedures of their issuance, their record-keeping, usage, and redemption.
Privatization certificates will be issued by the Savings Bank of Ukraine in accordance with the rules and procedures established by the National Bank of Ukraine. Each citizen of Ukraine will be given privatization certificates (PC) in the amounts to be determined by the privatization plan. PC will be individually assigned to citizens. In order to obtain these certificates a fee will be paid (amount not stated in the legislation). The privatization certificate will be non-transferable.
The purpose of the certificates is to permit citizens to bid for property in the course of privatization programs and may be used only as a means of payment for assets acquired during the privatization process. Special privatization certificates will be issued for different areas of privatization. (housing, land, enterprises) However, they will be convertible from one area to the other on conversion formulas to be established by the Cabinet of Ministers.
This Law permits brokerage activity and the establishment of mutual funds for purposes of pooling privatization certificates. This type of activity will be subject to licensing procedures in accordance with a separate Ukrainian legislation.
2402
03.06.92
On Ukraine's Joining into the International Monetary
Fund, International Bank for Reconstruction and Development, International
Financial Corporation, International Association on Development,
and Multilateral Agency on Investment Guarantees
The Law defines that the Cabinet of Ministers of Ukraine is authorized to decide all the issues concerning joining of Ukraine to the International Monetary Fund, International Bank for Reconstruction and Development, International Financial Corporation, International Association on Development and Multilateral Agency on Investment Guarantees
Besides, the National Bank of Ukraine acts as a depository bank for any amounts of the Fund, the Bank, the Corporation, the Association, and the Agency on the territory of Ukraine.
Agreements of the Fund, the Bank, the Corporation,
the Association and the Convention on the establishment of the
Agency with corresponding remarks are valid on the territory of
Ukraine.
2694 On Protection of Labor
14.10.92
This Law determines the main principles of implementation of the constitutional right of citizens to have their life and health protected in the course of work; it regulates, jointly with relevant organs of the state, relationships between owners of enterprises, institutions, organizations, and organs authorized by them (hereinafter referred to employers).
This Law shall apply to all enterprises, institutions, and organizations regardless of the form of ownership and line of business, to all working citizens, and other persons involved.
Part II defines guarantees for citizens rights on job protection, especially women labor and work of young people and employer's responsibility for labor protection.
The employer shall be obliged to provide working conditions in every link of the production chain in keeping with the requirements of regulatory acts and secure observance of the employees' rights guaranteed by the labor laws. Labor protection measures and programs shall be financed by the employer and no employees shall be made to pay for any.
Employers, starting new enterprises, shall receive permissions from the labor protection supervisory authority to put these enterprises into operation. Engineering procedures, machines, devices, equipment, and conveyances purchased abroad shall be allowed to be operated only when found to be in conformity with labor protection and ecological standards effective in Ukraine.
Part VI defines state regulation of labor protection.
Part VII defines rules for the state observance
and public control.
3125 On Audit Activity
22.04.93
This Law sets up legal foundations for auditing activity in Ukraine and is aimed at the creation of a system of independent financial control for the purpose of defending owner's interests. Auditing shall be carried out by independent persons (auditors), audit organizations, authorized by economic entities for carrying out audit.
Audit may be carried out on the initiative of economic entities and where it is provided by the legislation in force (obligatory audit). Expenses related to audit shall be included into the cost of goods (products and services).
Part I determines the basic principles of audit carry out, and defines that audit shall be obligatory for:
1) confirmation of the reliability and completeness of a year balance and accountability of commercial banks, funds, exchanges, companies, enterprises, coops, associations, and other economic entities regardless of their forms of ownership and types of activities, whose accountability is officially made public, excluding establishments and organizations fully maintained at the expense of the state budget that do not carry out entrepreneurial activity.
Obligatory auditing of annual balance and accounts of economic entities with an annual turnover less than 250 non-taxable minimums shall be carried out once three years;
2) revisions of financial state of the founders of commercial banks, enterprises with foreign investments, joint-stock companies, holding companies, investment funds, trust companies, and other financial mediators;
3) issuers of securities;
4) state enterprises when integral property complexes are let out on lease, subject to privatization or other change of the form of ownership;
5) where the question on insolvency or bankruptcy is raised.
Audit shall be also obligatory in other cases provided by the laws of Ukraine.
Economic entities, which are subjects to obligatory
auditing according to the legislation, shall inform respective
tax administrations on concluding an agreement on auditing before
December, 1 of the current year.
3792 On Copyright and Related Rights
23.12.93
This Law protects private (non-property) and property rights of authors and their legal successors connected with the creation and usage of works of science, literature, and arts (copyright), as well as rights of executives and manufacturers of sound tracks and organizations (related rights).
Part II is devoted to copyright; Part III - to related rights.
Part IV defines the principles of collective management of property rights.
Part V defines the principles of copyright and related
rights.
334_94 On Company Income Tax
28.12.94
This Law determines the basic principles of company income tax. According to it, the following persons shall be taxpayers:
- among residents: business entities, budget-funded enterprises, institutions, and organizations conducting activities aimed at gaining profits in Ukraine and abroad;
- among non-residents: physical persons and legal entities set up in any institutional and legal form gaining profits originating from Ukraine, except institutions and organizations with a diplomatic status or immunity as per international treaties of Ukraine or under the law;
- branches, sections, and other detached organization departments of taxpayers (hereinafter referred to as branches) without the legal entity status and located within a territorial community other than the taxpayer's.
- permanent agencies of non-residents gaining profits originating from Ukraine or acting as agents for such non-residents or their founders.
- other persons, which are defined in the Law, Article 2.
The object of taxation shall be the income determined by reducing the sum of adjusted gross income gained during the accounting period by: the sum of the taxpayer's gross expenses as per Article 5 thereunder; the sum of allocation for depreciation (capital charges) accrued as per Articles 8 and 9 thereunder.
The law determines the procedures and peculiarities
of tax evaluation; categories of taxpayers; that enjoy tax benefits,
the order of priority of tax payments; responsibility of taxpayers.
045_95 On Ecological Examination
09.02.95
The task of the legislation on ecological examination is to regulate social relations in the field of ecological examination to ensure ecological safety, protection of the environment, rational use and renewal of natural resources, protection of ecological rights and interests of citizens and the state.
The purpose of ecological examination is to prevent negative influence of anthropogenic activity on the environment and health of people, as well as evaluation of the degrees of ecological safety of economic activity and ecological situation on particular territories and facilities.
Objects of ecological examination shall be drafts of legislative and other regulatory legal acts, preparatory project materials, project materials, documentation for the introduction of new machinery, technology, materials, substances, and products, the realization of which can lead to the violation of ecological norms, negatively affect the state of the natural environment, and be dangerous for the people's health.
Forms of ecological examination are defined in Part II and include: state and public examination. Conclusions of state ecological examinations shall be obligatory for fulfillment. The conclusions of state ecological examination shall be taken into account on a par with other types of state examination during the adoption of decisions on further realization of the object of ecological examination.
The conclusions of public and other ecological examinations shall be of recommendation nature and can be taken into account during the realization of an ecological examination, as well as during the adoption of the decision on further realization of the object of ecological examination.
Part III determines the principles of state regulation and management in the field of ecological examination .
Part IV determines the status of an ecological examination expert.
Part V defines the rights and duties of clients of ecological examination.
Part VI determines the procedure for ecological examination.
Part VII determines the financing principles of ecological examination. The financing of the state ecological examination shall be carried out by its clients. The financing of the public ecological examination shall be realized at the expense of resources of public associations, public nature-protection and other funds, as well as voluntary monetary contributions of citizens, enterprises, establishments, and organizations.
Part VIII determines the responsibilities for the
violation of legislation on ecological examination.
108_95 On Remuneration of Labor
24.03.95
This Law specifies the economic, legal, and organizational basis for remunerating workers, who have entered labor relations on the basis of labor contracts with enterprises, institutions, organizations of all forms of ownership and management as well as individual persons, and the spheres of state and contractual control of remuneration of labor. The Law is aimed at the provision of the productive and incentive functions of wages and salaries.
Part I contains the general regulations on organization of remuneration of labor. This Part I determines minimum salaries established by the law for simple (unqualified) labor, below which the payments for monthly, hourly labor rates (scope of work) accomplished by workers shall not be allowed on the whole territory of Ukraine.
According to the Law, subjects of organization of remuneration of labor shall be as follows: bodies of state power and local governments; owners, associations of owners or their representative bodies; trade unions; trade-union associations or their representative bodies, and workers.
Part II determines the principles of state control of the remuneration of labor.
Part III defines the principles of contractual control of remuneration of labor.
Part IV determines the rights of workers related
to the remuneration of labor and their protection.
093_96 On Foreign Investment Procedure
19.03.96
This Law stipulates procedure for foreign investment activity on the territory of Ukraine, proceeding from goals, principles, and regulations of the legislation of Ukraine.
Part I determines the forms, objects, and procedures for estimation of foreign investments.
Part II defines the state guarantees for protection of foreign investments.
Foreign investments in Ukraine cannot be subjects for nationalization. State bodies do not have rights to expropriate foreign investments, excepts for measures undertaken in result of calamities, accidents, epidemics, epizootics. Bodies authorized by the Cabinet of Ministers of Ukraine can carry out the above expropriation. Decision on foreign investment expropriation and compensation conditions can be legally settled in keeping with legally established procedures.
Foreign investors have the right to indemnification of losses, including non-obtained profits and moral damage caused by the actions or a lack of such contradicting Ukraine's legislation in force and malfunctioning of Ukraine's state bodies and officials in respect to foreign investor or enterprise with foreign investments.
Compensation to be paid to a foreign investor shall be quick, adequate, effective, and established for the effective date of implementing decision on damage compensation.
Compensation shall be established for the effective date for suspense of the property right.
Compensation shall be made in the specified currency or in any other acceptable for foreign investor currency according to the current legislation of Ukraine on currency. From the effective date on compensation till the date the compensation is paid, interest at the average rate equivalent to those paid by first-rate London banks in the European currencies market shall added to total compensation sum.
In case of termination of foreign investment activity, the foreign investor shall have the right to withdraw products or currency of investment within the period no longer than six months since the date of termination of his investments in the amount equivalent to real investment (taking into account the possibility of reduction of the statute fund) tax-free. He shall also have the right to withdraw profits from his investments in money or goods according to their market price effective on the termination date of investment activity if otherwise is not provided in Ukraine's legislation or international agreement in force.
After the payment of taxes, fees, and other mandatory payments, foreign investors are have a guaranteed right to transfer abroad free and without delay their incomes, profits, and other money in foreign currency legally gained as a result of their investments.
Part III defines the procedure for state registration and control of foreign investments.
Part IV determines an establishment procedure and operation of enterprises with foreign investments.
Part V envisages foreign investments based on concession agreements, agreements (contracts) on production co-operation, joint production, and other forms of joint investment activities.
Part VI contains information on the regulation of
foreign investments in special (free) economic zones.
448_96 On State Regulation of the Securities Market in Ukraine
30.10.96
This Law determines the legal principles of state regulation of the securities market and state control over the issuance of securities and their derivatives in Ukraine.
State regulation of the securities market shall be exercised in the following forms:
- Adoption of legislative acts pertaining to the operation of participants of the securities market;
- Regulation of the issuance and circulation of securities, as well as the rights and responsibilities of participants taking part in the securities market;
- Issuance of special permits (licenses) allowing professional activities on the securities market and control thereof;
- Banning and suspending (up to one year) of professional activities on the securities market in the absence of special permits (licenses) allowing such activities;
- Registration of the issuance of securities and information on such issues;
- Control over the issuer's observing procedures of registration of issued securities, publication of information on such issues, and terms and conditions of sales (placement) of securities as envisaged by this information;
- Setting up a system of protection of investors' rights and control over observance thereof by the issuers of securities and other persons operating on the securities market;
- Monitoring the authenticity of information provided to supervising authorities by issuers and other persons operating professionally on the securities market;
- Institution of rules and standards of transactions on the securities market and control over the observance thereof;
- Monitoring of the observance of the antimonopoly laws on the securities market;
- Monitoring of the pricing system on the securities market;
- Monitoring of activities of persons serving the issuance and circulation of securities;
- Other measures to assist the state regulation and control over the issuance and circulation of securities.
State regulation of the securities market shall be the responsibility of the State Commission on Securities and Share Market. Other state organs shall monitor activities of participants in the securities market within the limits of their respective competence as provided by the Law.
Co-ordinating Council shall be set up to co-ordinate the efforts of state organs supervising the securities market.
The Co-ordinating Council shall consist of officials in charge for state organs controlling and otherwise monitoring the securities market and investments in Ukraine, acting within their respective competence. The Co-ordinating Council shall be headed by the Chairman of the State Commission on Securities and Share Market. The membership and the Regulations on the Co-ordinating Council shall be approved by the President of Ukraine on presentation of the Chairman of the State Commission on Securities and Stock Market.
The law defines the procedure of state control and
regulation, authorities of officials, responsibilities for violation
of legislation as to the circulation of securities in Ukraine.
168_97 On Value-Added Tax
03.04.97
This Law identifies the payers of value-added tax, determines its objects, basis of assessment, rates, lists VAT-free and VAT-exempt operations, provides the peculiarities of taxation of export/import transactions, defines the notion of a tax voucher (bill), accounting procedures, and the remittance of VAT payments to the budget.
According to the Law, all business or legal entities or individuals whose taxable transactions exceed the volume of 600 tax-free minimum incomes (currently, 10,200 UAH) are required to register themselves as VAT-payers. All imports, business activities dealing with cash, passenger and freight transit services are subject to VAT.
Most business transactions involving the supply of goods, works or services are considered taxable. VAT is applied on said transactions at one of the two rates: either at 0 percent, or at the standard 20 percent. Items such as coal and electricity are taxed at zero rate. While no tax is payable on these supplies, they are treated as taxable with regards to input VAT credit.
Financial operations (except when fixed assets are transferred between entities) are considered not subject to taxation, blank travelers cheques are considered to fall within the scope of VAT and are duly taxable.
Import VAT in Ukraine operates on the principle of destination, goods imported from other CIS member states may pay VAT in the exporting country, and then again at the Ukrainian customs. Exports are considered zero-rated, although VAT is payable on transport for export.
If a VAT-payer makes 20 percent-rated supply, the tax due must be taken into account. If the customer is a VAT-payer and the supplies are meant for business use, the tax is subject to input VAT credit. Any VAT charged for business purchases is subject to VAT credit.
According to procedures, taxpayers must file returns on a monthly basis, unless the payment is below 7,200 UAH, in which case the taxpayer may register itself as a quarterly filer. Returns and payments are due on the 15th and 20th of the month following the accounting period. First payments for VAT under the new legislation are due on August 20, 1997. If the VAT claim is in excess of the turnover tax, then the VAT-payer is eligible for refund, which refund shall be made within the month following the accounting period. Late refunds will include interest at the rate of 120 percent. If the VAT-payer does not apply for refunding, the difference is carried forward to the next return. It is the obligation of the tax-payer to keep invoices and books. No VAT credit will be given if supplies are not supported by invoices or other evidence.
The VAT law requires special registration: companies
subject to paying VAT are required to register with local tax
administrations. The registration fee is 17 UAH, or one tax-free
minimum of citizen's monthly income. A registered person whose
value of taxable transactions is below 600 tax-free minimum incomes
will be de-registered.
710_97 On the National Depository System and Peculiarities of the Computerized Securities Circulation System in Ukraine
10.12.97
This Law determines the legal principles of securities circulation within the National Depository System and peculiarities of the computerized securities circulation system in Ukraine.
The National Depository System consists of two levels.
The lower level is made up of custodians keeping registered securities holders' accounts, and of registrars keeping track of holders of registered securities.
The upper level is made up of the National Depository of Ukraine (hereinafter, referred to as the National Depository) and depositories keeping accounts for custodians' benefit and making clearing transactions and payments under securities contracts.
The National Bank of Ukraine provides government securities circulation and any relevant depository transactions. The peculiarities of depository transactions relating to government securities are established by the State Securities and Share Market Commission jointly with the National Bank of Ukraine.
Keeping such ledgers of registered securities holders shall be the prerogative of business entities and shall not be combined with any lines of business except such depository transactions.
For functioning of the single system guarantee of depository registration, the National Depository shall be established as a public joint-stock company to ensure the functioning of depository accounting system. The State Securities and Share Market Commission shall be an executive body thereof to manage the government share in the National Depository's statutory fund.
Part I of the Law also determines the forms of securities issuance, transfer and realization of property rights for securities.
Part II determines the basic principles of depository activity. According to it, the State Securities and Share Market Commission shall adopt lists of securities to be serviced by the National Depository System.
Legal entities qualified as participants in the National Depository System under this Law shall conduct the following operations:
- storage and servicing of securities circulation, being on securities accounts, and transactions performed by the issuer with regard to these securities;
- clearing of transactions and payments under securities contracts;
- keeping ledgers of registered securities holders.
Part III of the Law determines the participants of the National Depository System. Depository shall be understood as a legal entity established as a public joint-stock company consisting of at least 10 custodians and specializing exclusively in the depository business. The share of each such participant in the depository's statutory fund shall not exceed 25% of that fund.
The clients of each such depository shall include any such custodians as may have signed depository contracts therewith, as well as issuers keeping their own securities accounts opened under securities servicing contracts, or other depositories being parties to contracts on correspondent relationships.
Each depository shall be rewarded for his/their services in keeping with tariffs set by this depository. Maximum such tariffs shall be determined by the State Securities and Share Market Commission in co-ordination with the Antimonopoly Committee of Ukraine.
Commercial banks having the permission to issue and circulate securities, and traders in securities shall be authorized to act as custodians and carry out transactions with such deposited securities if so instructed by their holders, as well as to engage in other such depository endeavors as may be required when circulating securities, except clearing transactions and monetary payments under securities contracts.
Any other entities except the designated custodian, any other custodian, securities dealer, investment, insurance company, or any other institutional investor shall not possess an interest in that designated custodian's statutory fund over and above five percent of that fund.
Peculiarities of computerized securities circulation are determined in Part IV.
Part V contains a regulation of National Depository
System activity.
01.05.72 Labor Code
The Labor Code of Ukraine determines the legal principles and guarantees of realization of the right to dispose the capacities for productive and creative labor by citizens of Ukraine.
The Code was adopted during the Soviet Union period (1972) and envisaged the priority of rights of hired worker. After the independence of Ukraine some changes were introduced, first of all, those connected with the institute of private property.
The Code contains such Chapters:
Chapter 1 General Principles
Chapter 2 Collective Agreement
Chapter 3 Labor Contract
Chapter 3-A Employment Security of Discharged Individuals
Chapter 4 Working Hours
Chapter 5 Vacation
Chapter 6 Rating of Work
Chapter 7 Remuneration of Labor
Chapter 8 Guarantees and Compensations
Chapter 9 Guarantees of Employer's Liability for Damages Inflicted to Enterprise
Chapter 10 Labor Discipline
Chapter 11 Labor Protection
Chapter 12 Labor of Women
Chapter 13 Labor of Young People
Chapter 14 Privileges of Employees who Combine Work with Education
Chapter 15 Individual Labor Disputes
Chapter 16 Trade Unions, Participation of Employees in Management of Enterprises, Establishments and Organizations
Chapter 16-A Work Collective
Chapter 17 State Social Insurance
Chapter 18 Observance and Control of Legislation
on Labor Compliance