Chamber News (#01-02 January-February 2019)

Law digest

Law On Adjacent Zone of Ukraine signed

President Petro Poroshenko has signed the Law of Ukraine On Adjacent Zone of Ukraine adopted by the Ukrainian Parliament on 6 December 2018.

The purpose of the law is to harmonize the maritime legislation of Ukraine with the legislation of other Black Sea states and other states that are parties to the 1982 United Nations Convention on the Law of the Sea. Also, the law is aimed at preventing smuggling operations and calls by illegal vessel to the closed ports of the temporarily occupied territories of Ukraine.

According to the law, the adjacent zone of Ukraine is a zone of the high seas, which is adjacent to the territorial sea of Ukraine, and whose external border is at a distance of not more than 24 nautical miles, measured from the baselines, from which the width of the territorial sea of Ukraine is measured.

In its adjacent zone, Ukraine exercises control necessary to prevent violations of customs, fiscal (tax), immigration (migration), and sanitary legislation of Ukraine within the territory of Ukraine, including its internal waters or territorial sea.

The control is carried out with the aim of bringing to responsibility parties for any violation of the legislation of Ukraine, committed within the territory of Ukraine, including its internal waters or territorial sea.

The authorized body that ensures the inviolability of the state border and protection of the sovereign rights of Ukraine in its adjacent and exclusive (marine) economic zones can stop vessels; inspect them, detain or arrest vessels and/or their crew members, with the exception of warships and other state vessels used for non-commercial purposes.

According to the law, if a vessel has violated the legislation of Ukraine and tries to escape, the authorized body has the right to pursue such a vessel without delay to detain and prosecute it pursuant to the 1982 United Nations Convention on the Law of the Sea. The right to pursue is terminated as soon as the pursued vessel enters the territorial sea of the state whose flag the vessel is flying, or of any third country.

Pan-Euro-Med Convention on origin applied in trade with EU

From 1 January 2019, Ukraine and the European Union started application of provisions of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin in their trade relations. Pan-Euro-Med Convention establishes identical rules of origin for goods, which are applicable within the framework of free trade agreements concluded by its contracting parties. At present 25 countries are parties to the Convention. Ukraine has concluded free trade agreements with the following parties to the Regional Convention: EU, EFTA countries (Iceland, Liechtenstein, Norway, Switzerland), Georgia, Macedonia, Moldova, Montenegro. A free trade agreement between Ukraine and Israel is being readied for signing, and negotiations with Turkey are in progress. In practice, application of provisions of the Pan-Euro-Med Convention means the ability of a Ukrainian manufacturer to purchase raw materials or components from one of the parties to the Convention and to export finished products to another party to the Convention duty free or subject to payment of duty at a reduced rate.

National Bank of Ukraine approved new currency regulation system

The National Bank of Ukraine has approved and published regulations, which will become the framework for the new liberal system of currency regulation provided for by the Law On Currency and Currency Operations.

The new currency regulation system consists of eight major Decrees issued by the NBU, which replaced the preliminary framework consisting of 56 regulations.

The NBUs main priorities include lifting the number of restrictions that create the majority of additional difficulties for the conducting of foreign economic activity and that restrain inflow of new foreign investments into Ukraine. First and foremost:

gradual decrease and cancellation of requirements for the mandatory sale of currency receipts;

cancellation of the requirement for reservation of preliminary funds to purchase foreign currency (purchase under T+1 terms);

decrease and/or cancellation of the limit on repatriation of dividends;

cancellation of deadlines for settlement under residents transactions related to the export and import of goods, but not prior to adoption of the draft law on BEPS counteraction;

cancellation of the ban on the purchase of foreign currency using loan facilities;

cancellation of additional supervision over offsetting of currency liabilities;

increase and cancellation of limit on purchase of foreign currency in cash of no more than UAH 150,000/day by individuals.

List of offshore zones increased by five countries

The Cabinet of Ministers has included Trinidad and Tobago, Namibia, Guam, Palau and American Samoa to the list of its offshore zones.

Taking into account the data of the Global Forum on Transparency and Exchange of Information for OECD Tax Purposes, the state updates the Ukrainian list of offshore zones from time to time.

The forum has developed a blacklist of states that do not intend to cooperate on issues of taxation and do not implement OECD standards, and this list now includes the mentioned countries.

The list of offshore zones is approved by the Decree of the Cabinet of Ministers of Ukraine No. 143-r of 23 February 2011.

Parliament extends ban on sale of agricultural land

The Verkhovna Rada has approved an extension to the moratorium on the sale of agricultural land sale 1 January 2020. Draft Law No.9355-5 stipulates that the Cabinet of Ministers should develop and introduce to Parliament for consideration a Draft Law On Agricultural Land Turnover by 1 March 2019.

The ongoing moratoriumon thesaleof land was introduced in Ukraine in 2001 for a period until adoption of the new Land Code, but it has, in fact, become indefinite.

The moratorium allows the owner of a plot of land to lease it or to transfer it by succession, but it prohibits the sale of such a land plot or its pledging.

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