Legal Digest #1

A number of novelties were introduced at the end of 2023 and at the beginning of 2024. These include the entry into force of amendments to financial services legislation, introduction of the long-awaited administrative appeal procedure and the start of a next stage of the land market reform. The legal regulation of foreign trust services, the procedure for granting leave, and insurance of investment activities was also updated.

Below is a brief overview of new developments and comments from Deloitte experts.

The 2024 Audit Plan is published

The State Tax Service of Ukraine published on its website a schedule for documentary tax audits in 2024. As the schedule may be updated monthly during martial law, we recommend monitoring changes to the schedule regularly to determine whether your company is included in the Audit Plan.
Non-residents registered with the Ukrainian tax authorities should also prepare for scheduled tax audits, as some of them are included in the 2024 Audit Plan.

If you find your company in the Audit Plan, Deloitte’s attorneys-at-law and tax experts can provide support and assistance at all stages of the audit.

Latest developments in the non-banking financial services market

At the beginning of 2024, the new laws for non-banking financial services market entered into force, namely the Law of Ukraine “On Financial Services and Financial Companies”, the Law of Ukraine “On Insurance” and the Law of Ukraine “On Credit Unions”.

To implement the provisions of new laws, the NBU adopted a number of bylaws at the end of December last year. These include the new licenсe conditions for financial service providers, provisions on financial service secrecy, the use of electronic signatures and seals, including regulation of insurance market participants, credit unions, and pawnshops. In general, financial service providers have six months to harmonize their activities with the novelties introduced.

Given the significant number of changes, companies should review their internal processes and policies and update them. Our team will be happy to advise on the new requirements and help with their implementation.

New land market opportunities for legal entities

On 1 January 2024, legal entities received the long-awaited right to acquire agricultural land plots of up to 10 thousand hectares. However, it should be noted that only the legal entities incorporated under the laws of Ukraine will have this right. At the same time, the following legal entities are not allowed to purchase land:

1. whose participants or ultimate beneficial owners (UBOs) are foreign citizens or states, citizens of the Russian Federation or members of terrorist organizations;
2. whose ultimate beneficial owner cannot be identified, as well as those whose ultimate beneficial owners are registered in offshore zones, the list of which is approved by the CMU;
3. those that are subject to special economic and other restrictive measures (sanctions);
4. those controlled by the individuals and legal entities registered in countries included by the global money laundering and terrorist financing watchdog FATF in the list of countries that do not cooperate in the field of combating money laundering.

We hope that these changes will contribute to the land market development and create additional opportunities for attracting investment in the agricultural sector.

The Law on Administrative Procedure: A new way of interacting with the state authorities?

On 15 December 2023, the Law of Ukraine “On Administrative Procedure” (the “Law”) came into force, establishing new rules for handling petitions filed by the individuals and legal entities with the public and local authorities.

Previously, the procedure for handling petitions was partially regulated by the Law of Ukraine “On Citizen Petitions”, partially by the Law of Ukraine “On Administrative Services” and partially – by the relevant provisions of substantive law. As a result, the procedural issues remained unresolved, and the applicant – unprotected from abuse of power and law.

The Law establishes universal rules and standards for administrative procedures. The introduced rules should bring the process of reviewing an applicant’s petition closer to a judicial process with respective guarantees of the parties’ rights.

We will continue to monitor the implementation of the Law and evaluate the introduced novelties in practice, considering that the adoption of the right rules alone is not enough. It is necessary, at the very least, to enhance the proficiency of those who will implement them, in which we place our hope.

Antitrust law reform

On 1 January 2024, amendments to the legislation on the protection of economic competition and the activities of the Antimonopoly Committee of Ukraine (AMCU) came into force. The amendments are intended to bring Ukrainian legislation closer to the EU standards and provide for strengthening the powers and authority, and transparency of the AMCU, refining on leniency and the penalty calculation procedure, introducing a settlement procedure, etc.

We are closely monitoring the antitrust law reform and will keep you updated on further developments.

Opportunities for using foreign QES in Ukraine

In practice, we often see inquiries from Ukrainian businesses about the possibility of using foreign QES in their activities. For example, companies are interested in using DocuSign, Acrobat Sign, etc. to sign documents.

Although the Law of Ukraine “On Electronic Identification and Electronic Trust Services” provided for this possibility starting from 1 January 2023, certain technical aspects were only recently regulated by CMU Resolution No. 1198 that entered into force on 31 December 2023.

More specifically, Ukraine recognizes qualified electronic signatures (QES) from qualified providers included in the trusted lists of EU Member States and other EEA Member States published by the European Commission in accordance with Part 4 of Article 22 of Regulation (EU) No. 910/2014 of the European Parliament and of the Council dated 23 July 2014.

Getting back to practical issues, such as the use of DocuSign, the provider, DocuSign France, has an office registered in France and is included in the trusted list of EU and EEA member states. Accordingly, a QES generated using DocuSign is presumed to be equivalent to a handwritten signature in accordance with Ukrainian legislation. The list of qualified trust service providers is updated on a regular basis. The current list is available here.

Therefore, Ukrainian companies may consider using foreign QES when doing business with non-residents.

War risk insurance

Starting from 1 January 2024, the Ukrainian Export Credit Agency (ECA) has changed the investment insurance rules. The list of activities that can be insured by the ECA has been expanded to include war/political risk insurance:

• Ukrainian enterprises’ loans aimed at creating processing infrastructure facilities and exporting Ukrainian goods, works, and services;
• investments of foreign and Ukrainian investors in Ukraine.

Previously, the insurance services for foreign investments in Ukraine against war risks were provided by the international financial institutions MIGA and DFC.

In our opinion, such changes will have a positive impact on attracting foreign and local investments in Ukraine during martial law and will become an additional stimulus for attracting investors to rebuild Ukraine. However, for these changes to become fully effective, the CMU and the NBU must harmonize the regulatory framework with the Law of Ukraine “On Financial Incentives for Stimulating Export Activities” by the end of March. We will continue to follow the news and keep you updated.

Changes in the procedure for granting and using leave

At the end of December 2023, the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on Regulation of Granting and Using Vacations, and Other Issues” No. 3494-IX dated 22 December 2023 came into force, amending the Labor Code and the Law of Ukraine “On Vacations”, including the following key changes:

• The general period of unpaid leave has been increased from 15 to 30 calendar days per year and without limitation of duration in case of force majeure. However, such leaves will no longer be counted towards the length of service that gives the right to annual basic leave.
• Employees dismissed from military service are entitled to an unpaid leave of up to 60 calendar days, and employees called up for military service will be paid a compensation for all unused leave days upon their request. Therefore, the general compensation rule does not apply to them only in the event of their dismissal.
• The list of categories of employees who may be refused a leave request by the employer has been expanded.
• The Law provides for the possibility of determining the duration of vacations, transfer of days off and working days under the terms of employment and collective agreements. The procedure for applying for maternity leave has also been clarified.

Employers and employees should take these changes into account. If you have additional questions or need to reflect the new provisions in internal documents, Deloitte tax and legal specialists will be happy to help.

The above review is provided by Deloitte for information purposes only, and it should not be used as an official advice without the separate involvement of our specialists.

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