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On 13 February 2021 the new Law of Ukraine "On State Support of Investment Projects with Significant Investments" No. 1116-IX, dated 17 December 2021 (the "Law") became effective. The Law is yet another milestone in Ukraine's efforts to attract new investors into the country.
UkraineInvest, a Ukrainian investment promotion office, has been determined by the Cabinet of Ministers as the authority responsible to provide necessary support to the significant investors (as defined in the Law), such as ensuring information access, facilitating communication and documents exchange with the state and municipal authorities, etc.
Who is Eligible?
Ukrainian companies (SPVs) incorporated by investor(s) willing to invest at least 20 million Euro into the specific investment project (the "significant" investor).
The Law also provides for certain restrictions, for example, companies incorporated in Russia or beneficially owned by Russian residents, as well as companies incorporated in the offshore zones or companies where more than 50% of shares are held directly or indirectly by the companies incorporated in the offshore zones are restricted from participation in the significant investment projects specified by the Law.
Area of Investment
Significant investment projects can be developed in the following areas:
- processing industry (except for manufacturing and distribution of the alcohol, tobacco products);
- mining (except for fossil and brown coal, crude oil, natural gas);
- waste management;
- postal and courier services;
- scientific and technological activities;
- health care;
- resorts and recreation.
Fixed assets (except for intangible assets and goodwill) built, modernized, technically and/or technologically reequipped or acquired by the significant investor and adjacent infrastructure built or financed by the significant investor.
Incentives Provided by Ukraine
Ukraine offers the following incentives to the significant investors (specific arrangements are to be negotiated with the state on a case by case basis):
- tax exemptions;
- import duty exemptions;
- preferential land use rights;
- construction of the adjacent infrastructure at the expense of the state and municipal budgets.
Under the Law, total amount of the provided state support cannot exceed 30 per cent of the planned investment to be made by the significant investor.
Additional Incentives Pertaining to Land Use
The Law establishes additional benefits for significant investors requiring lease of state- and municipally-owned land:
- acquisition of land leases without competitive bidding;
- simplified, accelerated lease acquisition and renewal process;
- preemptive options to transition from lease to full ownership;
- assistance from state authorities in obtaining servitude rights (where necessary).
Major Requirements to the Significant Investment Projects
To be eligible for the state support, the significant investment projects must comply with the following requirements:
- fall within the established investment objects;
- refer to one of the designated areas of investment;
- provide for at least 80 new jobs;
- ensure investment of at least 20 million Euro during project’s implementation period;
- have implementation period of no more than 5 years.
Special Investment Agreement
To give effect to the state’s incentives under the Law, a special investment agreement has to be executed among the Cabinet of Ministers of Ukraine, municipal authorities (if applicable), foreign investor and Ukrainian company (SPV) designated for participation in the significant investment project in each case.
The basic terms of the special investment agreement are as follows:
- maximum term – 15 years;
- governing law – Ukrainian or any other law, subject to standard choice of law rules;
- dispute resolution – judicial, arbitration, mediation, etc;
- significant investor is entitled to recover its losses (except for loss of profit) in case the state is not able to ensure investor’s rights guaranteed by the state.