• Andriy Kolupaev

    Partner, Lexwell & Partners

  • Olena Tregubova

    Senior Associate, Lexwell & Partners

Lexwell & Partners


Sophia Business Centre,

6 Rylsky Lane, 5th Floor,

Kyiv, 01001, Ukraine

Tel.: +380 44 330 0080

E-mail: lexwell@lexwell.com.ua

Web-site: www.lexwell.com.ua


Lexwell & Partners is a Kyiv-based Ukrainian law firm which has been offering high-end professional legal services to major international and leading Ukrainian companies since 2005. Our focus is on complex and high-profile national and cross-border matters and we possess strong expertise in foreign investments, M&A, tax, real estate, litigation and international arbitration. We have earned an excellent reputation, which is highly ranked by the Legal 500, Chambers and Partners, IFLR1000, Ukrainian Law Firms, Kyiv Post, Legal Practice, Legal Newspaper. These are just some of our achievements:

  • No.1 by gross revenue (Legal Practice/Yuridecheskaya Praktica, 2020);
  • No.1 by revenue per lawyer (Legal Practice/Yuridecheskaya Praktica, 2020);
  • No.2 in high-value tax disputes (Legal Practice/Yuridecheskaya Praktica, 2020);
  • Tier 1 for dispute resolution (The Legal500, 2020);
  • Tier 2 for tax, real estate, commercial, corporate and M&A (The Legal500, 2020);
  • Recognized Practitioner in Dispute Resolution: Arbitration (Chambers & Partners, 2019).

Lexwell & Partners’ key clients are multinational and leading national companies, including ABN Amro, AET, Amstar, ArcelorMittal, Bridgestone, Bunge, Cargill, Chicago Mercantile Exchange, CRH, DuPont, East Metals, Eurobank, Evraz, Honda Trading, ING, Interpipe, Intesa Sanpaolo, Pfizer, PHV (Calvin Klein and Tommy Hilfiger), PwC, Rabobank, Red Bull, Marubeni, Millhouse, Morningstar, Naftogaz (National Oil & Gas Company), Schenker, Sojtz, Subaru, Sumitomo, Suzuki, Toyota, VS Energy.

Improving the Legal Framework for Investment: New Opportunities and New Obligations for Investors


Attracting investments and creating a favorable investment climate remains one of the key tasks announced by the Ukrainian authorities. To achieve this goal, new rules of legal regulation have been introduced recently which, on the one hand, are aimed at increasing the attractiveness of doing business in Ukraine and, on the other hand, at preventing any abusive practices on the part of individual market players by way of establishing more transparent rules of interaction between business and the state. In such circumstances, in order to be able to take advantage of updated legislation and, at the same time, to ensure compliance with all its requirements, the role of quality legal assistance is increasing. In this article, we will focus on some new benefits as well as new legal requirements that are worthy of attention.


Introducing New Forms and Mechanisms of State Support for Significant Investment Projects

On 13 February 2021, Law of Ukraine No.1116-IX On State Support for Investment Projects with Significant Investments in Ukraine took legal force and effect. The Law envisages support for investors by granting them additional benefits in many areas. In particular, the Law introduces such forms of state support as: exemption from certain taxes and duties in accordance with tax legislation; exemption of new equipment and component parts thereto imported solely to implement the investment project from import duty; ensuring the preemptive right to use a state-owned or communally-owned land plot in order to implement an investment project with significant investments, specifically providing a land plot for the use (lease) to implement the investment project and the investor’s preemptive right to purchase such land plot upon the fulfillment of a special investment agreement; ensuring the construction, at the expense of the state, local budgets and other sources, of ancillary infrastructure facilities (motorways, communication lines, heat, gas, water and electricity supply facilities, utility supply lines) necessary for implementation of the investment project.

At the same time, Law No.1116-ІХ establishes a number of criteria that must be met by the investor in order to enjoy the benefits envisaged by this Law. Thus, to be able to enjoy the benefits granted by it, the investor must implement the investment project on the territory of Ukraine in those areas defined by the Law: processing industry, extraction of mineral resources for the purpose of subsequent processing and/or treatment thereof; waste management; transport, warehousing, postal and courier activities, logistics; education, science, and research and technical activities; healthcare, arts, culture, sports, tourism, and resort and recreation sphere. The project must comply with a number of criteria, specifically it must create at least 80 new jobs with an average salary that is at least 15% higher than the average salary paid for the relevant activity across the region in which the project is being implemented for the previous calendar year; the sum of investment must exceed EUR 20 million and the implementation period of the investment project must not exceed five years.

In order to ensure the support and development of significant investment projects that will meet the criteria set by Law No.1116-IX, Resolution of the Cabinet of Ministers of Ukraine of 31 March 2021 No. 295 On the Establishment of the State Enterprise National Investment Fund of Ukraine provides for establishment of the institution (the Fund). The Fund will provide advisory assistance in the implementation of investment projects and interact with government agencies, authorities of local self-government in the interests of investors within the framework of implementation of the investment project.

Practical implementation of Law No.1116-ІХ still requires a number of changes and amendments to current legislation, and that is why it is too early to talk about the significant effectiveness of such changes and amendments in the near future. In general, the tendency towards improving legal regulation in the field of protection of investments is positive, although it should certainly be supported by a simultaneous increase in the role of the rule of law and increase of the efficiency of the country’s judicial system.


Improving the Legal Framework to Expand Investment Opportunities

One positive trend is improvement of the legal framework in several important areas, which expands opportunities for investment activities in Ukraine.

The procedure for granting special subsoil use permits has been improved. The sale of such permits at open auctions has already been introduced on a permanent basis (previously such procedure was applied as pilot and temporary). Resolution of the Cabinet of Ministers of Ukraine of 19 February 2020 No. 124 sets out the Procedure for Granting Special Subsoil Use Permits in the new wording. In October 2020, Resolution of the Cabinet of Ministers of Ukraine On Approval of the Procedure for Holding Auctions for the Sale of Special Subsoil Use Permits of 23 September 2020 No. 993 took legal force. Following introduction of the updated legal framework, the order and the procedure for the sale of special subsoil use permits have become more uniform and transparent. Among other things, subsoil users have been given the opportunity to initiate auctions for the sale of special subsoil use permits. The previously existing requirement of reaching agreement with local councils on the provision of subsoil for the use to extract mineral resources of national significance and for purposes not related to the extraction of mineral resources has been abolished. The list of subsoil uses for which a special permit can be obtained has been expanded. Namely, it has been supplemented with such areas as geological study of amber-bearing subsoil, including pilot and commercial development of deposits with subsequent amber extraction (industrial development of deposits).

In addition, the Draft Law On Amendments to Certain Legislative Acts of Ukraine Concerning Support for the Development of Domestic ­Subsoil Use Industries, No. 4187 of 5 October 2020 is pending at the Verkhovna Rada of Ukraine. The Draft Law provides for a number of important measures aimed at supporting development of subsoil use. Among other things, the Draft Law proposes to enable holders of special subsoil use permits to sell, pledge or otherwise alienate the rights, which are granted to such holders under special permits to other persons.

Despite the impact of the COVID-19 pandemic, the financial regulators (National Bank of Ukraine, the National Securities and Stock Market Commission, the Ministry of Finance, the Individual Deposit Guarantee Fund and the National Commission for the State Regulation of Financial Services Markets) are trying to implement the Financial Sector Development Strategy of Ukraine until 2025, which includes five strategic areas: financial stability, macroeconomic development, financial inclusion, development of financial markets and innovative development. The domestic government bond market traditionally remains active.

One of the important novelties that will potentially influence investment attractiveness is the opening up of the agricultural land market, the first stage of which will take place on 1 July 2021. As you know, in March 2020 the Verkhovna Rada of Ukraine adopted Law On Amendments to Certain Legislative Acts of Ukraine Concerning the Conditions of Circulation of Agricultural Land, No. 522-IX, which is aimed at launching the turnover of agricultural land in Ukraine. The Law came into force on 1 July 2021. As from that date, the current ban on the alienation of privately-owned agricultural land will be lifted on a step-by-step basis, with a number of restrictions, which are mainly reduced to restricting the acquisition of land by certain entities, as well as limiting the concentration of a certain area of land in “the hands of a single person”. Between 1 July 2021 and 1 January 2024 agreements for alienation of such land plots may be concluded only between Ukrainian citizens, and from 1 January 2024 legal entities established under Ukrainian law may be parties to such agreements, but with certain restrictions. Alienation of agricultural land to foreign legal entities will be possible if the relevant decision is adopted at an all-Ukrainian referendum. As a whole, Law No. 522-IX regulates numerous aspects related to the turnover of agricultural land that should be considered by business entities and are topical not only when concluding agreements for the alienation of such land.


Increasing the Transparency of Doing Business and Preventing Abusive Practices

Along with improving the legal framework, there is a tendency towards the establishment of clearer and more transparent rules for doing business. Thus, for example, on 1 January 2021 amendments to the Tax Code of Ukraine came into legal force which, as part of Ukraine’s implementation of BEPS (Base Erosion and Profit Shifting) Action Plan, introduced a number of novelties aimed at combating tax evasion by multinational companies. New rules in the field of taxation of income of controlled foreign companies have also been introduced. Such rules envisage that Ukrainian residents (both individuals and legal entities) that own or actually control companies in other countries must, in cases specified by law, pay tax on the income of such companies in Ukraine and file reports with respect to the latter. Punitive sanctions for violating such obligations are quite significant, and regulatory authorities are gradually establishing mechanisms for detecting violations.

The expansion of the notion of the permanent establishment of a non-resident should be mentioned among notable tax legislation novelties. At the same time, the establishment of the fact that the non-resident carries out business activities on the territory of Ukraine through a permanent establishment will result in the taxation of profit of such a permanent establishment, as a general rule, at the rate of 15%, and failure to get registered as a permanent establishment serves as independent grounds for seizing the property of the company.

Along with the unification of regulatory procedures, there is also a trend toward stepping up control over their transparency. For example, on 25 March 2021 Decree No.122/2021 of the President of Ukraine put into effect the Decision of the National Security and Defense Council dated 25 March 2021 On the State of Affairs in the Field of Subsoil Use. The Decision provides for unscheduled inspections of the activities of business entities that have obtained special subsoil use permits outside the auspices of an auction. It is also planned to conduct an audit of individual cases of subsoil use where violations could potentially have been committed. For example, if the extraction has not been commenced within two years of receiving extraction permits. Thus, on the one hand, the mechanisms for granting such permits have been simplified and, on the other hand, they must be transparent and lawful.

In general terms, we can draw the conclusion that, on the one hand, there is a noticeable trend towards the improvement of legal regulation of investment activities and approximation towards international standards, and towards the introduction of mechanisms aimed at minimizing potential abuses by business and increasing its transparency, on the other hand. Under such conditions, professional legal assistance will be a reliable guarantee that enables advantage to be taken of updated legislation and, at the same time, to prevent violations. We would like to expect that the positive orientation of legislative changes will be supported by subsequent active steps on the part of public authorities aimed at strengthening the rule of law in their ­day-to-day activities.