Foreign investment in Ukraine

In Ukraine foreign investment activity is regulated by the Law “On the Foreign Investment Regime” and a number of resolutions of The National Bank of Ukraine concerning currency issues involved in foreign investment.

The Law provides equal business conditions for domestic and foreign investors, which means that foreigners have the same rights to invest in Ukraine as Ukrainian legal entities and individuals. Furthermore, foreign investors may be granted preferential treatment if they implement projects in accordance with state programs for the development of priority branches of the economy and the social sphere.

In general, there is no need in any investment permits or special approvals from authorities for foreign direct investments. But, it should be noted, that all enterprises must be established according to the procedure prescribed by the law and registered with appropriate government institutions.

The Foreign Investment Regime classifies a legal entity as a company with foreign investment if it has at least 10% foreign ownership in its authorized capital (share capital). No minimum or maximum of foreign contribution requirements are stated. Also, in Ukraine it is possible to establish a legal entity with 100 % of foreign contribution.

Foreign investments may be effected in the following forms:

  • Hard currency (only specified in the 1st group of the Classifier of foreign currencies. *See the full list of the currencies from this group in the Procedure of foreign investment in monetary form);
  • Ukrainian currency (only for reinvesting);
  • Any movable or immovable property and property rights connected with it;
  • Securities, bonds and corporate rights;
  • Monetary claims and claims under contracts, valued in a hard currency;
  • Any intellectual property rights with confirmed estimation in hard currency according to the laws of the investor’s country of residence, including copyrights, trademarks, firm names, know-how, and others;
  • Rights to carry out specific commercial activity, including exploration and use of natural resources.

Types of foreign investments:

  • Buying movable or immovable property;
  • Establishing a company, wholly-owned by a foreign investor, a subsidiary, an affiliate, or division of the foreign investor or acquiring the assets of an existing Ukrainian legal entity;
  • Buying the right to use land and concessions to exploit natural resources;
  • Engaging in commercial activities based on product distribution agreements;
  • Acquisition of property rights by purchasing securities;
  • Engaging in other investment activities.

Note: The Foreign Investment Law also allows a foreign investor to enter into a contract with a Ukrainian entity for non-corporate joint activity. Parties of this type of contract are required to maintain separate books, records and reports on operations connected with the joint activity and are entitled to open separate accounts in Ukrainian banks for the purpose of making payments and settlements connected with this joint activity. Property imported into Ukraine by a foreign investor for joint activity for a period of at least three years is exempt from customs duties. However, if the property is sold prior to the expiration of the three-year period, customs duties must be paid.

Registering a foreign investment

In Ukraine foreign investment is required to be registered with the local authorities. Unregistered foreign investments do not enjoy the rights and privileges granted by the Law. However, to enjoy guarantees a foreign investment should be registered with the appropriate state authorities within definite period of time after the investment has been contributed.

State protection of foreign investment: guarantees and rights

  • Foreign investors are guaranteed the unhindered and immediate right of repatriation of profits from investments in Ukraine after the payment of applicable taxes;
  • In case of investment in kind: when terminating activity an investor has 6 months to return such investment as well as any profits earned either in kind or in cash without payment of customs duties;
  • Fixed assets imported to Ukraine as contribution to the authorized capital of a company are exempted from customs duties;
  • Foreign investments are protected against nationalization, expropriation, requisition, or any other measure of similar effect, except in the case of natural disasters, emergencies, epidemics etc. In such cases, appropriate and effective compensation must be provided and investors retain the right to reinvest their profits in Ukraine;
  • If foreign investors bear damages (losses of profit and moral injury) resulting from the negligent acts or failure to perform an act by the state organs and if it is confirmed – the compensation in hard currency is to be paid;
  • For a period of 10 years foreign investments are protected against future changes in legislation affecting these guarantees.

Restrictions on foreign investment

In Ukraine there are certain business areas where foreign investment is restricted or prohibited. Foreign companies are restricted from owing agricultural land, there are as well some restrictions on the amount of the participation of foreign entities in Ukrainian insurance, banking, publishing and broadcasting sectors, and some other businesses. Foreign investment in armaments, explosives, drugs and other areas of national interest are prohibited.

Also, in some cases it may be required an approval from the Antimonopoly Committee of Ukraine (AMC) in respect of mergers, acquisitions and incorporation of a new company. The anti-monopoly regulations may be subject to rapid changes, but is important to consider the potential application of such regulations to a merger/acquisition transaction.

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