On 26 June 2017 President Petro Poroshenko signed the Law of Ukraine "On Amendments to Some Legislative Acts of Ukraine on Eliminating Barriers to Attracting Foreign Investment" as adopted by the Verkhovna Rada of Ukraine on 23 May (the "Law"). The law was published on 27 June 2017 and will come into force three months after its publication.
Signing and official publication of the Law above is a part of the national legislative reform designed to facilitate doing business and to create more favorable investment climate for foreign investors in Ukraine.
In particular, the procedure for obtaining permits for the employment of foreigners and certificates for temporary residence in Ukraine had numerous drawbacks. The most significant drawback was that a foreign investor who was not concurrently employed with a company had no right to stay in Ukraine lawfully in order to monitor the activities of his company (a business entity through which the investment was actually made).
The Law states that:
- Investments in the economy of Ukraine are not only a basis for immigration, but also a basis for obtaining a temporary residence certificate.
- It regulates the basic aspects of obtaining permits for the employment of foreigners and temporary residence certificates at the legislative level.
As of today, persons who made a foreign investment in the economy of Ukraine in a foreign convertible currency amounting to not less than US$ 100,000 (one hundred thousand US dollars) had the right to apply to the competent authority for obtaining a permit for immigration to Ukraine within the quota established by the Cabinet of Ministers of Ukraine, and as a result to obtain a permanent residence certificate.
The procedure above restricted rights of investor in terms of control over the foreign investment as far as the period for considering an application for an immigration permit was one year from the date of its submission, and, correspondingly, control over the use of the investment could be exercised by a foreign national at a distance only, through authorized persons or by employment at the company in which the investment was made.
For the purposes of employment in Ukraine, a foreign national and a company which employs such foreigner had to undergo a number of bureaucratic procedures, pass various tests and obtain various certificates, which often led to abuse.
With the adoption of the Law, as from 27 September 2017 the above drawback will be eliminated.
Thus, a foreign national or a stateless person may apply for a temporary residence certificate, if:
- a foreign national and a stateless person is a founder and/or participant, and/or beneficiary owner (controller) of a legal entity registered with the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations;
- the ownership interest of a foreign national or a stateless person or a foreign legal entity beneficially owned (controlled) by him, in the charter capital of a Ukrainian legal entity amounts to not less than €100,000 according to the official exchange rate set by the National Bank of Ukraine as of the date of making the foreign investment.
Such certificate should be issued within 10 days from the day of receipt of the application for the issue of such a certificate by the authorized body.
As a result, persons who have arrived in Ukraine in order to control the activities of legal entities in which the investment in the prescribed amount is made and who have obtained a temporary residence certificate are deemed to be persons lawfully staying in Ukraine for the period of the validity of the certificate.
However, it should be noted that the amount of investment enabling to obtain a permanent residence permit and a temporary residence permit differs due to the determination of the amount of foreign investment in different foreign currencies. In our opinion, this may cause some misunderstanding at the initial stage of the implementation of the new rules.
First of all, the Law establishes the procedure for obtaining a permit for the employment of foreign nationals and stateless persons in Ukraine at the legislative level, which makes it impossible to create additional unreasonable bureaucratic obstacles to employing foreign nationals. Previously, the procedure and conditions for granting an employment permit were determined by the subordinate legislation, and, correspondingly, could be changed at the level of the subordinate legislation. Enshrining such rules in the Law significantly limits the scope for abuse and establishes clear requirements for the the subordinate legislation.
It should also be noted that the Law broadens the list of persons for whose employment permit may be issued, namely highly-paid foreign professionals, founders and/or participants and/or beneficiaries (controllers) of a legal entity established in Ukraine, graduates of the universities included in the first 100 of the world university rankings according to the list determined by the Cabinet of Ministers of Ukraine, foreign creative professionals and foreign IT professionals, and clearly defines the persons who are qualified for this purpose.
In our opinion these amendments will facilitate the procedure for obtaining the certificate for temporary residence in Ukraine for foreign investors and for the employment of foreign managers and foreign professionals which is necessary at the initial stages of the development of a company, including companies with foreign investments in Ukraine.
Generally, assessing the adoption of the Law, we believe that such amendments will contribute to the increase of foreign investment in Ukraine by removing regulatory barriers at the legislative level.
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.