Law on Investor Support. How to use it

Law on Investor Support. How to use it

Investing and attracting investment in Ukraine is an extremely important and exciting issue for the Ukrainian government and Ukrainian business. Undoubtedly, both the Ukrainian establishment and the citizens of Ukraine will benefit significantly from the attraction of foreign investment in Ukraine, in connection with the creation of new jobs. This issue needs to be addressed primarily in the regulatory field by providing foreign investors with certain guarantees and preferential terms to attract their funds to Ukraine, and Ukraine recently adopted a law on supporting foreign investors and providing them with certain guarantees.

The issue of attracting investment to Ukraine is vitally important, given the European course of Ukraine and the necessity to attract additional funds to the Ukrainian economy to finance a variety of measures and reforms of the Ukrainian government to improve the lives of citizens.

To achieve this goal, the Law of Ukraine on Investor Support has recently entered into force, which should significantly increase the inflow of investments into Ukraine, and which contains improved conditions for investors, in particular, in conducting their business in Ukraine and providing them with certain guarantees from Ukraine.

On February 10, 2021, the President of Ukraine signed a law on state support of investment projects with significant investments, which aims at attraction of strategic investors and investments to the Ukrainian economy, increase of Ukraine’s investment attractiveness, and overall increase of competitiveness in Ukraine.

Who is an investor with significant investments according to the adopted Law?

According to the Law, an investor with significant investments is a specially registered legal entity in Ukraine, which was purposely established for the implementation of an investment project with significant investments on the territory of Ukraine. The amount of such investments under the investment project must be at least 20 million euros, and the term thereof must not exceed 5 (five) years.

Which areas of investment projects are covered by the provisions of the Law

The law stipulates that the Law will cover investment projects with significant investments related to the construction, modernization, technical and/or technological re-equipment of investment facilities in the following areas:

  • processing industry (except for the production and circulation of tobacco products, alcoholic beverages);
  • extraction for further processing and/or enrichment of minerals (except coal and lignite, crude oil and natural gas);
  • waste management;
  • transport, warehousing, postal and courier activities, logistics;
  • education, science and scientific and technical activities;
  • health, art, culture, sports, tourism and resort and recreation.

Also, such an investment project may provide for the construction at the expense of the investor necessary for the implementation of the investment project of an adjacent infrastructure (highways, communication lines, means of heat, gas, water and electricity, engineering communications, etc.).

How to become an investor with significant investment and receive benefits?

In order for a project to fall into the category of an investment project with significant investments (i.e. under this Law), the applicant must submit an application and a package of documents provided for by law, including a draft of a special investment agreement to the authorized body, namely the Cabinet of Ministers of Ukraine, which shall evaluate such a project and provide its response considering the signing of such a special investment agreement within 60 days.

At the same time, the law contains a definition of who is an applicant and who is an investor with significant investments and what are the requirements for receiving state support.

The Law also stipulates the essential terms of a special investment agreement, such as the subject of the agreement (i.e., what work is planned to be done), the amount of necessary state support, duration, obligations of the parties and other important issues necessary for the implementation of such special investment agreement.

In addition to the already mentioned requirements, for an investor to receive state support, within the investment project (in addition to the previously mentioned requirements) the investor must additionally create 80 new jobs within the project with an average salary of at least 15% higher the average salary in the relevant field in the region where the project is implemented, for the previous calendar year.

What exactly are the benefits provided to investors with significant investments?

The state support to investors can be provided in the following forms:

  • exemption from payment of certain taxes, fees and import duties in connection with the import of new equipment (tools) and components to it, which is imported exclusively for the implementation of the investment project;
  • ensuring the transfer to the investor of land of state or communal ownership for the implementation of the investment project under a special simplified procedure and ensuring the pre-emptive right of the investor to acquire ownership of such land after the implementation of a special investment agreement;
  • providing at the expense of the state, local budgets and other sources, construction of objects of the adjacent infrastructure (highways, communication lines, means of heat, gas, water and power supply, engineering communications, etc.) necessary for realization of the investment project (this provision of the Law will come into force on January 1, 2022).

In this case, the total amount of state support should not exceed 30% of the total investment in the investment project.

What else is provided by law for investors with significant investments?

The law defines the procedure for the work of a government authorized institution, which includes investment managers involved in the support of investment projects, assistance to investors from the beginning of the project and throughout implementation thereof.

In addition, the Law provides for some state guarantees for investors, in particular:

  • guarantee of stable conditions for conducting business activities during the implementation of investment projects with significant investments, carried out on the basis of special investment agreements, as well as observance of the rights and legitimate interests of applicants and investors with significant investments;
  • guarantee of fulfillment of its obligations to provide an investor with significant investments of state support in the forms and amounts specified by the Law and the special investment agreement.

In general, the adopted Law has several positive aspects, including the granting of certain preferences to Ukrainian and foreign investors, construction of adjacent infrastructure for public funds for the project, the pre-emptive right to use and the right to acquire land by the investor after the investment agreement performance.

The adopted Law should undoubtedly have a positive impact on the investment climate of Ukraine and in the inflow of money into the budget of Ukraine and the budget of every citizen of Ukraine, because given the significant number of jobs to be created by investors – the benefits of this law will soon be felt. above all, Ukrainian citizens.