In order to promote a more attractive investment climate in Ukraine, the Parliament of Ukraine amended the Law of Ukraine No. 1116-IX “On State Support for Investment Projects with Significant Investments in Ukraine” (the “Law”), which reduces the requirements for investors to enjoy benefits provided by this Law.

The original version of the Law was designed to attract high-value foreign investments. Nevertheless, the Government determined that, in the current circumstances, state incentives and guarantees for investment projects should extend to a broader range of investors.

What criteria does the investment project need to meet to qualify for support?

The investment project and the subsequent special investment agreement (the “Agreement”) must comply with the following requirements:

1. The amount of investment must exceed €12 million. An investor can execute the Agreement with respect to a current project if it has already made some investment, the value of which does not exceed 30% of the total planned investment amount.
2. The implementation period of the investment project must not exceed 5 years from the date of entering into the Agreement.
3. The total value of the state support to implement the investment project shall not exceed 30% of the amount invested in the project.
4. The investment project must create a minimum of 50 new jobs, in which the average salary is higher than the average salary paid for the relevant activity across the region.

In what sectors can an investment project be implemented?

A Ukrainian or foreign investor can implement an investment project in the following industry sectors:

• Processing industry (except for the production and circulation of tobacco products, alcohol and alcoholic beverages)
• Production of biogas and biomethane (including liquefied or compressed)
• Extraction for the purpose of further processing and/or enrichment of mineral resources (except for coal, raw oil and gas)
• Waste management
• Transport, warehousing
• Postal and courier activities, logistics
• Education, scientific and research and technical activities
• Healthcare
• Arts, culture, sports, tourism, and resorts and recreation
• Telecommunications

An investment project can be carried out in the form of construction, modernization, technical and/or technological re-equipment of the investment target, the purchase of necessary equipment and component parts thereto, or the construction/reconstruction of engineering and transportation infrastructure.

What does the state offer for the investment project?

The state support of investment projects can take the following forms:

1. Tax benefits such as: (i) exemption from customs charges and VAT for the equipment imported by an investor to Ukraine for the implementation of the investment project and (ii) exemption of an investor from corporate income tax for five years. The draft law with respect to the exemption from the income tax and VAT is pending before the Verkhovna Rada of Ukraine.
2. Exemption of equipment and component parts from import duties.
3. The right to use (lease) a state- or communally owned land plot in order to implement the investment project, as well as the investor’s right to purchase said land plot upon the expiry of the term of the Agreement.
4. The construction, at the expense of the state, of ancillary infrastructure facilities (motorways, communication, heat, gas, water, and electricity lines, etc.) necessary to implement the investment project or the compensation of such expenses to an investor.
5. Reimbursement to an investor of costs related to connecting and integrating engineering and transportation facilities required for the execution of the investment project.
6. Exemption of an investor from compensating for the losses of the forestry production.

How to apply for support for the investment project

To apply for support for a qualifying investment project, the investor must submit an application and supporting documents to the special state body or local self-governmental authority (for regional projects).

The Law aims to simplify the procedure for seeking state support. In particular, the investor has the right to rectify any deficiencies in its technical and economic justification for the project.

Negotiations with the state or local government regarding the scope of the investment agreement must be completed within two months.

The investment agreement can only be concluded with an investor that has a legal entity registered in Ukraine. If a foreign investor will implement the investment project, it needs to establish a legal entity in Ukraine, of which it owns 100% of the shares.

What are the restrictions?

An application for the implementation of the investment project cannot be filed by:

1. Ukrainian or foreign legal entities, which:

• Are registered or controlled by residents of the Russian Federation or countries included in the FATF list
• Are subject to special economic or other restrictive measures (sanctions) in Ukraine
• Are undergoing bankruptcy proceedings, liquidation or reorganization
• Are registered in countries (or territories) classified as offshore zones

2. Non-profit enterprises, institutions, and organizations.

3. State and municipal enterprises, in which more than 50% of shares (participation interests) in the charter capital are owned by the state or territorial community.

The Office of the President of Ukraine is of the opinion that this law will foster investment activity in Ukraine, even during the period of martial law.