Business news from Ukraine

AMERICAN CHAMBER OF COMMERCE IN UKRAINE CALLS TO AMEND EXCISE TAX RATES ON HEATED TOBACCO PRODUCTS

The American Chamber of Commerce in Ukraine has called on Head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Hetmantsev to amend the Tax Code of Ukraine regarding the excise tax rate on heated tobacco products, according to the organization’s website.
“Since January 2021, law No. 466 has increased the tax rate on heated tobacco products by 320%. In the current economic realities, such a sharp increase in tax can lead to devastating consequences for the market and the economy of the country, since a significant increase in the price of such products will contribute to growth of illegal market, as a result of which the state will not receive the planned budget revenues,” the organization said.
According to the companies-members of the chamber, the plan to increase the excise tax rate on cigarettes needs to be amended by increasing it until 2030 with a 10% annual rate increase, as well as maintaining the current ad valorem component of the excise tax. At the same time, from January 1, 2021, the amount of excise tax is UAH 1,456 per 1,000 pieces with an annual tax rate increase of 20% to UAH 2,517 in 2024.
According to the American Chamber of Commerce, from January 1 of this year, the amendments introduced by law No. 466 also make it impossible to sell, transport and store liquids for electronic cigarettes already produced in 2020. Such restriction deprives tobacco companies of the opportunity to exercise their right to property, including storing, transporting, selling or exporting products outside the customs territory of Ukraine, the message said.
As reported, on January 16, 2020, the Verkhovna Rada adopted law No. 1210, which introduced amendments to the Tax Code, increasing the excise tax rate on heated tobacco products four-fold from January 1, 2021.

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AMERICAN CHAMBER OF COMMERCE IN UKRAINE ASKS PRESIDENT TO TAKE PERSONAL CONTROL OVER IMPLEMENTATION OF MEMO WITH ‘GREEN’ INVESTORS

The American Chamber of Commerce in Ukraine asks Volodymyr Zelensky to take personal control over Ukraine’s fulfillment of the memorandum obligations between the country’s government and renewable energy investors, which were legislatively enshrined in 2020.
Such a request is contained in a letter from President of the American Chamber of Commerce Andy Hunder to the head of the Ukrainian state dated January 26.
“We ask you to take personal control over the implementation of the provisions of Law No. 810-IX and the fulfillment of obligations under the current legislation and refrain from taking decisions that undermine earlier agreements between the state and investors,” the text of the letter said.
As Hunder recalled, on August 1, 2020, the law on the amendments to certain laws of Ukraine on improving the conditions of support for electricity production from alternative energy sources (No. 810-IX) came into force.
Adoption of Law No. 810-IX was aimed at improving the feed-in tariff’s sustainability and electricity market liquidity by enshrining in law the provisions set out in the Memorandum of Understanding, signed on June 10, 2020 by the Cabinet of Ministers, the Energy Ministry, the National Energy and Utilities Regulatory Commission (NEURC) and renewable industry associations.
Inter alia, the provisions of Law No. 810-IX envisaged 20% co-financing from the state budget and issuance of government domestic loan bonds to cover the deficit in payments to renewable energy producers. However, none of these mechanisms was implemented either in the state budget for 2021 or using debt financing instruments.
“Accordingly, the American Chamber of Commerce members expected that the government will fulfill its obligations under the legislation and the memorandum by allocating at least UAH 9 billion from the attracted UAH 10.25 billion of credit funds to pay off 40% of the debt to renewable energy producers accumulated as of August 1, 2020 in the amount of UAH 22.4 billion. However, on January 16, 2021, the NEURC issued the Guaranteed Buyer an instruction to allocate not less than 50% of the funds received from Ukrenergo under the loans provided by state-owned banks for repaying other debts,” Hunder said.
He said that such NEURC decision combined with a lack of actions by the government to implement Law No. 810-IX is a clear sign of Ukraine’s unwillingness to fulfill its commitments to private investors.

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AMERICAN CHAMBER OF COMMERCE CALLING ON PARLIAMENT TO SUPPORT DEVELOPMENT OF UKRAINE’S MOBILE NETWORK AND DIGITAL INFRASTRUCTURE

The American Chamber of Commerce in Ukraine calls on Members of Parliament to support Draft Law #4118 on amendments to the Law of Ukraine “On Access to Objects of Construction, Transport, Electricity for the Development of Telecommunication Networks”.
Draft Law #4118 creates transparent rules and equal access to infrastructure for all the telecom market players. It obliges them to work under the transparent agreements in which the fee for access is established in accordance with the clear methods developed by the Government. This will enable not only to prevent corruption risks and improve competition but also to contribute to developing the network and digital infrastructure in Ukraine.
We welcome the development of Draft Law #4118 and look forward to its adoption in the first reading.

AMERICAN VIDEO SERVICE NETFLIX BECOMES MEMBER OF AMERICAN CHAMBER OF COMMERCE IN UKRAINE

The American video service Netflix Inc. became a member of the American Chamber of Commerce in Ukraine (ACC), ACC President Andy Hunder told the members of the association.
He recalled that Netflix is now filming its first feature film in Ukraine.
Discovery Communications Europe Limited also became a member of the ACC in Ukraine in August.
Earlier information appeared on Netflix’ website that two Ukrainian studios Postmodern Postproduction and Tak Treba Production became partners of the video service and received the Gold partner status. They will duplicate service products in Ukrainian.
Postmodern Postproduction (formerly Pteroduction Sound) is one of the largest film studios in Ukraine. It specializes in postproduction (dubbing, CGI and VFX). Founded in 2001, it is part of Film.UA Group. The CEO of the company is Serhiy Bondarenko.
The multimedia company Tak Treba Production specializes in adaptation services for foreign films, TV series and animation (voice acting, dubbing, titration in Ukrainian and Russian). The company was founded in 2003 and is headed by Dmytro Melnyk.

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FOREIGN MINISTER OF UKRAINE INVITES ACC, EBA TO ATTRACT INVESTMENTS TOGETHER WITH FM

Foreign Minister of Ukraine Dmytro Kuleba has offered President of the American Chamber of Commerce in Ukraine (ACC) Andy Hunder and Executive Director of the European Business Association (EBA) Anna Derevyanko cooperation to develop trade and attract investment, the press service of the ministry said. “In the United States, Asian countries, and EU countries, the protection of internal business abroad, the development of trade, and the attraction of investments are some of the key functions of the foreign ministries. Now we are creating such an effective system of economic diplomacy in Ukraine. I would like to invite the leading Ukrainian business to unite forces,” Kuleba said during a video conference on Tuesday.
Kuleba also told about the relaunch of the Council of Exporters and Investors under the Ministry of Foreign Affairs. A meeting of the members, 80% of whom were reelected, is scheduled for May 21. Participants will be organized according to industry principles and will develop a joint work plan for the year.
The minister also shared with Hunder and Derevyanko his vision of cooperation between the diplomatic system and business, which will fill the agenda of relations with other countries with real cooperation projects, liberalize trade, expand the geography of exports, and attract investment in Ukraine.
Kuleba believes that successful Ukrainian business is also able to play a key role in establishing an effective system of economic diplomacy. It is, in particular, about professional expert assessment, attracting business to diplomatic education, and conducting special trainings and courses.
Derevyanko and Hunder, in turn, expressed gratitude for the initiative, which, in their opinion, is able to bring cooperation between business and diplomacy to a new level and contribute to the protection of Ukrainian economic interests. For their part, they confirmed their readiness to cooperate under the Council of Exporters and Investors, as well as in the development of an assessment system and diplomatic education.The parties paid special attention to the subject of encouraging foreign companies that transfer production from other regions of the world closer to sales markets, to locating production in Ukraine.

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STATEMENT OF THE AMERICAN CHAMBER OF COMMERCE IN UKRAINE ON LABOR LAW

The American Chamber of Commerce in Ukraine (the Chamber) has been actively involved in the process of discussing changes to the labor law from the outset, providing comments and suggestions, and sharing the views of member companies’ experts. The Chamber Human Capital Committee regularly organizes meetings with representatives from political parties, government agencies, and institutions to discuss changes to the labor law. Also, the Chamber member companies’ experts are involved in activities of the working group of the Parliamentary Committee on Social Policy and Veterans’ Rights.
The Chamber members believe that the current labor legislation should be reformed, as the Labor Code, which is the main legislative act governing labor relations, was adopted in 1971. The Chamber has been actively working on the Draft Law #2708 that was recently withdrawn. It had to be revised, but at the same time, it could liberalize the excessively regulated labor law and make labor relations more flexible. Labor law reform will give businesses much more flexibility to retain current employees and quickly hire new employees.
The most relevant changes that need to be introduced to the legislation identified by the Chamber member companies’ experts include:
Reducing the state pressure and creating opportunities for employers and employees to decide the conditions of employment independently;
Introduction of electronic form of employment contract followed by the cancellation of employment records;
Regulating the types of involvement of third-party employees – outstaffing and outsourcing at the legislative level;
Updating regulations on material liability to meet the present-day demands;
Settlement of labor disputes;
Regulation of employment terms and conditions in the situation of country-wide lockdowns or other forms of restrictions that significantly influence business activity.
The situation with COVID-19 pandemic has also revealed gaps in the existing regulation that need to be addressed urgently to contain the spread of the virus and, at the same time, to keep the business working safely and effectively. The new flexible and distant ways of working shall be recognized and established on a legislative level. We now see that the digitalization of processes is not only a good initiative but a critical need nowadays.
Experts of the Chamber member companies are convinced that the liberalization of the labor legislation will help to create equal rules on the labor market as it will balance the interests of employees and employers. It will also provide incentives for business development, simplify entry-exit from labor relations in combination with effective mechanisms of protection against sudden loss of work, looking for a new job, and reducing unemployment. All these things will contribute to the development of the Ukrainian economy at large, increase investment inflow and business competitiveness.

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