"Investment nanny" has received tools for supporting projects

On 2 March 2021 the Parliament of Ukraine adopted the draft laws No. 3761 і No. 3762 (both registered as of 1 July 2020, further - "Draft Laws"), which enable the provision of tax and customs exemptions to projects with significant investment in accordance with the Law "On state support of investment projects with substantial investments in Ukraine" No. 1116-IX dated 17 December, 2020 (hereinafter – the "Law"). The Law came into force on 13 February 2021 and provided, in particular, tax and customs exemptions for qualifying investment projects. However, the scope and certain conditions for granting these exemptions needed to be prescribed in the Tax and Customs Codes of Ukraine, which were amended by the Draft Laws.

According to the available wording of the Draft Laws, investors can expect the following exemptions within the total amount of state support for the investment project, which is provided based on the special investment treaty:

• VAT and customs duties exemptions for the import of new equipment, which:
• is imported to Ukraine by the investor for the investment project with the significant investments under the special investment treaty concluded according to the Law
• is in the list of goods with defined UKT ZED codes
• is manufactured within 3 years before the date of import
• will be used only within the investment project for at least 5 years from the date of import (special requirement)
• is not originating/being imported from a country recognised as an invader or aggressor state against Ukraine.

The Cabinet of Ministers of Ukraine will (i) approve the procedure and the volume of imported goods for the relevant special investment treaty and (ii) determine the general rules of import and specified use of these goods.

• Corporate profit tax exemption during 5 consecutive years (but not more than the duration of the special investment treaty), under the following conditions:
• The exemption applies starting from the first day of the calendar quarter determined by the investor in the application form submitted to the tax authority for the use of a right for such exemption
• Profit received by the investor from transactions, which are controlled from the transfer pricing perspective, is not exempt and is taxed under general rules
• If the investor is a controller in relation to a controlled foreign company (CFC), the profit of such CFC is not exempt and is taxed under general rules prescribed for the taxation of CFC profit
• The reporting period is a calendar quarter (using annual reporting period is not allowed).
• Reduced rates of land tax and land rent for state-owned and communal-owned land, as well as exemption from land tax under the following conditions:
• The decision on the application of benefits for land tax and land rent is set by the relevant local governmental authorities
• The abovementioned benefits may apply only to land plots, for which a normative monetary evaluation was performed, and which are used within the investment projects with significant investments (except for the projects related to extraction of mineral resources for further processing and / or enrichment).

These exemptions apply until 2035 and during the implementation of an investment project.

We stress that the total amount of the above exemptions cannot exceed the total amount of the state support for the specific investment project, which is provided under the special investment treaty, i.e. up to 30% of the planned amount of investment (please see tax and legal alert of 21 December 2020).

The parliament and the government should adopt several additional draft laws and decrees in order to put the Law and its rules in force. Still, the first step has already been made. We suggest that you can already analyse the possibility of receiving state support for the implementation of your investment projects in Ukraine.

PwC Ukraine team is ready to assist you with your investment plans in Ukraine. In particular, we can provide required professional support and represent your interests in the process.

Our team continues to monitor legislative changes intended to stimulate investment activity in Ukraine and create investment opportunities.