Investment contract in Ukraine

The regime of foreign investment in Ukraine is regulated by the Law on the Regime of Foreign Investment effective as of 25 April, 1996.

The law states different methods of making foreign investments, which need corresponding agreements. Therefore there are different types of investment agreements, such as:

• agreements on establishment of legal entities;
• agreements on joint investment activity;
• acquisition agreements.

Under the law of Ukraine foreign investments may be made in the form of ownership interest of foreign investors in entities, which are being established jointly with Ukrainian legal entities and natural persons, or acquisition of shares of functioning entities, as well as in the form of establishment of entities wholly owned by foreign investors, subsidiaries and branches of foreign legal entities or full acquisition of existing entities.

Contracts of acquisition of real estate including buildings, apartments, premises and other real property by direct acquisition of property and proprietary complexes or in the form of stocks, bonds and other securities refer to the investment contract as well.

Foreign investments may also be made in the form of the acquisition of the rights to use land and/or concessions for the use of natural resources in the territory of Ukraine by foreign investors, independently or jointly with Ukrainian legal entities or physical persons.

Under the law assignment of rights to foreign investors as to mining and development of the renewable and nonrenewable natural resources, carrying out economic activity connected with the usage of the state owned items that are not given to the entities, institutions, organizations for the complete ownership or operational management is executed on the basis of concession contracts drawn up with the foreign investors by the Cabinet of Ministers of Ukraine or another state body authorized to do that according to the legislation of Ukraine. Term of concession contract validity is determined depending on the type and conditions of the concession, but cannot exceed 99 years.

If concession contracts include conditions, which are not stipulated by the legislation of Ukraine, then they are to be approved by the Verkhovna Rada (Parliament) of Ukraine.

Foreign investors have the right to conclude agreements (contracts) on joint investments activity (production cooperation, joint production, etc.), which is not connected with establishment of a legal entity according to the legislation of Ukraine.

Economic activity on the basis of the agreements (contracts) on joint investment activity is regulated by the legislation of Ukraine. Parties of the agreements (contracts) should keep separate accounting and draw up reports on operations connected with the fulfillment of the terms and conditions of these agreements as well as open separate accounts in bank institutions of Ukraine to make payments under these agreements (contracts). The agreements (contracts) should be registered within the terms and according to the procedure determined by the Cabinet of Ministers of Ukraine.

Property (except for goods for sale or entity’s consumption) imported into Ukraine by foreign investor for not less than 3 years with the purpose of investment under the registered agreements (contracts) is exempted from customs duty payment. In case of alienation of this property within 3 years from the date of its inclusion to the entity’s balance sheet the customs duty shall be paid.

Profit received as a result of the joint investment activity under agreements (contracts) is taxed according to the legislation of Ukraine.

The above is intended to provide a brief guide only. It is essential that appropriate professional advice is obtained. Our company will be glad to assist you in this respect. Please do not hesitate to contact us.