Non-Banking Financial Services

Social Sphere

Taxes

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 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

Arbitration

1) Law of Ukraine No. 2705-IV “On Incorporating Amendments to Certain Legislative Acts of Ukraine on Pretrial Settlement of Disputes” dated 23 June 2005. In order for pretrial settlement to take place, both parties to a dispute must agree to resolve their dispute in this manner. The law took effect on 21 July 2005.

Banking

2) Law of Ukraine No. 2704-IV “On Formation and Circulation of Credit Histories” dated 23 June 2005. This law regulates the use of information on individuals' fulfillment of their financial obligations and provides for the creation of a credit history bureau, the exclusive activity of which will be the collection, storage and use of information used to compile credit histories. The law defines what information a credit history consists of. The individual who is the subject of a credit history must give his consent before the credit history bureau can collect, store or use his personal information. The law has not yet been published, but will take effect six months after its date of publication.

3) National Bank of Ukraine ("NBU") Letter No. 13-312/3513 “Concerning Termination of the Sale of US Dollars in Cash” dated 1 August 2005. As of 1 August, the NBU has stopped selling US Dollars in cash to authorized banks for a commission of 0.075%. The import of this letter is that the NBU is no longer selling its USD cash reserves; banks may, however, continue selling USD one to another.

International Treaties

4) Bill No. 7814 “On Incorporating Amendments to Certain Legislative Acts of Ukraine (on Payment by Ukraine of Membership Fees in Eurocontrol)” dated 13 July 2005. On 26 November 2003, Ukraine acceded to the Eurocontrol International Convention relating to Cooperation for the Safety of Air Navigation, and the Multilateral Agreement relating to Route Charges. Therefore, the Cabinet of Ministers of Ukraine ("Cabinet of Ministers") has proposed to regulate the payment of air navigation route charges, their rates and the procedure for their payment. The bill also states that no NBU license is necessary to conduct such foreign currency operations.

Investment

5) State Tax Administration ("STA") Order No. 238 “On Approval of a State Tax Service Agency Confirmation Order on Notifying of the Actual Deposit of Foreign Investments or Promissory Notes Distributed at the Time of Importation of Property into Ukraine as a Foreign Investor’s Contribution to the Statutory Fund of a Company with Foreign Investments, and under Joint Investment Activity Contracts” dated 29 July 2005. This order determines the procedure by which the STA confirms that it has been notified about the actual deposit of foreign investments. The STA agency must, within 15 calendar days after receiving a written request that it confirm having been notified, stamp the notification and return it to the applicant or else give a reasoned refusal in writing. This order took effect on 25 July 2005.

Land

6) Cabinet of Ministers Decree No. 543 “On the Agrarian Fund” dated 6 July 2005. This ordinance states that an Agrarian Fund shall implement pricing policy in the agro-industrial sector of the economy. The Fund shall act in the name of the State in extending loans and collecting food reserves subject to state pricing regulation. This decree took effect on 6 July 2005.

7) Law of Ukraine No. 2662-IV “On Vines and Wine” dated 16 June 2005. This law regulates viniculture and winemaking in Ukraine. Businesses need to obtain a license in order to produce wine. This law foresees the possibility of wine being recognized as "fake" and imposes liability for infringing the rules of viniculture and winemaking. This law takes effect on 1 January 2006.

8) Cabinet of Ministers Decree No. 668 “On Approval of the General Conditions for Concluding and Carrying out Contracts of Work and Labor in Capital Construction ” dated 1 August 2005. This ordinance specifies how contracts of work and labor in capital construction are to be concluded and carried out with the participation of foreign companies (economic entities). When concluding and carrying out such contracts, the general rules applicable to construction projects shall apply, irrespective of the source of financing of the project or the forms of ownership of the contractor and the client. This decree took effect on 1 August 2005.

Non-Banking Financial Services

9) State Committee on Regulation of the Financial Services Market Ordinance No. 4122 “On Approval of Requirements for Software and Special Technical Equipment of Credit Unions Involved in Providing Financial Services” dated 3 July 2005. According to the adopted Requirements, credit unions must develop controlled access regulation and technical support for complex information systems, which can provide for password creation during work with the information system, validity for a period of time and delegation of authority. The Ordinance will take effect on 1 January 2006.

Social Sphere

10) Law of Ukraine No. 2661-IV “On Incorporating Amendments to Law of Ukraine No. 966-XIV “On the Cost of Living” dated 16 June 2005. This law increases the cost of living allowance for persons entitled to receive social security, by the same amount as the individual income tax rate. This law took effect on 7 July 2005.

Taxes

11) Law of Ukraine No. 2771-IV “On Implementing Changes to Law of Ukraine No 2285-IV 'On the State Budget of Ukraine for 2005' and other Laws of Ukraine” dated 7 July 2005. The new law amends the State Budget for 2005 and certain laws concerning taxation. In particular, it increases the rent payment for oil and gas condensate. Effective 1 August, this rent payment will be 550 UAH (approximately 110 USD) per ton of oil or gas condensate extracted. It amends the Law “On the Corporate Profits Tax” by increasing the amount of insurance expenses that a taxpayer may attribute to its total expenses. It amends the Law “On the Individual Income Tax” by decreasing the amount of the social tax benefits from 1 to 0.5 minimum wage effective 1 January 2006. It amends the Law “On Obligatory State Pension Insurance” by increasing the amount of obligatory state pension insurance charged on mobile communication services. It also makes other amendments to the Laws “On Operations with Give-and-Take Raw Materials in Foreign Economic Relations” and “On Value Added Tax”. This law took effect on 28 July 2005.

Specific Sectors of the Economy/Miscellaneous

12) Law of Ukraine No. 2633-IV “On Heat Supply” dated 2 July 2005. This law regulates responsibility for violations of the law and of international cooperation in the sphere of heat supply. This law took effect on 11 July 2005.

13) State Tourist Administration Order No. 50 “On Approval of the Procedure for Drawing Up and Executing Vouchers for Tourist Services Agreements” dated 6 July 2005. Effective 1 October, all providers of tourist services must use a voucher form. Use of the voucher is compulsory for all providers of tourist services, regardless of their form of ownership or place of business. This order took effect on 29 July 2005.

14) Law of Ukraine No. 2664-IV “On Incorporating Amendments into Certain Legislative Acts of Ukraine on Additional Protection Guarantees of State Financial Interests” dated 16 June 2005. This law was adopted in order to protect state financial interests and to increase control over the spending of state funds. The law broadens the definition of what constitute "state funds"; it establishes new public purchases procedures; provides for creation of an annual plan for public purchases; creates a new procedure for conducting auctions; and changes the procedure for filing and reviewing complaints. This law took effect on 6 August 2005.

15) Law of Ukraine No. 2711-IV “On Measures Aimed at Guaranteeing the Continuous Functioning of the Fuel-Energy Complex” dated 23 June 2005. This law lays out a set of organizational and economic measures aimed at ensuring the continuity of the functioning of Ukraine's "fuel-energy complex". The law applies to businesses in the energy industry, and also to other companies that are in arrears on their payments for energy resources. Companies that benefit from organizational and economic measures must register with the special registry of "fuel-energy complex" companies. Companies in the registry cannot use organizational and economic measures for more than nine months after being entered in the registry. This law takes effect on 25 October 2005.