Russian-Ukrainian Legal Group, P.A.
Kiev, Ukraine; Washington, D.C., USA
Chronicle
of Recent Developments in Ukrainian Legislation
novemBER 2004
Advertising
Banking
Currency Control
Customs
Intellectual Property
Labor Law
Land
Subsoil Use
Taxes
Telecommunications
Specific Sectors of the Economy/Miscellaneous
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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) State Committee of Ukraine for Technical Regulation and Consumer Policy ("Consumer
Policy Committee") Letter No. 9251-3-11/17 "Concerning the
Language of Advertising" dated 13 October 2004. If, when
it is first registered, a printed mass media publication or a TV/radio
organization ("Mass Media") declares its
language of publication or broadcast to be something other than Ukrainian
(e.g., Russian), then said Mass Media organization can run advertisements in
the language specified. The above provision applies only to regional Mass
Media; it does not apply to Mass Media distributed or broadcast over the entire
territory of Ukraine. According to the Letter, this point of view is only a recommendation
of the Consumer Policy Committee.
Banking
2) National Bank of Ukraine ("National
Bank") Resolution No. 576 "On Temporary Measures
Concerning Banks' Activity" dated 30 November 2004. The
Resolution aims to ensure the stability of the Ukrainian banking system. Its
essential provisions include: (1) placing an 80,000 UAH monthly limit on a
legal entity's withdrawal of cash from its account (this limit does not apply
to cash withdrawn for the payment of salaries or welfare, social or similar
payments); (2) until 31 December 2004, banks are not allowed to pay to legal
entities and individuals money under deposit agreements before maturity. Also,
authorized banks can make one-time foreign currency cash disbursements in
excess of 1000 US dollars or wire foreign currency in excess of 50,000 US
dollars, but only with the written approval of a bank's chief manager. Payment
orders should be presented to a bank in order to transfer the relevant funds,
which funds must be available at the time the payment order is presented, and
the money can then be transferred to the recipient the next day after the
presentation of the payment order. It is recommended that banks also establish
a limit of 1,500 UAH per day on cash disbursements through cash dispensers to
legal entities and individuals, and adjust the terms and conditions of deposit
agreements (interest rates, deadlines, etc.) in accordance with the changing
economic situation. The aforementioned restrictions will remain effective until
31
December 2004. The
Resolution took effect on 30 November 2004.
3) National Bank Resolution No. 583 "On Amending
National Bank of Ukraine Resolution No. 576 dated 30 November
2004" dated 2 December
2004. The National Bank Resolution mentioned in item (2)
of this Chronicle was subsequently amended to permit cash to be withdrawn
without limitation by meat and milk industry processing enterprises for the
purchase of milk and live cattle from individuals, and also to permit
withdrawals for use on business trips. In the latter case, however, the cash
amount cannot exceed three times the amount prescribed by the legislation for
business trips. Also, the rule stating that money must transferred to a
recipient the next day after presentation of a payment order, should be
regarded as a guideline rather than as a mandatory provision. The Resolution
took effect on 2 December 2004.
4) National Bank Letters No. 18-111/4923-12622 dated 6 December
2004 and No.
18-111/5021-12863 dated 9 December 2004 "On Some Aspects of the Practical Application
of Resolution No. 576 dated 30 November 2004".
The National Bank issued further clarifications of its Resolution (please see
item (2) of this Chronicle), in particular, saying that the UAH equivalent of
issued foreign currency cash is to be included in the maximum amount allowed
pursuant to the Resolution (80,000 UAH per month). In some cases (purchases,
insurance payouts for accidents, etc.), banks can request that the National
Bank approve the withdrawal of an amount that exceeds the above limit. The
Resolution also allows the early cancellation of a deposit agreement: (1) if a
written cancellation notice was submitted before 30 November 2004 and such
notice is provided for in the deposit agreement; (2) to cover funeral costs
(against presentation of certifying documents); or (3) to pay for medical
treatment, to purchase a dwelling or to invest in a dwelling construction
project. In any of these cases, deposited funds can be wired directly to the
recipient's account (on the basis of the relevant bills if applicable). The
Letters also prescribe a new restriction concerning re-formalization of UAH
deposit agreements as foreign currency deposit agreements.
Currency Control
5) National Bank Resolution No. 483 "On Approving the
Regulations on the Procedure for Issuance by the National Bank of Ukraine of
Individual Licenses Authorizing the Use of Foreign Currency as a Means of
Payment in the territory of Ukraine" dated 14 October 2004. Under the
general rule, non-cash foreign currency can be used as a means of payment only
if a resident or non-resident holds a license to make such a payment. The exceptions
are: (1) when the sender or the recipient in a currency transaction is an
authorized bank; and (2) in other cases, stipulated by the laws of Ukraine. The date of issuance of the license must be earlier
than the date of the currency transaction. The term prescribed by the license
conditions for a license holder to effect a currency transaction cannot exceed
one calendar year after the date of issuance of the license. When one party to
a currency transaction has received a license, this also means that the other
party to the transaction, and any third party involved in the transaction, is
also allowed to carry it out, unless otherwise stipulated by the license
conditions. The Resolution took effect on 20 November 2004.
6) National Bank Resolution No. 484 "On Approving the
Regulations on the Procedure for Issuance by the National Bank of Ukraine of
Individual Licenses Authorizing Ukrainian Currency Payments Between Residents
and Non-Residents Within Trade Turnover, and Amending a Regulation of the National
Bank of Ukraine" dated 14 October 2004. The rule, that payments under
export and import transactions with non-residents can only be made through a
correspondent account of a non-resident bank registered in the country in which
the non-resident is registered, does not apply to payments based on an
individual license from the National Bank and authorizing Ukrainian currency
payments between residents and non-residents during commerce. The Regulations
stipulate the procedure for issuance of said licenses. They also require
Ukrainian currency payments between residents and non-residents during commerce
to be made on the basis of such a license, except for in the cases specified in
the Regulations. The Resolution took effect on 20 November 2004.
7) National Bank Resolution No. 499 "On Amending the
Rules for Carrying Out Operations on the Inter-Bank Currency Market of Ukraine" dated 20 October 2004. The
rules now state that an authorized bank (authorized financial institution) only
has the right to purchase foreign currency from the National Bank for the
purpose of implementing orders and instructions of their clients (except for
authorized banks and authorized financial institutions), or to meet the bank's
own needs. The Resolution took effect on 22 November 2004.
8) National Bank Letter No. 13-135/5734-12478 "On
Carrying Out Currency Exchange Operations" dated 1 December
2004. Starting 2 December 2004, foreign currency can only be sold through banks'
own cash departments. Authorized banks can only provide currency exchange
offices, including their agents' currency exchange offices, with UAH.
Customs
9) State Customs Service of Ukraine ("Customs Service") Letter No.
25/4-14-35/14317-ЕP "On Updated Information" dated 30 November
2004. The Letter contains updated data concerning the
decisions of the Inter-Departmental Commission for International Trade,
imposing special types of customs duties on certain goods transported across
the customs border of Ukraine. The Letter summarizes the decisions; describes the
codes, descriptions and countries of origin of the goods
covered by the decisions; and gives the customs duty rates for imported
goods and the terms for which the rates remain effective.
Intellectual Property
10) Customs Service and Ukrainian Office of the International
Federation of Phonographic Industry ("IFPI") Protocol "On
Cooperation in Combating Circulation of Counterfeit Phonographic Products"
dated 5 November 2004. The
parties to the Protocol undertook: (1) to arrange for a continuous exchange of
information and procedural recommendations concerning illegal use of objects of
copyright; (2) to conduct joint research of counterfeit audiovisual products
and of the methods and means used for smuggling such products through the
customs territory of Ukraine; (3) to consult on matters that fall within the
parties' powers; and (4) to involve IFPI representatives in any meetings and
seminars dealing with combating the smuggling of counterfeit products. The
Customs Service also undertook to implement, upon its own initiative and/or
based on IFPI data, measures to combat the illegal distribution of counterfeit
products. IFPI will finance some of the measures and provide incentives to
Customs Service officers. The text of the Protocol is not yet publicly
available.
11) Ministry of Education and Science of Ukraine Letter No. 16-15/4592 "On Payment of Royalties
for the Use of Phonograms" dated 26 October 2004. The
royalty for the use of phonograms by night clubs, which charge entrance fees,
constitutes 4% of the gross proceeds from ticket sales, and for establishments,
which charge no entrance fees, 1% of all revenue generated from the activity
involving the use of the relevant objects of neighboring rights, or 2.5% of the
total cost of said use of objects of neighboring rights in cases when no
revenue is generated. The royalties are collected by: (1) the All-Ukrainian
Association of Holders of Copyright and Neighboring Rights "Oberig";
(2) the Enterprise Association "Ukrainian Musical Alliance"; and (3)
the Enterprise Association "Ukrainian League of Musical Rights".
Businesses can conclude royalty payment agreements with any one of the
aforementioned organizations, chosen at their discretion. The royalties are to
be collected irrespective of whether domestic or foreign phonograms are used,
or whether domestic or foreign performers' performances are fixed therein.
Labor Law
12) Law of Ukraine No. 2150-IV "On Providing First Jobs for
Youths Who Have Received Higher or Vocational Training and Issuing Grants to
the Employer" dated 4 November 2004. The Law stipulates that a
government grant can be issued to an employer for a term of two years, if the
employer employs young people based on orders of the state employment service,
provided that during the last six months the employer did not reduce the number
of persons doing the same jobs for which the youths are employed. The list of
the jobs (specialties), with respect to which the grant can be issued, will be
provided separately. The amount of the grant is not stated clearly, because
according to the Law, the decisions concerning the issuance and amounts of the
grant should be made annually by the Board of the Fund of Ukraine for Mandatory
State Social Insurance, based on the Fund's financial condition and state
budget allocations. The Law will take effect on 1 January 2005.
13) State Committee of Ukraine for Supervision of Labor Protection Order No. 255
"On Approving Standard Regulations of the Labor Protection Service"
dated 15 November 2004. The
approved Standard Regulations are the basis for developing and approving Labor
Protection Service Regulations at enterprises with 50 or more employees. Under
Ukrainian law, the responsibility for developing such Regulations lies with the
employer and should be implemented subject to the employer's specific
operations, activities, number of employees, working conditions and other
factors. The Order took effect on 12 December 2004.
Land
14) Law of Ukraine No. 2059-IV "On Incorporating Amendments into
the Land Code of Ukraine" dated 6 October 2004. The Law
extends the deadlines prescribed for: (1) renewing the right of ownership or
the right to lease with respect to land plots permanently used by individuals
and legal entities -- from 1 January 2005 until 1 January 2008; (2) the
prohibition against legal entities and individuals acquiring more than 100
hectares of agricultural land -- from 1 January 2010 until 1 January 2015; (3)
the prohibition against contributing titles to land shares (equity stakes) to
the authorized funds of companies -- from 1 January 2005 until 1 January 2007;
(4) the moratorium on sale and other alienation of agricultural land and land
shares (equity stakes) -- from 1 January 2005 until 1 January 2007. The Law
took effect on 7 December 2004.
15) Ministry for Protection of the Natural Environment Order No.
434 "On Approving the Procedure for Issuance by Nature Protection Bodies
of Materials Concerning Withdrawal (Redemption), Granting of Land Plots"
dated 5 November 2004. The approved Procedure defines a mechanism for
nature protection bodies to issue approvals with respect to land plots chosen
for facilities, sites of facilities and land plot allocation projects, covering
all categories of land irrespective of its form of ownership or use. The
materials concerning withdrawal (redemption), granting of land plots are
reviewed to check for observance of environmental protection laws and
regulations, standards, rates and rules, lists of which are defined on a
case-by-case basis. Opinions issued by nature protection bodies serve as the
basis for the signing or rejection by a representative of a nature protection
body of a statement certifying the choice of a land plot for a facility. The
Order took effect on 3 December 2004.
Subsoil Use
16) State Committee of Ukraine for Natural Resources ("Natural
Resources Committee") Order No. 199 "Concerning the
Approval of the List of the Cases of Issuance of Special Permits (Licenses)
Authorizing the Use of Subsoil Without Holding Tenders" dated 25 October
2004. Exercising its powers (see the October 2004 issue of this Chronicle),
the Natural Resources Committee has defined a List of the cases when subsoil
use licenses can be granted without holding tenders. There are 12 cases,
including: (1) geological studies (production) in subsoil areas which are not
in high demand on the market; (2) submission of less than two applications for
a license, or if a license is not sold at a repeated auction; (3) geological
study of subsoil is conducted by a subsoil user which intends to carry out
production on a deposit; (4) granting a subsoil area for use, when the business
which submitted the license application owns a property complex located on the
subsoil area, and the business intends to extract mineral resources there; (5)
if a subsoil area is granted for use under production-sharing
agreements; (6) license renewal in case of succession, or of extension
of a subsoil user's license term. The Order took effect on 5 December 2004.
17) State Commission for Mineral Reserves of Ukraine ("Mineral
Reserves Commission") Order No. 224 "On Approving the
Instructions Concerning the Application to Peat Deposits of the Classification
of Mineral Reserves and Resources of the State Subsoil Fund" dated 25
October 2004. The Instructions stipulate the classification of deposits by
natural types and kinds of peat, principles of classifying peat reserves by
commercial significance, feasibility and geological studies, as well as
requirements concerning the degree of exploration of peat deposits, counting
the reserves and their readiness for commercial development. The Instructions'
requirements are binding upon enterprises of all forms of ownership which plan,
finance and carry out peat prospecting, or which design and construct peat
production enterprises, operate deposits or maintain records of peat reserves
and resources. The Order will take effect on 1 January 2005.
18) Mineral Reserves Commission Order No. 225 "On Approving
the Instructions Concerning the Application to Coal Deposits of the
Classification of Mineral Reserves and Resources of the State Subsoil
Fund" dated 25 October 2004. The Instructions stipulate the
classification of coal deposits by geological-commercial types, commercial
significance, feasibility and geological studies, as well as requirements
concerning the degree of exploration of coal deposits and accompanying mineral
resources, counting the reserves and their readiness for commercial
development. The Instructions' requirements are binding upon enterprises of all
forms of ownership which plan, finance and carry out coal prospecting, design
and construct coal mines and sections (mining enterprises), operate deposits or
maintain records of coal reserves and resources. The Order will take effect on 1 January 2005.
Taxes
19) Law of Ukraine No. 2157-IV "On Incorporating Amendments into
the Law of Ukraine "On Foreign Economic Activity"
(Clarification of Some Terms") dated 4 November 2004. The
provisions establishing the criteria for granting tax privileges to subjects of
foreign economic activity and describing the types of such privileges were
deleted from the Law "On Foreign Economic Activity". The Law took
effect on 3 December 2004.
20) State Tax Administration of Ukraine Letter No. 9363/6/15-1316 "Concerning Taxation
of Non-Residents' Income" dated 20 October 2004. The
Letter clarifies how to tax the income of a non-resident, who is a client of a
branch of a bank that pays a consolidated profits tax. The Letter states that,
when making payment of income to a non-resident, a bank's branch that is a
payer of the profits tax must withhold tax on such non-resident's income and
remit it to the branch's local Budget.
Telecommunications
21) Ministry of Transport and Communication of Ukraine Order No.
984 "On Approving Licensing Conditions for Carrying Out Activity in the
Sphere of Telecommunications Associated with the Maintenance and Operation of
TV and Radio Broadcasting Networks, Wire Radio Broadcasting and Television
Networks, Granting Electric Communication Channels for Use" dated 10
November 2004. According to the new Licensing Conditions in the sphere of
telecommunications, businesses can receive licenses authorizing the maintenance
and operation of TV and radio broadcasting networks, wire radio broadcasting
and television networks and use of electric communication channels. Novelties
include applicants' obligation to present documents certifying that they
possess the funds and personnel required for the relevant activity and
information certifying their ability to create and operate a telecommunication
network, as well as an obligation to publish their service rates no more than
seven calendar days prior to their introduction. The Order took effect on 23 November
2004.
Specific Sectors of the
Economy/Miscellaneous
22) Law of Ukraine No. 2116-IV "On Incorporating Amendments into
Certain Laws of Ukraine" dated 21 October 2004.
Suppliers no longer need to keep copies of certificates of conformity and/or of
conformity declarations, or copies of conformity recognition certificates with
respect to products, the conformity of which is subject to mandatory
confirmation. Products can now be sold if the documents, based on which the
products were transferred from a supplier, contain registration numbers of the
aforementioned certificates and declarations, so long as this is prescribed by
the technical rules for certifying the conformity of such products. The Law
took effect on 17 November 2004.