SUPPORT FOR BUSINESS
The Law of Ukraine No. 1116-ІХ “On State Support for Investment Projects with Significant Investments in Ukraine” introduced an investment incentives system intended for new large-scale projects. The Law aims to encourage new significant investors into the Ukrainian market, as well as promote expansion of existing businesses.
State support for investment projects with significant investments is provided after signing a special investment agreement between the investor, on the one hand, and the state of Ukraine represented by the Cabinet of Ministers of Ukraine and the local community represented by local government (if such a local community provides support), on the other hand. Such an agreement is concluded for a period of up to 15 years.
Forms of state support:
1) exemption from payment of certain taxes and fees (in force till January 1, 2035):
– VAT exemption for operations on import into the customs territory of Ukraine in the customs regime of import of new equipment and components to it;
– exemption from the profit tax (except for projects in the field of extraction for further processing and/or enrichment of minerals);
– reduced land tax and rent rates for state and communal land or exemption from land tax (except for projects in the field of extraction for further processing and/or enrichment of minerals).
2) exemption from import duty of new equipment and components to it which are imported exclusively for the implementation of an investment project with significant investments within the framework of a special investment agreement (these equipment and components are to be manufactured not earlier than three years before the date of import and should have not been in use) (in force till January 1, 2035);
3) ensuring the preemptive right to use a land plot of state or communal property for the implementation of an investment project with significant investments and to acquire ownership of the land plot after the expiration of the special investment agreement;
4) construction of related infrastructure (highways, communication lines, heat, gas, water and electricity, utilities, etc.) required for the implementation of an investment project with significant investment (except for projects in the field of iron ore enrichment).
Additionally, if the implementation of an investment project with significant investments requires connection to the networks of heat, gas, water and electricity supply, utilities, etc., including networks and/or communications owned by natural monopolies, the state may assist the investor with significant investments in the process of such connection.
Specifics of state support:
– several investors may participate in the implementation of one investment project jointly;
– total amount of state support for the investment project may reach up to 30% of the planned amount of investments;
– upon request, the specially authorized institution provides investors with organizational and advisory assistance during the course of preparation and implementation of investment projects, as well as cooperate with public authorities, local governments on issues regarding investment projects preparation and implementation.
Requirements for investment projects:
– investment project implementation must include construction, modernization, technical and/or technological re-equipment of investment objects, purchase of necessary equipment and its complementary parts;
– at least 80 jobs must be created in the course of investment project implementation;
– amount of investments must reach at least 20 million euros;
– investment project implementation period must not exceed 5 years.
Areas of investment project implementation:
– processing industry (except manufacturing and trade of tobacco products, ethyl alcohol, cognac and fruit alcohol, alcohol beverages);
– extraction for the purpose of further processing and/or enrichment of natural resources (except hard coal, lignite, crude petroleum, natural gas);
– waste management;
– transportation;
– warehousing;
– postal and courier activities;
– logistics;
– education;
– R&D;
– healthcare;
– arts and culture;
– sports;
– tourism;
– hospitality.
For more information and starting application procedure please visit the following website: https://ukraineinvest.gov.ua/analytics-research-2/explanatory-guide/.
The Law of Ukraine No. 1667-IX “On Stimulating the Development of the Digital Economy in Ukraine” established virtual economic zone, the so-called Diia.City that combines favorable tax conditions with effective tools to allow companies to build a transparent corporate structure, attract foreign investment more easily, and use additional mechanisms to protect intangible assets.
The following incentives are available for Diia.City residents, in particular:
1) a special corporate income tax regime: a Diia.City resident may choose to pay 9% withdrawal capital tax instead of 18% corporate income tax payable on general basis;
2) 0% on the income of individuals as dividends accrued by a resident company, provided that they are paid no more than once in 2 years term;
3) tax rebate (with personal income tax) on the amount of investments in Ukrainian startups: personal income tax is paid not on the entire amount of profit, but only on the excess amount of investments;
4) a new form of cooperation between Diia.City residents and IT specialists: By working under “gig-contracts” IT specialists pay 5% PIT and are allowed to include such provisions as employees’ non-disclosure obligations, non-competition, remuneration in a foreign currency, which is currently prohibited by labor law;
5) venture investment tools: right to increase charter capital of a limited liability company via convertible loans mechanism; mechanisms of the employee stock ownership plan (ESOP); warranties and indemnities regulations, liquidated damages provisions etc.
Diia.City resident status can be obtained by a company that meets the following general requirements:
1) A company carries out, among others, one or more of the following activities, in particular:
– software development and testing, including games;
– publishing and distribution of software, including SaaS;
– teaching computer literacy, programming, testing, software technical support;
– digital marketing and advertising via software developed by Diia.City residents;
– R&D in IT and Telecom;
– cybersport;
– providing services related to the virtual assets flow etc.
2) The average monthly salary of employees and gig-specialists (in total) is not less than the equivalent of EUR 1,200 as of 1st day of each month.
3) A company employs not less than 9 employees and/or gig-specialists (in total).
4) The amount of a company’s net income and royalties received from the qualified activity (so-called “qualified income”) for the reporting period is not less than 90% of the amount of the company’s total net income for the same reporting period.
Diia.City resident status can be obtained by a startup IT company that meets the following Requirements for startups:
1) A company carries out, among others, one or more of the above-mentioned activities.
2) The amount of a company’s net income and royalties received from the qualified activity (so-called “qualified income”) for the reporting period is not less than 90% of the amount of the company’s total net income for the same reporting period.
3) A company’s total annual income does not exceed the threshold for the third group of unified tax payers (some UAH 7,5 million).
4) Not later than starting from the first day of the 7th month after obtaining a Diia.City resident status, the average monthly salary of employees and gig-specialists (in total) of the company is not less than the equivalent of EUR 1,200 as of 1st day of each month.
In connection with the armed aggression of the Russian Federation against Ukraine, the Cabinet of Ministers of Ukraine adopted the Resolution as of 29 March 2022 No. 382 “Some issues of the legal regime of Diia.City in connection with the imposition of martial law in Ukraine” that simplified the criteria of Diia.City residence: during martial law, companies will not be deprived of the status of residents of Diia.City, even if they do not meet the criteria established by the law “On Stimulating the Development of the Digital Economy in Ukraine”, in particular, requirements regarding carried on activities, number of employees, average salary, income; if they violate the deadlines for submission of reports; if they do not meet the requirements regarding court decisions on non-compliance of Diia.City resident with the established requirements. This applies to both current residents and companies seeking to obtain Diia.City resident status.
For more information and starting application procedure please visit the following website: https://city.diia.gov.ua/en/.
The Law of Ukraine “On Industrial Parks” provides a number of economic incentives that meet current global trends and are designed to increase direct investment in industrial parks of Ukraine and increase their competitiveness.
The following incentives are eligible to managing companies, companies-initiators and/or participants of industrial parks:
1) full or partial compensation of interest rates on loans, non-refundable financing for the purpose of arranging an industrial park, as well as for the purpose of carrying out economic activity within an industrial;
2) non-refundable financing for the purpose of arranging an industrial park and/or construction of related infrastructure facilities (highways, communication lines, heat, gas, water and electricity, utilities, etc.);
3) compensation for connecting to engineering grids (incl. compensation for connecting to the electric grid).
In addition, following tax and customs incentives are available for participants of industrial parks:
1) 10-year CIT exemption on income of participants of industrial parks earned from their business activity within the industrial park. However, the respective CIT exemption would be applied only if the respective amount of money will be reinvested by the participant into the investment project development;
2) VAT exemption on operations of importing of new equipment (components) by the participants of industrial parks intended only for the own use of the participants of industrial parks;
3) favorable land tax rates might be granted for participants of industrial parks by decision of a local government;
4) exemption from taxation of customs duties on new equipment (components) imported by such participants for their own use only.
Activities allowed in industrial parks:
– processing industry;
– recycling of industrial and/or household waste (except for waste disposal);
– R&D;
– activities in the IT sector.
As of July 2022, the Ministry of Economy of Ukraine, as an authorized state body, is working on development of bylaws, adoption of which will ensure the full functioning of the system of industrial parks.
Find more details about the support available in your industry on the Industries page.
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