Author: admin

According to the results of a recent assessment by the World Bank, Ukrainian recovery and reconstruction will require at least $411 billion. This figure is 1.5 times higher than the size of the pre-war economy of Ukraine – writes Anna Derevyanko, European Business Association Executive Director (pictured),

Plans to rebuild Ukraine are already being talked about – at different events all over the world, in media, during business trips and high-official meetings. Nevertheless, it is also worth moving from words to actions – making concrete plans, with concrete steps and understanding who will have to pay and for what.

Definitely, the private sector has an important role to play in the rebuilding of Ukraine – in a variety of ways, including direct investment, critical projects, mobilizing capital, etc. And we see – a business that works in Ukraine is ready to be involved in the process of rebuilding. Moreover, businesses stay committed and support the country, continue to work and to pay salaries. Now even more than at the beginning of the war. However, rebuilding is a huge process that entails investments. Hence, how to attract the private sector, foreign investments – the questions that need to be thought about already. As opportunities are enormous – in food and agro, IT, logistics and infrastructure, defense, etc. Sure, for some businesses security reasons can be a slowdown. However, mechanisms like war risk investment guarantees can bring the appetite. In other words, businesses that want to invest or work with Ukraine also need to have support, guarantees while entering a challenging market. It’s priceless to have donors and governmental support. However, the sooner we (as a country) create a more sustainable economic front, the sooner Ukraine will be less dependable on international support, the sooner the EU and USA will spend less from their budgets. So, I welcome countries to think about such mechanisms for their businesses willing to invest in Ukraine.

Ukraine as well must do a huge homework to welcome investors. Let’s be honest, even before the start of the full-scale war, Ukraine didn’t have huge boom of investors due to the continuing concerns about corruption, rule of law, governance, etc. Though, Ukraine is currently the focus of the whole world. And, yes, countries support Ukraine, help and are ready to continue doing so. But when you talk to real businesses about specific things, investments, you still hear a certain skepticism. Therefore, the situation must be corrected already – across all industries and fronts, and this should be the focus of the entire governmental team.

Important progress has already been achieved. According to the Corruption Perception Index 2022 of Transparency International, an NGO working in over 100 countries to end the injustice of corruption, Ukraine is one of the few countries tracked that became less corrupt last year. Ukraine is well-known for the digitalization of administrative services, Ukraine has 18 free trade agreements with 46 countries, in recent times Ukraine canceled around 600 permits required for running a business. And this list of changes can be continued.

However, the Ukrainian government must make significant further reforms on transparency and accountability to create a strong business-enabling environment for attracting private sector investment.

The situation motivates Ukraine to strengthen diplomacy and economic diplomacy. Ukraine should work to create an attractive brand and an economic brand abroad. Reputation is not easy to form, it is not fast, even harder to change but it is the only way to convince others. Therefore, we in the European Business Association launched a Global Business for Ukraine initiative to work on the development of economic diplomacy, to talk about Ukraine and business opportunities, to help global companies find business partners in the country, to be the right hand for global companies – potential investors who want to launch business in Ukraine.

However, the attractiveness of the brand must have a real and strong background. Hence, it is necessary to take care of creating a new, transparent, and fast management structure, to continue reforms and changes, to be more demanding towards the state apparatus. After all, Ukraine faces a task that, probably, has not yet been performed by any country in the world. But opportunities are also opening, which probably has not been in any country.

So, what we as a country should continue doing to create this strong background?

First, to continue establishing the rule of law in the country, investors must know that even if their rights have been violated, the courts will certainly be able to help find justice, protect legal interests and it won’t take years.

Second, effectively fight against corruption. Currently, many agencies, in particular, law enforcement agencies, have an extremely bad reputation in this area. Since taking office, Zelensky has stressed to the international community that he will make fighting corruption in his country a major policy priority. Zelensky’s reform agenda leaves little doubt about his intention to eradicate illegal practices and step up the fight against corruption. But more complex solutions – at all levels and in all branches of government are needed. And complex results.

Third, concrete steps and plans to overcome the shadow economy in the country, which accounts for about a third of the GDP. Unfortunately, the war did not fundamentally change the situation, but in some industries even deteriorated. As an example, the shadow economy in the tobacco industry is the highest since Ukrainian independence and is about 22%. Last year, the state budget did not receive about 20.5 billion hryvnias of charges due to the illegal circulation of tobacco,and in 2023, according to KPMG report, the state losses will amount toEUR 636 million of unpaid taxes.From the media we could read high-profile cases of recording specific violations, but, unfortunately, it is difficult to remember specific punishments and prosecutions. The share of the illegal market remains significant. Therefore, it’s crucial to have coordinated work of all structures and make unpopular decisions. So that a transparent business also understands and feels fairness in approaches.

I am sure that these issues can be resolved. Actually, we as a country that is confidently heading towards EU membership have no other way out. And business is ready to be a partner in this process of transformation. Partner in spreading the word of the mouse to motivate new investments to come to the country. It already does so by promoting Ukraine, participating in global events, sharing stories, investing. And I hope this tendency will continue. Moreover, hope that the Ukrainian government will have a constant dialogue with such companies. As only together is possible to rebuild, develop and strengthen our economy. 

https://www.eureporter.co/world/ukraine/2023/08/10/ukraine-the-path-to-the-recovery/?fbclid=IwAR1zi2Gh7p0DKr7tYEUSYJYrJMaS03Fc8R6UlyhU7iG9Z2FTMzP4ji9mMuw&_gl=11lqo2m8_gaMTIwMTA5NDU2OC4xNjk4MDcyOTgx_ga_BXS2HELDDH*MTY5ODA3Mjk4MS4xLjAuMTY5ODA3Mjk4Mi4wLjAuMA..

Why can’t we talk about full reconstruction of Ukraine without private funds and what is required to attract investors? 

One more session of the Ukraine Recovery Conference in London clearly shows how strongly the Western world supports Ukraine in its fight against russian aggression. 

Inspirational speeches by top officials of the UK, the US and the EU, promises to finance restoration of Ukrainian infrastructure just today give us confidence that we will not be left alone with our most painful problems and the Western world will do everything possible in order to prevent humanitarian crisis in Ukraine. 

Western officials and businessmen, either modestly or actively, talk about their love for Ukraine who protects the entire Western civilization from inadequate Eastern tyranny at the cost of thousands of lives of its soldiers. 

Therefore, Western governments manage to convince their taxpayers that it is necessary to invest their costs into the victory of Ukraine. 

It means that they will help us to win and to provide minimum human needs. And what about investments into development of Ukraine? It is no secret that funds of Western governments, i.e. taxpayers, will not be enough for such investments. 

Even costs that we can theoretically receive in the form of compensation from the aggressor state will not be enough. Therefore, only private capital can become the most important source for investments into proper recovery and rapid economic growth of Ukraine. 

One should not be naive: no matter how much Western investors love Ukraine, they love their money much more. It means that they will make their investments into our state only when they are sure that such funds will result in much more earnings. 

First, they should make sure that assets they will create will not be destroyed. 

Insurance against such events is a vital issue, but with high risks of an insured event it will not help so much, because insurance payment will only return invested costs. Therefore, without NATO-level security guarantees, there is no sense to talk about an investment boom. 

Next, Western investors should be convinced that their investments will not be threatened by a corrupt official, law enforcement officer or judge. After all, russian propaganda created for us an image of the most corrupt European country. 

There are certain reasons for this, based mainly on numerous cases when a foreign investor faced arbitrariness of the Ukrainian authorities. And every such case is gladly spread by the Western media. Moreover, even experienced Ukrainian business entities are ready to flee the country in view of arbitrariness of law enforcement officers. 

Based on this, I see that the answer to the question asked by one of the top Ukrainian speakers, why the Europeans should not build one of the four planned gigafactories in Ukraine, will be disappointing. 

It is also not surprising that at the London Conference, almost every speaker not related to the Ukrainian authorities mentioned the need to secure the rule of law and freedom from corruption in Ukraine. 

The main German diplomat on the sidelines of the conference spoke about Ukrainian nepotism and corruption in a completely undiplomatic way, because corruption and selective justice cause not only risks of relations between business and state. 

They cause also unfair rules of market game, i.e. situations where a business operating in accordance to high ethical standards always loses competition to a less responsible business. 

Therefore, responsible business entities have little chance of development. As a result, we will face regress and will move far from European standards. 

Perhaps the best marker that we have overcome most of the barriers to investment will be our accession to the EU and NATO. Only then we can really rely upon a frenzied influx of Western investment. 

While we are still doing our homework for the fastest possible European integration, we can seriously rely only upon investments into Ukrainian business. After all, our business is much bolder and more determined than foreign investors for whom Ukraine is only one of several hundreds of targets for their capital investment. 

Therefore, first and foremost for the government to start its way to major investments in Ukraine is to facilitate comfort for Ukrainian investors. Although they are not so big as Western ones, their financial capabilities are smaller. 

But it is the local investor who will be the litmus test, the signal for foreigners that it is safe here and that one can invest and earn here. In other words, it will be extremely difficult to attract foreign money here in the absence of local investors. 

Here, the government can help by actively attracting Western state and quasi-state funds for local investment projects, as well as by developing effective incentives and investment support measures. Sincerely, the Law of Ukraine on investment nannies was a failed attempt. 

Is there any benefit to conferences similar to those held in Lugano or in London? Of course, there is, because it is probably the best platform for Ukrainian officials to receive objective and unbiased feedback from potential foreign investors regarding up-to-date investment climate in Ukraine. Then they will better understand how this climate can be changed. 

https://www.epravda.com.ua/columns/2023/06/23/701520/

This year, Ukraine Recovery Conference 2023 in London has become one of the most significant events upon Ukraine recovery. As for its scope and importance, it managed to surpass the very first such event in Lugano. For the last year, Ukraine had to draw up conclusions following the Swiss conference, while partners had to decide how to help rebuild the country. Dmytro Natalukha, Chairman of the Supreme Council Committee on Economic Development, analyzed what Ukraine has achieved and what still needs to be worked on. 

From fire to recovery: what the West has to offer 

At the URC, partners promised to grant aid to Ukraine amounting to 60 billion USD, i.e. the largest announced scope for reconstruction of the country. 

The aid amounting 50 billion EUR until 2027 is also an absolute record, as declared by Ursula von der Leyen, President of the European Commission. The calculation is simple: Ukraine’s needs aim to cover the budget deficit of 60 billion EUR and 50 billion EUR for rapid reconstruction, with 45% to be covered by the EU. 

1. Participation and cooperation 

Ukraine’s partners have drawn up a clear aid coordination scheme for Ukraine. In late 2022, Europe also proposed to divide macro-financial assistance to Ukraine in half between the EU and other partners. 

In fact, it is a sort of economic Rammstein forum. This format is optimal for Ukraine. It allows to focus not on day-to-day needs, but on development of long-term plans. Ukraine will be able to pursue a more consistent tax policy with predetermined sources of covering the deficit. 

2. From fire-fighting to restoration 

Most previous sets of assistance are focused on stabilizing public finances. Half of the funds announced in London will be aimed at reconstruction of schools, hospitals, transport infrastructure and many other facilities. 

Apart from loan guarantees of 3 billion USD for the World Bank, Rishi Sunak, the British Prime Minister, launched the Ukraine Business Compact Initiative so that the private sector could show its support for recovery and reconstruction of Ukraine. Over 400 companies from 38 countries with a total market capitalization of 4.9 trillion USD have already joined it. 

Strategy in the form of not donations, but investments is the best formula for relations between the West for Ukraine. 

3. Taboo was lifted by using the confiscation term  

Ursula von der Leyen explained the origin of funds to be granted by the EU for Ukraine: in addition to grants and loans, these are confiscated russian assets. 

The partners cannot cover all the losses incurred due to the war, estimated by the World Bank in the amount of 411 billion USD; although London announced on a smaller amount (349 billion USD), it is still unaffordable for them. 

For example, Canada has already formed a legislative framework for working with confiscated assets of the russian federation, but their largest volume is seized by the EU. Therefore, statement on transfer of such assets to Ukraine is an important precedent. Although legal feasibility of the process is in question, its format is still unknown. 

What Ukraine offers 

Instead of one presentation in Switzerland, containing a list of demands for 700 billion UAH, Ukraine prepared much better for the conference in London, following the path of priorities: what we want in the near future and what specifically we need help from the West. 

1. Quick recovery 

The concept of quick recovery postpones a full-fledged post-war reconstruction of Ukraine, which will require significantly more resources. But it allows us to mobilize forces in support of what is necessary right now. 

The Government of Ukraine has identified five areas: 

• power supply; 

• demining; 

• housing; 

• critical infrastructure repair; 

• economic support of small and medium business. 

Prime Minister Denys Shmyhal notes, Ukraine needs 14.1 billion USD for such industries in the following year, while 3 billion USD are kept in the budget. Ukraine will be able to get it from its partners. For example, the UK will provide loan guarantees for 3 billion USD, primarily designed to unlock cooperation with the World Bank. 

2. Transparent projects 

Oleksandr Kubrakov, the Deputy Prime Minister for the Restoration of Ukraine, announced on launching the initiative called We Build Ukraine. Through DREAM digital system, partners will be able to view recovery projects. The system provides for control over all stages of launching the project, including design and audit of work results. DREAM can become a showcase that will demonstrate Ukraine’s serious intentions and level the position of skeptics. 

3. Announced targets 

Yuliya Svyridenko, the Minister of Economy, announced that Ukraine should reach 1 trillion USD in GDP within 10 years, while share of GDP redistribution through the budget should decrease to 25%. In Ukraine, ca. 50% of GDP passes through the budget, so fruitful work on changing the tax legislation will await us. 

A disappointing conclusion 

But there are still some mistakes regarding reconstruction of Ukraine. 

1. Lack of vision 

Reconstruction projects are good, but they cannot replace a holistic vision of state development. Foreigners at the URC completely misunderstood, in which country they were invited to invest. 

It is important for an investor to understand that in such a country it would be equally profitable to open a coffee shop and to produce space rocket launchers. This requires not just an estimate, but a comprehensive vision of fundamental reforms. It should contain special proposals regarding tax changes, guarantees for investors, support programs, public administration system. 

2. Expediency of programs and priorities 

Of course, the mission-oriented approach is popular. However, setting certain indicators without a sufficient logical justification looks like a Komsomol race following the plan. 

Among the priority areas of Ukraine, there was named agro-industrial complex with a plan to increase the yield of grain and oil crops to 150 million tons and 50% processing. But it is not specified anyway what exactly the processing should be: will it be enough for us to produce flour, which is not in short supply, or should we plan to develop the food industry and to produce semi-finished products. 

Target for production of 46 million tons of green steel per year does not include further plans for its use in construction of cars, airplanes or production of basic rolled metal. When most countries compete to produce batteries for electric cars, we are simply talking about mining and basic processing of lithium. 

If we analyze the government’s theses with regards to replacing goods from China and russia in the EU markets, we should offer ready-made products, and not preserve ourselves as a raw material state. Otherwise, Ukraine will be destined for the fate of a country with maximum population of 15-20 million people. 

3. The problem of rose-colored glasses 

Without answers to the previous questions, we will not see 1 trillion USD in GDP in 10 years. Although there can be discussion concerning actuality of such target (with declared methods of achievement). It is necessary to grow by 20% per year, in view of potential force majeure. When using ambitious goals, we should propose equally ambitious steps aimed to achieve them. 

Because the same 750 billion UAH announced by the government for restoration of Ukraine bear significant expenses and risks. Can we understand that investment of such costs into the country automatically turns it into one of the financial centers of the world? Do we have the structural possibility to absorb such funds and for which period? Who has resources in this amount and who is willing to take such enormous risks? 

No post-war country has been rebuilt to a greater extent by private investors yet. A significant part will be carried out by the state with business involved, i.e. through PPP and other instruments. The other part will not be extracted even by PPP; so, in such case one has to rely on grants or assistance programs of partners. These two parts will differ both programmatically and design-wise. 

Investors will take the third part, i.e. what is left and what is actually attractive for private business from the aspect of capital and risks. Considering the latter, investors will expect different presentations than Key Investor Information Document for the project. 

One should understand clearly how the state will function, why it is worth risking in money investment and how it will competitively differ from its nearest rivals. It will be beneficial for businesses and citizens, who during 1.5-year war had an opportunity to practically compare living conditions, social guarantees, and easy business-making both in Ukraine and abroad. 

Otherwise, it has no sense. That is why the Ukraine Recovery Conference 2023 leaves three dots in respect of reconstruction, but still with a plus mark. There is much work to be done and conclusions to be drawn.

https://forbes.ua/money/kontseptsiya-shvidkogo-vidnovlennya-spodobalasya-partneram-tvereziy-poglyad-golovi-ekonomichnogo-komitetu-vru-dmitra-natalukhi-na-ukraine-recovery-conference-26062023-14410

The perseverance of you – the Ukrainian people – in going about your daily lives despite the horrific pain and suffering caused by Russia’s illegal full-scale invasion is recognised all around the world. 

The same is true of Ukrainian businesses, who are striving to sell their products, service their clients and support their employees despite the devastation wrought on Ukraine’s infrastructure.  

And while UK air defence systems and donate military hardware continues to be put to good use by the Armed Forces of Ukraine to protect your cities and critical national infrastructure, there is immediate work to be done to support you and your businesses to rebuild.

Not in a few months’ time, not when the war ends – now and long into the future. The UK is committed to doing exactly that.

There is a huge amount of goodwill and determination from UK businesses to support Ukraine and help you rebuild,

but the sad reality of the situation is that companies face serious challenges reaching their Ukrainian counterparts and operating in the country.

That’s where the UK Government is stepping up – we are working with Ukraine to unblock these issues and unleash the ingenuity, expertise and drive of the private sector in both countries.

When I had the opportunity to be Minister at DBT for the Ukraine Recovery Conference, I jumped at the responsibility. I wanted to ensure that the UK – as co-host of this week’s conference alongside Ukraine – goes beyond pledges of financial support and delivers real time physical support, working with businesses to build back Ukraine brick by brick.

As you already know, Ukraine is a digital powerhouse and your tech sector is driving a modern, innovative economic future for the country – and despite being under constant bombardment, you continued to grow your exports last year with 2022 showing a record $7.34 billion in export volume.

Trading digitally is particularly important now, while damage to infrastructure and warfare makes it much harder to trade physically. 

That’s why the UK and Ukraine have signed a Digital Trade Agreement that will help UK and Ukrainian businesses do business more efficiently and cheaply through, for example, electronic transactions and e-signatures. 

But a trade deal isn’t just a piece of paper. Business is about relationships, collaboration, the sharing of expertise and realising of opportunities.

UK and Ukrainian businesses tell us that the war creates challenges in creating business connections. That’s why

we have this week announced two initiatives to help address this.

Firstly, a new TechBridge to bring the UK and Ukrainian tech and tech-enabled sectors together to collaborate, innovate, and drive commercial opportunities.

Secondly, the Business Bridge Ukraine platform – an app for businesses to identify and link up with counterparts who provide the kind of service their business needs. 

The UK has also this week committed an extra up to £20m of funding for the Multilateral Investment Guarantee Agency to expand its political risk insurance offer in Ukraine. Giving businesses the cover they need to do work with and in Ukraine is crucial, and I look forward to seeing the opportunities this funding presents realised.

Businesses are key to Ukraine’s recovery, that’s why we are working to make sure Ukrainian businesses will succeed. The measures we have announced this week and the $60 billion plus of international commitments will go some way to doing that. But we will not stop there.

We will support you, Ukraine, for as long as it takes, while you fight Russia’s full-scale invasion and long into the future. 


https://www.eurointegration.com.ua/eng/experts/2023/06/23/7164265/

Interlegal regular client filed a request concerning, inter alia, controlled foreign companies (CFCs).

Rules on CFC taxation in Ukraine entered into force on January 1, 2022. CFC is a foreign company either owned or managed by the Ukrainian resident. In such cases, tax legislation of Ukraine provides for taxation on its adjusted profit in Ukraine, not in registration state.

Also, in accordance with Tax Code of Ukraine, the Ukrainian resident who owns or manages CFC shall be treated as its controlling entity. While gaining such a status, the Ukrainian residents shall bear such liabilities as submission of CFC reporting, notifying Tax Service of Ukraine on gaining/losing control over CFC etc.

Interlegal experts drafted a legal advice indicating why the Client’s company shall be deemed as CFC and the Client itself shall have a status of controlling entity, jointly with detailed procedure for filling-in and submitting CFC report. Special attention was drawn to the issue of notices on CFC in case of corporate restructuring the Client’s group of companies.

Interlegal associate attorneys Marta Sverdlykivska & Alyona Remenyak, lawyer Dmytro Bondar and partner Irina Voyevodina led the project.

Special attention should be drawn to the issues of CFC reporting in Ukraine because Tax Code of Ukraine stipulates serious penalties for non-compliance or violation of such procedure. For instance, for non-submission of CFC report by controlling entity, Tax Service of Ukraine may impose fine amounting to 268,400 UAH, while failure to notify Tax Service on acquiring share in CFC or on share transfer to another entity, as well as failure to notify on gaining/losing control over CFC, shall entail fine amounting to 805,200 UAH per each fact.

Interlegal Corporate&Tax department provides consulting upon controlled foreign companies and helps to fill-in and to submit CFC reports and notices. Legal advice and assistance by Interlegal lawyers may prevent large fines in case of using foreign companies in your own business.