Russian-Ukrainian Legal Group, P.A.

Kiev, Ukraine; Washington, DC, USA

 

 

Chronicle of Recent Developments in Ukrainian Legislation

 
FEBRUARY 2004

 

Advertising

Banking

Currency Control

Customs

Intellectual Property

Tax Treaties

Land

Licensing

Money Laundering

Non-Banking Financial Services

Oil and Gas

Subsoil

Specific Sectors of the Economy/Miscellaneous

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The “Chronicle of Recent Developments in Ukrainian Legislation” is a monthly summary of the most important legislative developments in Ukraine in the area of business and corporate law, and is prepared, published and distributed by the Russian-Ukrainian Legal Group as a free service to our clients.   The Chronicle will be distributed only via e-mail, in English and Russian, by the middle of each month, and will summarize the legislative developments of the previous month.  The Chronicle is prepared in an effort to capture news of greatest interest to the widest cross-section of our firm’s clientele, without restating all legislation published and drowning our readers in too much information. Due to the winnowing process necessary when preparing the Chronicle, we cannot and do not guarantee that it contains a comprehensive list of all Ukrainian legislation relevant to your business. Finally, please bear in mind that this summary does not constitute legal advice; it is an informational service only.  Should you wish to receive further information or actual legal advice, please do not hesitate email us at chronicle@rulg.com.

 

Advertising

 

1)        Law of Ukraine No. 1407-IV "On Amending Certain Legislative Acts of Ukraine Concerning Protection of Intellectual Property" dated 3 February 2004. With the aim of bringing the legislation of Ukraine into line with the re-stated Law of Ukraine "On Copyright and Neighboring Rights", amendments were made to several regulations of Ukraine. In particular, Article 6 of the Law "On Advertising" has been restated to the effect that the requirement concerning dissemination in the territory of Ukraine of advertising in the Ukrainian language, mandatory Ukrainian-language duplication of trademarks registered in a foreign language, as well as the requirement of having trademarks and Ukrainian companies' logos in the Ukrainian language only, have all been cancelled. The Law will take effect on 2 March 2004.

 

Banking

 

2)        National Bank of Ukraine ("National Bank") Resolution No. 49 "On Incorporating Amendments into the Regulations on the Procedure for Carrying Out On-Site Inspections of Observance by Banks and Financial Institutions of the Requirements of the Currency Legislation of Ukraine" dated 17 February 2004. The Resolution has cancelled the rights of the officials, authorized to carry out inspections, to (1) require that banks (financial institutions) produce copies of the documents certifying hard currency transactions and (2) remove (carry out)  such documents from the banks (financial institutions). The inspection of observance of legislative requirements concerning money laundering during hard currency transactions has been deleted from the list of the issues to be inspected in a bank (financial institution). The Resolution took effect on 12 March 2004.

 

3)        National Bank Letter No. 25-118/148-754 "On the Procedure for Opening Accounts to Create the Authorized Fund of an Economic Society" dated 2 February 2004. The National Bank informs that submission of a copy of a foundation agreement is not required when a checking account is being opened in order to create the authorized fund of a limited liability company with any number of participants, or the authorized fund of a joint-stock company that has only one shareholder.

 

Currency Control

 

4)        Law of Ukraine No. 1454-IV "On Incorporating Amendments into Article 6 of the Law of Ukraine 'On the Foreign Currency Payments Procedure'" dated 5 February 2004. Article 4 of the Law of Ukraine "On the Foreign Currency Payments Procedure" (the "Law") stipulates liability for tardy placement of residents' foreign currency proceeds under foreign-economic contracts in the residents' hard currency accounts. The amended Article 6 of the Law creates an exception to such liability attaching. To wit, if the deadline for placing such foreign currency earnings in the residents' hard currency accounts is not observed because of a force majeure, the "clock should stop ticking" for the duration of the force majeure, and only "resume ticking" on the day that follows the day that the force majeure ceases to exist. The Law took effect on 26 February 2004.

 

Customs

 

5)        Ministry of Economy and European Integration of Ukraine ("Ministry of Economy") Order No. 52 "On Approving the Regulations on the Procedure for Formalization and Issuance by the Ministry of Economy and European Integration of Ukraine of Authorizations to Re-Export Goods of Foreign Origin and Goods of Ukrainian Origin" dated 10 February 2004. The Regulations stipulate a list of the documents that must be submitted to the Ministry of Economy in order to obtain written permits to re-export goods or copies of such permits, a procedure for considering requests for such permits and a procedure for issuing or refusing to issue such permits. The Order took effect on 13 March 2004.

 

6)        State Customs Service of Ukraine ("Customs Service") Letter No. 24/4-14-34/1545-ÅP "On the Payment of Customs Fees for Customs Clearance of Goods with the Use of a Temporary Declaration and an Incomplete Declaration" dated 11 February 2004. The Customs Service's Letter indicates that when a temporary declaration or incomplete declaration is used (the procedure and conditions for the use of which are stipulated by Customs Service Order No. 932 dated 30 December 2003, which we discussed in the January issue of this Chronicle), customs fees for customs clearance of goods shall not be collected.

 

Intellectual Property

 

7)        Law of Ukraine No. 1407-IV "On Amending Certain Legislative Acts of Ukraine Concerning Protection of Intellectual Property" dated 3 February 2004. With the aim of bringing the legislation of Ukraine into line with the re-stated Law of Ukraine "On Copyright and Neighboring Rights", amendments were made to several Laws of Ukraine and the Decree of the Cabinet of Ministers of Ukraine (the "Cabinet of Ministers") "On Standardization and Certification" (the "Decree"). In particular, the Law "On Investment Activity" indicates that proprietary rights to intellectual property can be investments. The Law "On Advertising" stipulates that trade marks for goods and services must be presented in advertising in the form in which they are protected in Ukraine. The provision stating that the proprietary part of a copyright to State standards of Ukraine is vested with the State, irrespective of the sources of financing of their development, has been deleted from the Decree. The Law took effect on 2 March 2004.

 

Tax Treaties

 

8)        Law of Ukraine No. 1436-IV "On Ratifying the Agreement Between the Government of Ukraine and the Government of the Syrian Arab Republic for the Avoidance of Double Taxation and Prevention of Tax Evasion Concerning Income Taxes" dated 4 February 2004. Ukraine has ratified the Agreement with Syria for the avoidance of double taxation. The Agreement regulates such taxes as: (a) for Syria: taxes levied on profit derived from commercial, industrial and non-commercial activity; income tax levied on salaries; income tax levied on non-residents; income tax levied on movable and immovable capital; additional taxes charged as a percentage of the aforementioned taxes; (b) for Ukraine: the enterprise profit tax; the individual income tax. The Law took effect on 7 March 2004.

 

9)        Law of Ukraine No. 1437-IV "On Ratifying the Convention Between the Cabinet of Ministers of Ukraine and the Government of the South-African Republic for the Avoidance of Double Taxation and Prevention of Tax Evasion Concerning Income Taxes" dated 4 February 2004. Ukraine has ratified the Convention with South Africa for the avoidance of double taxation. The Convention applies to such taxes as: (a) in South Africa: ordinary taxes; secondary taxes collected from companies; royalty taxes at the source of payment; (b) in Ukraine: the enterprise profit tax; the individual income tax. The Law took effect on 10 March 2004.

 

Land

 

10)      Verkhovna Rada of Ukraine Resolution No. 1492-IV "On Extending the Validity of Clause 6 of the Verkhovna Rada of Ukraine Resolution 'On Land Reform'" dated 17 February 2004. The term for formalization of the right of ownership of land or the right to use land vested with individuals, enterprises, institutions and organizations who/which use the land plots granted to them before the entry into force of the Land Code (i.e., 1 January 2002) has been extended for 4 years -- until 1 January 2008.

 

11)      Constitutional Court of Ukraine Decision No. 2-rp/2004 "On the Case Based on the Constitutional Application of Svitiaz Village Council, Shatsky District, Volyn Oblast, Concerning Official Interpretation of the Term 'Transfer' Used in Sub-Clause 5.1.17 of Clause 5.1 of Article 5 of the Law of Ukraine 'On Value-Added Tax' (the Case Concerning the Interpretation of the Term 'Transfer of Land Plots')" dated 5 February 2004. The Law of Ukraine "On Value-Added Tax" treats transfers of land plots as tax-exempt if the transfers are allowed under the Land Code of Ukraine. The Constitutional Court Decision stipulates that "transfer" should be understood to mean obtaining (assigning) the rights to said land plots (right of ownership, right to use) on the basis of relevant deeds, including under purchase-and-sale contracts. "Transfer" does not cover transfers of land for lease.

 

Licensing

 

12)      Ministry of Economy Order No. 46 "On the Procedure for Licensing Export, Import of Goods in 2004" dated 5 February 2004. Regulations on the Procedure for Licensing Import of Goods in 2004 and Regulations on the Procedure for Licensing Export of Goods in 2004 have been approved. The Regulations stipulate a uniform procedure for formalizing and issuing licenses authorizing the import and export of the goods that are subject to licensing and quotas in 2004. The Order took effect on 2 March 2004.

 

Money Laundering

 

13)      National Bank Resolution No. 597 "On Remitting National and Foreign Currency for the Benefit of Non-Residents in Certain Operations" dated 30 December 2003. The rules for effecting national and foreign currency remittances by banks for the benefit of non-residents, previously established by National Bank Resolution No. 58 dated 12 February 2003 (please see the 2003 February issue of the Chronicle), have been revised. The statement of expert evaluation of price, issued by the State Information and Analytical Center for Monitoring Foreign Commodity Markets to confirm that a contract price for services accords with market prices, is still required in cases when the total cost of a non-resident's services (i.e., the value of a contract) is greater than 50,000 Euros. Services of a sub-class of the Foreign-Economic Activity Services Classification, received by a resident under a contract made with the same person, are treated as if acquired under a single contract. The Resolution took effect on 16 February 2004.

 

14)      State Committee for Securities and the Stock Market Decision No. 562 "On Approving the Procedure for Organizing Professional Training of Financial Monitoring Experts of Professional Participants on the Securities Market" dated 10 December 2003. The staff of a legal entity that carries out professional activity on the securities market must include, before 1 January 2005, at least one person who has successfully passed a qualification exam in financial monitoring. The Decision took effect on 21 February 2004.

 

Oil and Gas

 

15)      Law No. 1456-IV "On Rent Payments for Oil, Natural and Condensed Gas" dated 5 February 2004. The Law sets forth the definitions and amounts of, and procedure for, paying the rent charged for oil and natural and condensed gas extracted in Ukraine, natural gas and gas condensate, supervision of the correct calculation and payment thereof, as well as the rent payers' liability. The rent payers are defined as subjects of business activity that extract oil or natural or condensed gas within Ukraine and that are registered as taxpayers. The rent payers, rental objects and rent rates, rent calculation and payment procedures cannot be established or changed by other legislative acts, except for laws concerning amendments of this Law. Upon publication, the Law will be retroactive, treated as being effective as of 1 January 2004, except for Section III of the Law, which stipulates the rates, deadlines and the procedure for making rent payments, which Section will take effect on 1 January 2005.

 

Non-Banking Financial Services

 

16)      State Commission for Regulation of the Financial Services Markets of Ukraine ("Financial Services Commission") Ordinance No. 188 "On Establishing a Licensing Fee" dated 29 December 2003. The established fee to be charged for licenses authorizing certain financial services ranges from 200 UAH to 10,000 UAH, and is paid one time for the entire term of the license. The Ordinance took effect on 5 March 2004.

 

17)      Financial Services Commission Ordinance No. 33 "On Approving a List of the Services Which Can Be Indicated in the Annex to the Financial Institution Registration Certificate Issued to a Financial Company" dated 30 January 2004. The following financial services can be indicated in the Annex to the Financial Institution Registration Certificate: granting financial credits based on loaned and own funds; granting loans; money remittances; granting surety; receiving financial assets from individuals and legal entities; financial leasing; granting guarantees; factoring; trust management of financial assets; clearing; servicing traveler's cheques; and currency exchange activity. The approved list is not an exhaustive one and can be expanded in the future by the Financial Services Commission.

 

Subsoil

 

18)      Presidential Decree No. 176/2004 "On the Regulations of the Ministry for Protection of the Environment of Ukraine" dated 10 February 2004. The Ministry of Ecology and Natural Resources of Ukraine was reorganized into the Ministry for Protection of the Environment of Ukraine ("Ministry of the Environment") and the State Committee of Ukraine for Natural Resources ("Natural Resources Committee") in September of 2003. The Regulations of the Ministry of the Environment have been approved pursuant to the Decree. The Ministry of the Environment is authorized: to issue approvals with respect to special use of natural resources (except for subsoil), releases and discharges of pollutants, operations in the sphere of circulation of waste, and to issue licenses authorizing certain economic activities in this sphere. The Decree took effect on 29 February 2004.

 

19)      Presidential Decree No. 177/2004 "On the Regulations of the State Committee of Ukraine for Natural Resources" dated 10 February 2004. The Regulations of the Natural Resources Committee have been approved. The principal powers of the Natural Resources Committee include: issuance of special approvals concerning the use of subsoil areas, the authorizations (licenses) to carry out prospecting (exploration) and operation of mineral deposits; and support of inter-departmental commissions that identify winners of tenders for the obtaining of special permits to use oil and gas bearing subsoil. The Decree took effect on 29 February 2004.

 

Specific Sectors of the Economy/Miscellaneous

 

20)      Cabinet of Ministers Resolution No. 150 "On Official Promulgation of Regulations Adopted by Local Bodies of Executive Power, Territorial Bodies of the Central Bodies of Executive Power and Their Officials, and Amending the Procedure for Promulgating on the Internet Information Concerning the Activities of the Bodies of Executive Power" dated 11 February 2004. The regulations adopted by the Council of Ministers of the Autonomous Republic of Crimea, oblast, Kiev and Sevastopol City, district, district State Administrations in Kiev and Sevastopol, as well as by their officials, must be published in the official publications of the aforementioned bodies. The Resolution took effect on 28 February 2004.

 

21)      Letter of the State Committee of Ukraine for Regulatory Policy and Entrepreneurship No. 638 "On Considering the Letter (Concerning the Deadline for Carrying Out Scheduled and Unscheduled Audits of Financial and Economic Activity of Subjects of Business Activity)" dated 4 February 2004. According to the clarifications set forth in the Letter, during scheduled on-site audits, priority deadlines are deadlines which do not exceed 30 working days, except for subjects of business activity the annual total gross income of which equals or exceeds 20 million UAH; the deadlines for their audits can exceed 30 working days. The effective legislation does not prescribe deadlines for carrying out unscheduled audits.