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Arzinger. Newsletter1

Newsletter№94 24 February 2015

REAL ESTATE AND CONSTRUCTION— Decentralization of architectural and constructional control authorities

EMPLOYMENT— Toughened liability of employers and other changes in Ukrainian labor legislation

— Amounts of payments on "sick leaves" for employees with pensionable service under 3 years and from 5 to 8 years changed

— Establishment of the Unified Social Insurance Fund

— Early retirement period for women extended

— Employees of companies in the ATO zone may take leaves for the entire duration of ATO

— Law approving Decree on Mobilization signed

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Arzinger Newsletter is a monthly publi-cation on the latest changes in legisla-tion of Ukraine, as well as related pub-lications by Arzinger. Arzinger assumes no obligation to update this Newsletter in connection with further changes in the Ukrainian legislation.

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LEGISLATION NEWS

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CORPORATE— Quorum for general meetings of joint stock companies reduced to 50%+1 share

— Amendments to the Regulation on information disclosure by issuers of securities

— New corporate governance rules for banks in force as of January 10, 2015

— Legal entities should use stamps in bank transactions unless they amend their constituent documents

AGRIBUSINESS— Tax changes for agribusiness as of January 1, 2015

— VAT refund cancelled on exports of crops for traders and manufacturers

— Fixed agricultural tax cancelled

— Restrictions on construction and reconstruction cost compensation for farms lifted

— Incentives for family farms

ENERGY— State-owned energy enterprises are evacuated from the ATO zone

— Cabinet of Ministers of Ukraine approved the Action Plan to implement three EU directives on energy efficiency

— NCSREU approved the gas price for industry

— Changes in the obligation for enterprises to buy gas exclusively from "Naftogaz"

— The court has assigned ownership of part of a pipeline previously appropriated by a Russian company to Ukraine

— Effect of CMU Resolution on the state of emergency in the power sector extended

— Gas import from Russia resumed

— New unregulated electricity tariff in Crimea

— Complicated situation with the shale gas extraction investor Chevron (USA)

— Strelkovoye gas producing well assigned to Ukraine

— Agreement on increased gas imports from Europe to Ukraine

— Tariffs for standard connection of electricity-generating plants in 2015 approved



— Gas balance approved for the current year

— NEC "Ukrenergo" held a tender to sell access to electricity export in 2015

— Loan from the World Bank

LIFE SCIENCES AND HEALTHCARE— Life Sciences & Healthcare Newsletter December – 2014/ January 2015

FOOD AND BEVERAGES— Food & Beverages Newsletter December – 2014/ January 2015

SUCCESS STORIES— Arzinger protected the interests of its client, the Ukrainian participant of a world-

famous agribusiness group

— Markian Malskyy elected Chairman of the EBA Board’s West Ukrainian Branch for 2015

— Arzinger honored among leading Ukrainian companies specializing in trademark-related issues

— Pavlo Petrenko and Anna Zorya discussed anticorruption laws with business



Decentralization of architectural anD constructional control authorities

— On 13.01.2015 the Parliament of Ukraine adopted the Draft Law of Ukraine No. 1546 "On amendments to some legislative acts of Ukraine regarding decentralization of powers in the area of architectural and con-structional control and improvement of urban construction legislation" (hereinafter, the Draft Law) on first reading. The Draft Law amends a number of laws in the area of architecture and constriction control as well as of urban development.

It should be noted that despite of the declared decentralization of architectural and constructional control functions, the Draft Law reserves the majority of control functions for the State Architecture and Construc-tion Inspectorate of Ukraine and actually disable local governments in exercising the delegated powers in the provision of permits, commissioning of completed construction sites as well as other powers in archi-tectural and constructional control.

Under the Draft Law, the architectural and constructional control powers shall be vested in:

— Executive authorities of village, town and city councils for state architectural and constructional control – regarding property constructed in localities;

— Structural subdivisions of district state administrations for state architectural and constructional con-trol – regarding property constructed outside localities;

— Construction supervision inspectors of the State Architecture and Construction Inspectorate – regard-ing property constructed on the territory of several administrative and territorial units.

The powers of the State Architecture and Construction Inspectorate under the Draft Law include:

— Supervision through chief construction supervision inspectors;

— Licensing of business activities related to the implementation of architectural projects;

— Maintaining the Unified State Register of business entities that perform construction work.

Apart from that, structural subdivisions and executive committees will be controlled by the State Architec-ture and Control Inspectorate within their relevant powers. Heads of the relevant structural subdivisions and executive bodies, who should meet the qualification requirements set by the State Architecture and Control Inspectorate, will be appointed and dismissed upon the Inspectorate’s approval as well.


REAL ESTATE & CONSTRUCTION

Real Estate & Construction


In the course of supervising the officials of architectural and constructional control authorities the chief construction supervision inspectors may bring officials of the relevant authorities to liability, including dis-ciplinary liability, make submissions for their dismissal, and cancel or suspend the effect of their decisions.

In addition to the redistribution of functions in the field of architectural and constructional control, changes were also made in the urban development legislation, in particular:

— The issuance term for specifications has been shortened from 15 (30) to 10 business days upon the reg-istration of the relevant application;

— The procedure for submitting a declaration of completed preparatory and construction work estab-lishes an exhaustive list of grounds for its return;

— Customers are no longer required to inform local executive authorities and local governments about documents obtained for the start of construction and commissioning of constructed property, while liability for failure to provide such information is cancelled.

As of 24.01.2015, the Draft Law is being prepared for second reading. Should the Draft be passed into law, the amending provisions will come into effect in three months after its publication.

arzinger's relateD publications:

— REFORM AND CONTENT (in Russian)Timur Bondaryev, Managing Partner, Natalia Klochun, Associate/ Yuridicheskaya Praktika, No.4, (892), 27.01.2015/

— COMMENT: WHAT HAVE THE LAWMAKERS CONFUSED IN REAL ESTATE TAx? (in Russian)Timur Bondaryev, Managing Partner/ ABC News, 22.01.2015 /

— COMMENT: HOW THE MILITARY COLLECTION WILL AFFECT THE COST OF RENTAL PROPERTY (in Russian)Natalia Klochun, Associate/ABC News, 20.01.2015 /

— LEGISLATIVE REGULATION OF REAL ESTATE MARKET: WHETHER ALL CHANGE FOR THE BETTER? (in Russian)Svitlana Teush, Senior Associate, Natalia Klochun, Associate / Yurist i Zakon, 15.01.2015 /

— GETTING THE DEAL THROUGH: REAL ESTATE 2015Timur Bondaryev, Managing Partner, Svitlana Teush, Senior Associate, Natalia Klochun, Associate/ Law Business Research Ltd 2014, Getting the Deal Through: Real Estate 2015 /

Real Estate & Construction

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http://arzinger.ua/ru/press/publications/tag-6277/page-2/92272/





tougheneD liability of employers anD other changes in ukrainian labor legislation

— On 01.01.2015 the Law of Ukraine "On Amendments to some Legislative Acts of Ukraine regarding the reform of compulsory state social insurance and legalization of payroll fund" No.77-VIII dated 28.12.2014 (hereinafter, the Law No. 77-VIII) came into effect.

Among other things, Law No. 77-VIII introduces the following amendments to the legislation of Ukraine to toughen the liability for employment law violations:

1. In accordance with the amendments to the Labor Code of Ukraine (Article 265) employers shall be subject to financial liability in the form of fines for breach of labor legislation requirements. Thus, legal entities and individual entrepreneurs using work for hire shall be fined for:

— Actual admission of an employee to work without formalizing the employment relations, appointing an employee part-time with the actual full-time work and payment of salary without accrual and payment of Single Social Contribution – 30 times the minimum wage for each employee the viola-tion relates to. The minimum wage from 01.01.2015 till 30.11.2015 amounts to UAH 1,218, and from 01.12.2015 till 31.12.2015 – UAH 1,378;

— Violation of the terms set for salary payment and other payments provided for by labor laws for more than one month, their incomplete payment – 3 times the minimum wage;

— Incompliance with the minimum state guarantees in the payment of salaries – 10 times the mini-mum wage for each employee the violation relates to;

— Violation of other requirements of labor laws – in the amount of 1 minimum wage.

Fines will be imposed by the State Labor Inspectorate of Ukraine in the manner that will be approved by the Cabinet of Ministers of Ukraine.

2. The Law No. 77-VIII amends the Code of Administrative Offences of Ukraine in terms of administra-tive liability of employers’ officers. Thus:

— Fines (from 500 to 1000 non-taxable minimum allowances (UAH 8,500 – 17,000)) are imposed for the actual admission of a person to work without concluding an employment agreement and for ad-


EMPLOYMENT

Employment


mitting foreigners, stateless persons and persons that have applied for refugee status to work without obtaining a special permit for the use of labor;

— Untimely payment of salaries, pensions or training allowances the fine shall be 30 to 100 non-taxable minimum allowances (UAH 510 – 1,700);

— Violations of legal requirements for labor protection shall be punished with a fine of 20 to 40 non-taxable minimum allowances (UAH 340 – 680).

3. Amendments under the Law No. 77-VIII to the Criminal Code of Ukraine regarding criminal liability of employers’ officers stipulate that:

— From now on, gross violations of labor legislation that entail criminal liability include, inter alia, il-legal dismissal of an employee due to the latter’s report of violation of the Law of Ukraine "On the Principles of Prevention and Combating Corruption" by another person. A gross violation of labor legislation entails a fine of 3,000 non-taxable minimum allowances (UAH 51,000) or deprival of the right to hold certain positions or engage in certain activities, or correctional labor for up to 2 years. The same actions committed repeatedly or against a minor, a pregnant woman, a single father or mother or a person who replaces them and raises a child under the age of 14 or a disabled child shall entail a fine of 3,000 to 5,000 non-taxable minimum allowances or deprivation of the right to hold certain positions or engage in certain activities for up to five years, or correctional labor for up to 2 years, or imprisonment for up to six months.

Also, the Law No. 77-VIII introduces a number of other changes to the Labor Code of Ukraine, includ-ing the following:

1. Employees may not be admitted to work without a labor agreement concluded by the employer's for-malized employment order or instruction (Part 4 of Article 24 of the Labor Code has been excluded);

2. Employers shall notify the authorities responsible for the administration of single social contribution (SSC) (currently – the State Fiscal Service of Ukraine) for employing a person under the procedure to be established by the Cabinet of Ministers of Ukraine (Part 3 of Article 24 of the Labor Code). However, the CMU has not approved such procedure so far. The Cabinet of Ministers shall draft the procedure within three months upon the promulgation of the Law. To date, the State Fiscal Service accepts notifi-cation letters in free form containing information about an employee, the date of his/her appointment and position, the number and date of the relevant employment order and a copy of the order on his/her employment;

3. The requirement to register labor agreements with the State Employment Service of Ukraine (Article 241 of the Labor Code has been excluded) is cancelled for individuals employing other persons;

4. Court decisions on formalizing the employment relations with an employer and establishing their peri-od (if actual work is performed without an employment agreement or on a full-time basis, the employee being formally employed part-time) will be possible. Along with such decisions courts may also make decisions on the payment of salary to the relevant employee in the amount of at least average salary on the relevant type of economic activity in the region (excluding the actually paid salary) and on the ac-crual of PIT and SSC amounts (amendments to Articles 232 and 235 of the Labor Code);

5. Provisions of the Labor Code are brought into line with other legal regulations, in particular with the Guidelines on the Procedure for Keeping Employees’ Work Records dated 29.07.1993 No. 58, the Law of Ukraine "On Employment" dated 05.07.2012 No. 5067-VI (Article 48, 492, 196 of the Labor Code).

Employment


amounts of payments on "sick leaves" for employees with pensionable service unDer 3 years anD from 5 to 8 years changeD

— The Law No. 77-VIII provides for changed amounts of temporary disability allowances paid to insured per-sons with pensionable service under three years (previously – 60% of the average salary) and from five to eight (previously – 80%) years.

Under Article 24 of the Law of Ukraine "On Compulsory State Social Insurance", starting from January 1, 2015 insured persons will be paid temporary disability allowances in the following amounts:

— 50% of the average wage (income) – to persons with pensionable service under 3 years;

— 60% of the average wage (income) – to persons with pensionable service from 3 to 5 years;

— 70% of the average wage (income) – to persons with pensionable service from 5 to 8 years;

— 100% of the average wage (income) – to persons with pensionable service over 8 years as well as to some preferential groups ("Chernobyl victims," war veterans, combatants, donors, etc.).

Whereas the Law No. 77-VIII is in force as of January 1, 2015, the above amounts of temporary disability allowances apply to insurance events occurring from that date.

However, the Payment Procedure for the first five days of temporary disability due to illness or injury not related to an accident at work, out of the funds of an enterprise, institution or organization approved by CMU Resolution dated 06.05.2001 No. 439 contains unchanged payment amounts for the first five days of temporary disability: under 5 years – 60% of average salary; from 5 to 8 years – 80% of average salary; over 8 years – 100% of average salary. Considering the above, the Procedure should be amended accordingly.

establishment of the unifieD social insurance funD

— As of January 1, 2015 the Social Insurance Fund for accidents at work and occupational diseases and the Social Insurance Fund for temporary disability are merged into the Unified Social Security Fund.

Thus, starting from 2015, the single Fund will manage and control compulsory state social insurance against accidents in connection with temporary disability and medical insurance, accumulate insurance contribu-tions, control the use of moneys and arrange for financing the relevant social insurance payments.

In connection with the above, the Law of Ukraine "On Compulsory State Social Insurance against Acci-dents at Work and Occupational Diseases that have Caused Disability" dated 23.09.1999 No. 1105-XIV has been set forth in a new wording, while the Law of Ukraine " On Compulsory State Social Insurance Due to Temporary Disability and Expenses Occasioned by Burial" dated 18.01.2001 No. 2240-III has been repealed.Therefore, starting from 2015 all social insurance payments due to temporary disability or accidents at work or professional diseases that have caused disability will be made by the unified Social Insurance Fund in ac-cordance with the Law of Ukraine "On Compulsory State Social Insurance." The above amendments have been effected by the Law No. 77-VIII.

Employment


early retirement perioD for women extenDeD

— On January 14, 2015 the Parliament of Ukraine passed the Bill "On Amendments to the Law of Ukraine "On Compulsory State Pension Insurance" into law. The Law stipulates that till January 1, 2022 the right of early retirement due to age is provided to women who have turned 55, subject to pensionable service of at least 30 years and dismissal from work. In this case, the amount of their pension calculated in accordance with Article 27 and subject to Article 28 of this Law, shall be decreases by 0.5 % for each complete or incomplete month of early retirement.

employees of companies in the ato zone may take leaves for the entire Duration of ato

— On January 15, 2015 the Parliament of Ukraine passed the Law amending Article 25 of the Law of Ukraine "On Leaves" (regarding leaves to employees at the workplace in the ATO territory) No. 121-VIII.

According to the amendments, an unpaid leave shall be provided on a mandatory basis at the request of a person employed in the ATO zone. Leaves shall be provided for the period of ATO in the relevant locality with due regard to the period of time required for returning back to the workplace, which, however, should not exceed 7 calendar days after the date of decision on termination of the АТО.

The Law allows reserving workplaces for such employees and adding the period of their absence at work due to the ATO to the pensionable service.

Unfortunately, the adopted wording does not take into account the proposals of Ukrainian employers and fails to resolve the problem of interaction with employees who cannot be contacted (as employees are re-quired to submit their applications for such leaves).

law approving Decree on mobilization signeD

— On January 19, 2014 the President signed the Law "On Approval of the Decree of the President of Ukraine "On Partial Mobilization.""

During 210 days upon the entry into force of the Decree (i.e. after its promulgation) partial mobilization shall be announced and carried out in three stages.

Within the period from March 18 to May 1, 2015 it is planned to transfer to the reserve (demobilize) those enrolled during the mobilization for the special period under the Decree on Partial Mobilization dated March 17, 2014 No. 303.

The Cabinet of Ministers of Ukraine is instructed to transfer the national economy of Ukraine to function-ing under the special period conditions to the extent that guarantees uninterrupted supply of needs of the Armed Forces of Ukraine and other military formations of Ukraine during the execution of their tasks, and to bring certain industries, enterprises, institutions and organizations into full readiness.

Apart from that, the Decree notes that persons doing military service upon mobilization are guaranteed that their jobs (positions) are preserved for the special period, however, for no longer than one year.

Employment

Arzinger. Newsletter10 Employment


— CERTIFICATION OF WORKING PLACES IN ACCORDANCE TO THE WORKING CONDITIONS: AN ALGORITHM FOR THE PERSONNEL (in Ukrainian)Natalia Anokhina, Associate, Maria Hryniv, Associate/Pratsya i Zakon No.1, (181) /

— LABOUR RELATIONS IN THE ATO AREA (Ukrainian)Alesya Pavlynska, Senior Associate / Yurydychna Gazeta, No.46-47/

— COMPETITIVE CLAUSE IN THE EMPLOYMENT CONTRACT (in Ukrainian)Alesya Pavlynska, Senior Associate, Kateryna Zviagina, Associate/ Pratzya i Zakon, No.11-12, 2014 /












Quorum for general meetings of joint stock companies reDuceD to 50%+1 share

— On January 13, 2015 the Parliament of Ukraine passed the Bill "On Amendments to Article 41 of the Law of Ukraine "On Joint Stock Companies"" regarding the quorum for general meetings of joint stock companies into law.

It is established that a joint stock company’s general meeting shall have the decision-making quorum of 50 % + 1 share (instead of 60 % + 1 share). It is important to note that such reduced quorum is provided for by the Coalition Agreement. The Law shall come into effect upon enactment for companies with a state share, and on January 1, 2016 for others.

It should be noted that the quorum of 60%+1 share enabled owners jointly holding 40-50 % of shares to deliberately block the conduct of general meetings and thus led to bankruptcy, raiding or violations other shareholders’ rights.

amenDments to the regulation on information Disclosure by issuers of securities

— By its Decision dated December 16, 2014 No. 1713 the National Commission for Securities and Stock Mar-ket (the NCSSM) approved amendments to the Regulation on Information Disclosure by Issuers of Securi-ties. The newly added section obliges public joint stock companies (PJSC) to post information subject to disclosure on the Internet in compliance with the laws.

The obligation becomes effective on the day following the registration of the relevant report on the share placement results and the issuance of a registration certificate for the first issue of shares by the Commis-sion.

The information shall be posted on the relevant Web page in the national language, with the publication date indicated. PJSCs shall provide for any person’s free access to such information and shall provide the relevant Web page addresses to the interested persons at their request.


CORPORATE

Corporate


Also, it is noted that information shall be available on the Web page during the whole period of the PJSC’s activities, save for the information regarding accounting documents to be available on that page during the period set by the law for keeping such documents.

Should the Web page address be changed, the PJSC shall ensure that the relevant information is published on the new page and shall publish a notice of its changed address within 5 business days.

The Decision shall come into effect on March 1, 2015, however, not prior to its official publication.

new corporate governance rules for banks in force as of january 10, 2015

— On December 10, 2015 the Law "On Amendments to the Law of Ukraine "On Banks and Banking" regard-ing the specifics of corporate governance in banks (hereinafter, the Law) came into effect.

The Law changes the list of governance bodies to be established at banks by excluding the revision com-mittee as well as redistributes powers between the other governance bodies – the General Shareholders’ Meeting, the Board of the Bank and the Management Board. In addition, requirements to persons holding positions of heads of banks are tightened.

Also, the notion "banking group" has been changed. Thus, there is an express rule under which in banking groups including parent banks the latter should be responsible for the group’s activities.

Banks have time till July 10, 2015 to bring their activities into compliance with the new requirements, in particular to amend their constituent documents.

legal entities shoulD use stamps in bank transactions unless they amenD their constituent Documents

— If a legal entity abandons the use of its stamp, it must amend its constituent documents and provide its new certified card without a stamp impression to the bank. This is explained in the letter of the National Bank of Ukraine dated December 11, 2014 No. 25-110/74213 issued in connection with the entry into force of the Law No. 1206-VII simplifying the business opening procedure on November 6, 2014. The Law cancels the mandatory and provides for transfer to the voluntary use of stamps by private businesses.

Pursuant to the Law, the National Bank has drafted a resolution on the relevant changes. As soon as the resolution is passed, the NBU Board will register it and communicate it to the banks.

Considering that legal entities shall determine the organization procedure for their activities, when decid-ing on whether to continue using stamps when providing bank services banks should be governed by their constituent documents (articles of association, memorandum of association, constituent deed, regulations), that are the main documents regulating legal entities’ activities. If constituent documents provide for the use of a stamp, the latter should be used in all transactions, including in contractual relations with a bank and in disposing of an account or signing settlement documents.

Thus, if a legal entity does not wish to further use a stamp in its activities, it may abandon its use, notify its bank thereof and provide supportive documents that will be added to the legal files of the relevant account.

Corporate



— COMMENT: TO IDENTIFY AND PREVENT (Russian)Maksym Cherkasenko, Partner/Yurydycheskaya practica, # 1-2 2015 /

— INVESTMENT BACKGROUND (in Russian)Anna Zorya, Partner/Top-50, Yuridicheskaya Praktika /

Corporate

5 Law of Ukraine "On Interim Measures for the Period of the Anti-terrorist Operation" No.1669-VII dated 02.09.2014

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AGRIBUSINESS

tax changes for agribusiness as of january 1, 2015

— The adopted Law of Ukraine No. 71-VIII "On Amendments to the Tax Code of Ukraine and some other Laws of Ukraine (regarding the tax reform)" dated 28.12.2014 (hereinafter, the Law No. 71) substantially changes the tax rules for agribusinesses. We will consider the key changes below.

vat refunD cancelleD on exports of crops for traDers anD manufacturers

— VED and industrial crops under headings 1205 and 1206 of UKT VED in the customs territory of Ukraine, save for transactions for their first supply by the manufacturer or first agent, till December 31, 2017.

At the same time, export transactions with the above grain crops and industrial crops shall be exempt from VAT as of January 1, 2015. This actually means that grain traders and manufactures that export their prod-ucts independently have lost the relevant VAT refund possibility.

Under the adopted Law, special VAT treatment for internal transactions of agricultural manufacturers in Ukraine as well as VAT exemption for grain an industrial crops, save for transactions for their supply by the manufacturer or the first agent, is preserved in 2015. It should be noted that special VAT treatment for agribusinesses will take into account electronic VAT administration and special Vat accounts functioning. To transfer VAT amounts from a payer’s account (agricultural enterprise that has opted for special treatment under Article 209 of the Tax Code of Ukraine), the relevant fiscal authority will notify the treasury of the tax amount to be transferred in the electronic VAT administration system (i.e. from its VAT account) to the payer’s special account at a bank institution. On the thirtieth day following the reporting month the Treas-ury will transfer tax amounts to the payer’s special account for the payer to finance the relevant production needs. In general, it should be noted that the VAT accounts system may "wash out" the current assets of business entities, including agricultural enterprises.

It should be noted that the Cabinet of Ministers of Ukraine had previously proposed to preserve the zero rate and thus VAT refund for agricultural manufacturers. However, during the voting an amendment was made to "equate" market players, i.e. VAT will not be refunded to any agricultural businesses. At the same time, the common rule 209.4 of the Tax Code of Ukraine on the right of agricultural producers for tax re-fund on exports of agricultural products other than those of headings referred to above is preserved.

Agribusiness


This amendment does not take into account the pricing mechanisms on the market, as traders deprived of VAT refund may obtain the same funds by reducing the purchase prices by the appropriate percent in the internal market, while agricultural manufacturers cannot do the same.

fixeD agricultural tax cancelleD

— The most dramatic tax changes relate to persons that were payers of fixed agricultural tax (FAT) till 2015. Thus, FAT is cancelled as of January 1, 2015.

Former FAT payers have been turned into single tax payers of group four as of January 2015. AT the same time, the requirement of agricultural production share of at least 75 percent for the previous tax year applies to FAT payers as before.

The tax assessment base is the normative value of one hectare of agricultural land taking into account the rate of indexation as of January 1 of the base tax year. Single tax rates for Singe tax payers of group four, as previ-ously for FAT payers, depend on the class (type) of land owned by or leased out to that payer, but are three times higher than FAT rates. Considering that the tax assessment base has been increased along with the tax rates (previously, the base was the normative monetary value of one hectare as of 01.07.1995), the amount of tax has grown considerably. Accordingly, while the average FAT amount per hectare of arable land was less than UAH 6/hectare in 2014, the relevant mandatory payment will be many times higher this year.

The ground for Single tax accrual for payers of group four is information of the state land cadaster and/or of the state register of real estate rights.

Single tax payers of group four shall calculate the tax amount independently and pay it quarterly within 30 calendar days following the last calendar day of the tax quarter in the following amounts:

— In the I quarter – 10%;

— In the II quarter – 10%;

— In the III quarter – 50%;

— In the IV quarter – 30%.

To transfer to the simplified taxation system or confirm annually their single tax payer status, agricultural manufacturers shall submit a set of documents specified in the Tax Code of Ukraine by February 20 of the current year, including a certificate of available land plots, to supervisory authorities at their location and/or the location of their land plots.

restrictions on construction anD reconstruction cost compensation for farms lifteD

— On January 13, 2015 the Parliament of Ukraine passed the Bill "On Amendments to Article 17-2 of the Law on State Support for Agriculture of Ukraine regarding the facilities of livestock farms and complexes" into law (hereinafter, the Law).

The amendments are intended to support midsize and small agricultural manufacturers by lifting some restrictions regarding the facilities of livestock farms and complexes, which may obtain partial construction or reconstruction cost refund.

Agribusiness


It is established that agricultural manufacturers may obtain refund for up to 50 % of construction and recon-struction cost of livestock farms and complexes for keeping cattle, pigs, poultry, milking parlors and meat processing plants established on a cooperative basis.

Also, the Law provides for the compensation of up to 30 % of the purchase cost of machinery and equip-ment for agricultural manufacturing as well as for construction or reconstruction of auxiliary enterprises for processing and storage of agricultural products.

incentives for family farms

— The Parliament of Ukraine proposes incentives for family farms by allowing private farms to obtain the sta-tus of a legal entity or an individual agricultural producer.

The relevant proposal is set out in the Draft Laws No. 1599 "On Amendments to some Laws of Ukraine Regarding Incentives for Establishment and Operation of Family Farms" and No. 1600 "On Amendments to the Tax Code of Ukraine (on Incentives for Establishment and Operation of Family Farms)" registered with the Parliament of Ukraine.

In particular, it is proposed to single out individual entrepreneurs that are heads of farms as a separate group of single tax payers, for farms with the annual income not to exceed UAH 3 million and having no workers for hire, except for the seasonal work period.

The single tax rate for such taxpayers is proposed in the amount of 1% of income subject to VAT payment or 3%, if VAT is part of the single tax.

Such amendments are due to the fact that farmers cannot enter organized markets as they lack the proper official status. Thus they are forced to sell their products to agents at a reduced price. As a result, illegal trade in agricultural products booms. Apart from that, private farms lacking the status of business entities may not be treated as VAT payers and thus have no source for compensating the incoming VAT.


— COMMENT: UKRAINIAN FARMERS ExPECT A TOUGH YEAR (in Russian)Anna Zorya, Parter/ Comments.ua, 09.02.2015 /

— TAx CHANGES FOR AGRARIANS FROM JANUARY 1, 2015 (in Russian)Anna Zorya, Parter, Pavlo Khodakovsky, Parter/APK Inform, 20.01.2015 /

Agribusiness









ENERGY

state-owneD energy enterprises are evacuateD from the ato zone

— On November 25, 2014 the Ministry of Energy and Coal Industry approved its Order No. 841 dated 25.11.2014 "On Measures to Stabilize the Social and Economic Situation in Donetsk and Lugansk Regions" (the Order). In accordance with the document, as of November 28, 2014 state-owned enterprises, institu-tions, organizations and associations subordinated to the Ministry of Energy and Coal Industry as well as companies located in the antiterrorist operation zone, in which the Ministry of Energy and Coal Industry governs the State’s corporate rights, shall cease their production as well as business and financial operations. All in all, the List of such enterprises annexed to the Order contains 252 objects.

Directors of such enterprises had to submit their proposals by November, 28 2014 on how to relocate and evacuate their employees and property.

cabinet of ministers of ukraine approveD the action plan to implement three eu Directives on energy efficiency

— On November 26, 2014 pursuant to the commitments of Ukraine within its membership in the European Energy Community in accordance with the Protocol of Accession to the Treaty establishing the Energy Community, the Cabinet of Ministers of Ukraine passed its Resolution No. 1150-р "On Approval of Plans drafted by the Ministry of Economic Development and Trade for Implementation of some EU Regulations" 1. The document approves implementation plans for three Directives of the European Union:

1. Directive 2006/32 / EC of the European Parliament and of the Council dated 5 April 2006 on energy end-use efficiency and energy services.

2. Directive 2010/30/ЕС of the European Parliament and of the Council dated 19 May 2010 on the indication by labeling and standard product information of the consumption of energy and other resources by energy-related products.

3. Directive 2010/31/ЕС of the European Parliament and of the Council dated May 19, 2010 on the energy performance of buildings.

It should be recalled that Directive 2006/32/ЕС (transposition date 31.12.2011) stipulates that the Member States undertake and strive to achieve the energy efficiency target figure of 9% by 2009 – the ninth year

Energy

1 http://www.kmu.gov.ua/kmu/control/uk/cardnpd

http://www.kmu.gov.ua/kmu/control/uk/cardnpd


of application of this Directive (to improve annually, starting from 2006, the end-use energy intensity additionally by one percent) by providing energy services and implementing other measures to raise the energy efficiency. It should also be noted that on 25.10.2012 the Directive was replaced by the Energy Efficiency Directive 2012/27/ЕС, which came into effect on December 4, 2012. However, in 2013 the Council of Ministers of the Energy Community adopted its Recommendation to implement Directive 2012/27/EU with adjustments2, having thus allowed the contracting parties to be prepared for the fact that the Directive would become legally binding in 2014.

Directive 2010/30/ЕС (transposition date 31.12.2012) establishes rules for product information provided to the end user. The document harmonizes national measures for energy labeling of household appliances and light bulbs. It covers both home appliances and products, which do not consume energy themselves but have a direct or indirect impact on energy saving.

Directive 2010/31/ЕС (transposition date 30.09.2012) stipulates that the Member States shall take the necessary measures to establish minimum requirements for the energy performance of buildings or parts thereof. Another basic requirement of the Directive is to obtain an energy performance certificate for buildings leased out or sold, so that a potential tenant/buyer could ensure that the building meets the relevant minimum energy efficiency requirements.

By its Resolution, the Cabinet of Ministers of Ukraine intends to take implementation measures to improve the end-use of energy, reduce the country’s dependence on imported energy, inform consumers about the energy consumption level of products by means of labeling and standardization, implement the general principles into the energy performance calculation methodology for buildings, establish the minimum energy efficiency requirements for new buildings as well as for existing buildings to be renovated or reconstructed, and to carry out the energy certification of buildings.

ncsreu approveD the gas price for inDustry

— On December 26, 2014 the National Commission for State Regulation of Energy and Utilities passed its Resolution No. 1043 "On establishing the maximum price for natural gas for industrial consumers and other business entities." According to the Resolution, the maximum price for natural gas sold to indus-trial consumers and other business entities shall be UAH 5,900.00 per 1000 m3 (net of VAT, duty in the form of a target premium to the current tariff for natural gas for consumers of all types of ownership, which is charged in the amount of 2 percent, tariffs for transmission, distribution and supply of natural gas at regulated tariffs).

The Resolution came into effect on January 1, 2015.

changes in the obligation for enterprises to buy gas exclusively from "naftogaz"

— By its Resolution No. 647 dated 26.11.2014 "On Procedure for industrial, power-generating and heat-gen-erating (in terms of industrial gas volumes) enterprises to purchase natural gas" the Cabinet of Ministers of Ukraine (the CMU) has increased the list of industrial, power-generating and heat-generating enterprises (from 74 to 152), which are obliged to purchase gas exclusively from the NJSC "Naftogaz of Ukraine" for the period from December 1, 2014 till February 28, 2015.

Energy

2 11th Energy Community Ministerial Council. Meeting Conclusions. Belgrade, 24th October 2013. // Energy Community. – http://www.energy-community.org/pls/portal/docs/2388178.PDF


Also, the Resolution obliges gas distribution and gas transmission companies to transmit natural gas to industrial, power-generating and heat-generating enterprises only from the resource of "Naftogaz of Ukraine."

NJSC "Naftogaz of Ukraine" is obliged to conclude contracts with such enterprises in accordance with the law, while regional state administrations shall take appropriate measures to cause such contracts to be concluded.

On December 10, 2014 the Energy Community represented by Janez Kopač asked the Minister of Energy and Coal Industry Mr. Demchyshyn to review legislation that restricted the rights of participants in the gas market and allowed for state intervention in the gas sector as well as undermined efforts to liberalize the market. It should be recalled that on November 14, 2014 Janez Kopač had already addressed a similar request to the Cabinet of Ministers and had asked for an explanation on the relevant measures taken. On December 11, 2014, in response to the request by Janez Kopač, the Prime Minister of Ukraine A. Yatsenyuk confirmed that NJSC "Naftogaz of Ukraine" had allowed all private companies to import gas to Ukraine from anywhere.

It should be noted that on December 16, 2014 the District Administrative Court of Kyiv allowed the class action of the natural gas market participants of Ukraine in full and ruled the CMU Resolution No. 647 by its Ruling No. 826/17772/14 illegal. However, considering that the Resolution is still described as effective on the Website of the Ukrainian Parliament, we suppose that the court ruling has been appealed. Thus the entry into force of the court ruling is delayed till the appeal is considered.

the court has assigneD ownership of part of a pipeline previously appropriateD by a russian company to ukraine

— By ruling of the Rivne Commercial Court of Appeal dated November 25, 20143 at the suit of the Depu-ty Prosecutor General of Ukraine in the interests of the State represented by the State Property Fund of Ukraine to the subsidiary "PrikarpatZapadtrans" of the Southwest Open Joint Stock Company Russian of the oil pipeline transport of the Russian joint stock company "Transnefteprodukt" recognized Ukraine’s ownership of part of oil pipelines Samara-West Direction and Grozny-Armavir-Trudovaya passing through the territory of Ukraine.

Previously, the above pipelines located in Zhytomyr, Rivne, Ternopil, Lviv, and Transcarpathian regions of Ukraine were recognized as property of the Russian Federation and were unilaterally contributed to the authorized capital of the Russian company SE "Prikarpatzapadtrans" of the joint stock company "Transneft" (Rivne) as foreign investment.

effect of cmu resolution on the state of emergency in the power sector extenDeD

— On August 13, 2014 the Cabinet of Ministers of Ukraine passed its Resolution No. 372 dated 13.08.2014 "On approval of Procedure for taking temporary emergency measures to overcome the effects of prolonged disruption of the normal operation of the electricity market"4 (the Resolution).

Energy

3 http://www.reyestr.court.gov.ua/Review/41606206

4 http://zakon4.rada.gov.ua/laws/show/372-2014-%D0%BF

http://www.reyestr.court.gov.ua/Review/41606206%20

%20http://zakon4.rada.gov.ua/laws/show/372-2014-%25D0%25BF


Under the provisions of the Resolution, it was effective for one month and then extended. AS of January 22, 2015 the CMU Resolution is still in effect.

It should be recalled that the Resolution approves the Procedure for taking temporary emergency measures to overcome the effects of prolonged disruption of the normal operation of the electricity market, which determines the grounds and procedure for decision-making on temporary emergency measures to overcome the effects of prolonged disruption of the normal operation of the electricity market due to emergency situations in the unified energy system of Ukraine caused by damage to electric power plants and their components, structures, or as a result of emergencies.

gas import from russia resumeD

— On December 9, 2014, following the five-month disruption, imports to Ukraine from the Russian Federa-tion were resumed on the basis of two documents adopted as a result of EU-Ukraine-Russia negotiations held on October 30-31, 2014 in Brussels.

The first, legally binding tripartite protocol setting forth the agreement on Russian gas supplies to Ukraine during the winter season 2014-2015, and the second, addenda to the Contract between "Gazprom" and NJSC "Naftogaz of Ukraine", stating the conditions for the supply of Russian gas for the period till the end of March 2015. Russia will import 43.5 million cubic meters of natural gas daily for the needs of Ukrainian consumers through the gas-metering station Mozyr and Sudzha.

new unregulateD electricity tariff in crimea

— On December 10, 2014 the Cabinet of Ministers of Ukraine issued its Resolution No. 698 dated 10.12.2014 "On Amendments to the Resolution of the Cabinet of Ministers of Ukraine dated May 7, 2014 No. 148"5

permitting the State Foreign Trade Company "Ukrinterenergo" to sell electricity at non-regulated tariff to suppliers operating in Crimea.

From now on, "Ukrinterenergo" will select electricity suppliers on a competitive basis at an auction with the open price bid and sell electricity to suppliers subject to full pre-payment or a state bank’s payment guarantee.

It should be recalled that previously, under Resolution 148, the State Foreign Trade Company "Ukrinterenergo" could sell electricity to energy supply companies of the unrecognized Republic of Crimea operating in electric power transmission to local power grids and supplying electricity only at regulated tariffs.

complicateD situation with the shale gas extraction investor chevron (usa)

— On December 12, 2014 Chevron officially informed the Ukrainian Government about its decision to termi-nate the Agreement on the distribution of hydrocarbons to be produced within the site Olessky, by and be-tween the State of Ukraine, Chevron Ukraine B.V. and the limited liability company "Nadra Olessky" signed on 05.11.2013 (СРП) unilaterally.

5 http://zakon1.rada.gov.ua/laws/show/698-2014-%D0%BF

Energy

http://zakon1.rada.gov.ua/laws/show/698-2014-%25D0%25BF


The Company’s letter refers to a number of specific reasons for its abandoning the concluded Product Distribution Agreement. It states that the Government of Ukraine, in particular the Ministry of Finance, has failed to timely meet the undertaken obligation to bring its regulations into line with the effective Ukrainian legislation, and applied tax pressure to the investor. In particular, in August 2014 the payment for subsoil use in natural gas production was increased twice and was extended to all projects, including the Product Distribution Agreement, under which part of the products were transferred to the State instead of cash payments.

strelkovoye gas proDucing well assigneD to ukraine

— According to the statement of V. Zhdanov, Advisor to the General Director of the oil and gas company "Chernomorneftegaz" operating on the territory of the occupied peninsula, "Chernomorneftegaz" has as-signed the explored gas producing well in Kherson region, which supplies gas to Genichesk, to Ukraine.

agreement on increaseD gas imports from europe to ukraine

— On December 17, 2014 the operator of the Ukrainian gas transportation system PJSC "Ukrtransgaz" and Poland (Gaz-System S.А.) signed a liaison agreement in Warsaw.

The text of the understanding provides for the integration of gas transport systems of both countries to increase the volume of gas imports to Ukraine from Europe through the Republic of Poland as well as to ensure the safety of European gas in underground gas storages of Ukraine and its supply to consumers in the EU Member States.

In the Ukrainian territory, the main option for expansion is the construction of the 110 km main gas pipeline interconnector "Drozdowicze – Bilche-Volytsa" with a capacity of 8.0 billion cubic meters per annum in the direction Poland-Ukraine and 7.0 billion cubic meters per annum in the direction Ukraine-Poland

tariffs for stanDarD connection of electricity-generating plants in 2015 approveD

— On December 16, 2014 the National Commission for State Regulation of Energy and Utilities passed its Resolution No. 805 "On approval of fees for standard connection of electricity-generating plants for the Autonomous Republic of Crimea, regions, Kyiv and Sevastopol for 2015"6 (the Resolution) to approve the fees for standard connection of electricity-generating plants taking into account the degree of tension in the point of connection, power supply reliability class and single or three-phase connection, separately for rural and urban areas.

It should be noted that the Resolution comes into effect on the day of its official publication. Previously, the cost of standard connection services was calculated by electricity transmission organizations in the manner provided for by Articles 17-2 of the Law of Ukraine "On Electric Power Industry" and the Methods for calculation of fees for connection of electricity-generating plants to the grid.

6 http://zakon2.rada.gov.ua/laws/show/z1636-14

Energy

http://zakon2.rada.gov.ua/laws/show/z1636-14


gas balance approveD for the current year

— On November 26, 2014 the Cabinet of Ministers of Ukraine issued its Ordinance No. 1211-р dated 26.11.2014 "On Approval of the Expected Receipt and Distribution Balance of Natural Gas in Ukraine for 2014"7 to ap-prove the expected receipt and distribution balance of natural gas in Ukraine for 2014.

According to the document, Ukraine was going to import 19.899 billion cubic meters of natural gas in 2014. Natural gas receipt from Gazprom in the current year is expected in the amount of 14.866 billion cubic meters, and from the EU Member States – 4.966 billion cubic meters. Apart from that, Ostchem controlled by Dmytro Firtash imports 0.067 billion cubic meters of gas from the Markov fields located in Rostov region.In whole, Ukraine needed 53.033 billion cubic meters of natural gas in 2014, including 20.495 billion cubic meters of own gas, 19.899 billion cubic meters of gas imports, 12.357 billion cubic meters of gas from underground storages, 0.279 billion cubic meters from gas pipelines, and 0.003 billion cubic meters of the balancing gas volume from Gazprom.

The document stipulates that Ukrainian consumers will obtain 38.95 billion cubic meters of gas in the current year, including industrial enterprises – 14,158 billion cubic meters, private households – 15,419 billion cubic meters, to heat supply enterprises and CHPPs – 8,645 billion cubic meters (for the production of heat for population – 7,066 billion cubic meters, for the production of heat for state-financed organizations – 1.579 billion cubic meters), to state-financed organizations – 0.705 billion cubic meters, and to religious organizations – 0,023 billion cubic meters.

nec "ukrenergo" helD a tenDer to sell access to electricity export in 2015

— On December 18, 2014 the NEC "Ukrenergo" held a tender to sell access to the carrying capacity of inter-state lines for electricity exports with a total capacity of 950 MW in 20158.

Following the bidding procedure:

— "DTEK Trading" gained access to the section "Burshtyn Energy Island" with a total capacity of 100 MW;

— "DTEK Vostokenergo" – to the section "ECO Ukraine – Moldova ECO" with a total capacity of 350 MW;

— and "DTEK Vostokenergo" – to Belarus with a total capacity of 500 MW.

loan from the worlD bank

— On 22.12.2014 the World Bank approved a loan for Ukraine in the amount of USD 378,400,000 for the sec-ond Power Transmission Project to improve the power system reliability and support the wholesale electric-ity market in Ukraine.

The Project includes a loan of USD 48.42 m, which will be used to help "Ukrenergo" to design and install new-generation modern communications, manage the network and control systems in order to integrate the resources of wind and solar energy and improve the management and operation of the data transmission network. Also, the Project allocates USD 2.5 m of institutional support for the Ministry of Energy and Coal Industry of Ukraine for the implementation of reforms in the energy sector in accordance with the commitments to the Energy Community and the Association Agreement with the EU.

7 http://zakon4.rada.gov.ua/laws/show/1211-2014-%D1%80

8 http://www.ukrenergo.energy.gov.ua/ukrenergo/control/uk/publish/article?art_id=177452&cat_id=75289

Energy

http://zakon4.rada.gov.ua/laws/show/1211-2014-%25D1%2580

http://www.ukrenergo.energy.gov.ua/ukrenergo/control/uk/publish/article%3Fart_id%3D177452%26cat_id%3D75289%0D



LIFE SCIENCES AND HEALTHCARE

reaD the news on life sciencesanD healthcare in our specializeD newsletters:

— life sciences & healthcare newsletter – December – 2014/ january 2015


— GETTING THE DEAL THROUGH: LIFE SCIENCES 2015Lana Sinichkina, Partner, Timur Bondaryev, Managing Partner, Svitlana Malynovska, Senior Associate / Law Business Research Ltd 2014, Getting the Deal Through: Life Sciences 2015 /

— ANTITRUST RISKS FOR PHARMACY NETWORKS (in Russian)Svitlana Malynovska, Senior Associate/ Apteka.ua, 30.12.2014 /

— COMPULSORY LICENSING OF MEDICINES IN UKRAINE: IN SEARCH OF THE BALANCE BETWEEN THE INTERESTS OF PATIENTS AND MANUFACTURERS (in Russian)Anton Polikarpov, Senior Associate, Leonid Cherniavsky, Associate, Yevgenia Ocheretko, Associate/ MOSTY | VOL. 8 – DECEMBER 2014 – JANUARY 2015 /

Life Sciences and Healthcare

http://arzinger.ua/files/file/file_collection/ru/Nalogovoe%20Planirovanie_8-2013.pdf

http://arzinger.ua/ru/press/publications/tag-6510/92303/















http://arzinger.ua/files/file/Arzinger%20Pharma%20Newsletter%20-January%202015_eng.pdf



FOOD AND DRINKS

reaD the news on fooD anD Drinks in our specializeD newsletters:

— fooD & Drinks newsletter – December – 2014/ january 2015


— RETAIL UNDER ATTENTION OF THE ANTIMONOPOLY COMMITTEE: HOW TO STAY IN A SAFE AREA? (in Russian)Lana Sinichkina, Partner, Svitlana Malynovska, Senior Associate, Mariya Baranovych, Associate/ Kontrakty.ua, 29.12.2014 /

— CORRUPTION IN THE FIELD OF WASTE MANAGEMENT: TO BE CONTINUED (in Russian)Lana Sinichkina, Partner / Companion, 01.12.2014 /

Food and Drinks

http://arzinger.ua/files/file/Arzinger%20Food%20and%20Drinks%20Newsletter-December2014-January2015_eng.pdf














SUCCESS STORIES

arzinger protecteD the interests of its client, the ukrainian participant of a worlD-famous agribusiness group

— Arzinger Law Office successfully protected the interest of its client, the Ukrainian participant of a world-famous agribusiness group, in a litigation with individuals regarding the compensation for damages caused by a high-profile accident involving the client’s truck

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markian malskyy electeD chairman of the eba boarD’s west ukrainian branch for 2015

— On January 23, 2015 Markian Malskyy, Head of the West Ukrainian Branch of Arzinger and Partner at Arzinger Law Office, was elected Chairman of the Board of the European Business Association’s Branch located in Lviv. Prior to that, he headed the legal department of the regional office of the European Business Association for several years in a row, along with being its Board member. In his new position Markian will continue his activities aimed at the improvement of business climate in the Western region of Ukraine.

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arzinger honoreD among leaDing ukrainian companies specializing in traDemark-relateD issues

— Lawyers of Arzinger’s IPR practice and its Head, Senior Associate Anton Polikarpov, were named among the strongest Ukrainian experts on issues related to trademarks according to the WTR 1000 ranking pub-lished by the monthly legal paper World Trademark Review. This recognition demonstrates the Company’s remarkably strong position in the area of intellectual property on the Ukrainian market.

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Success stories

http://arzinger.ua/press/news/93957/



http://arzinger.ua/press/news/page-2/88550/


Arzinger. Newsletter26 Success stories

pavlo petrenko anD anna zorya DiscusseD anticorruption laws with business

— On February 13, 2015 Arzinger Law Office held a dis-cussion on anticorruption laws between the Minister of Justice of Ukraine Pavlo Petrenko, his First Deputy Natalia Sevostyanova, and business representatives. The chamber atmosphere of the event allowed all the participants to ask their questions and get detailed and frank answers from Mr. Petrenko and Ms. Sev-ostyanova. Arzinger is ready to render any support in shaping up a dialogue between the business commu-nity and the public authorities, as openness in opin-ion exchange is the key to successful reform of the State.

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http://arzinger.ua/ru/press/news/page-2/88211/