Month: June 2025

Author: Olena Andriyko, lawyer at F&P

Incoterms (International Commercial Terms) are internationally recognized standards developed by the International Chamber of Commerce (ICC) that set out clear rules for the allocation of costs, risks and responsibilities between the seller and the buyer in international and domestic trade transactions. The 2020 version of Incoterms, which entered into force on January 1, 2020, is a relevant tool for regulating commercial transactions. This article discusses the key aspects of the practical application of Incoterms 2020, legal nuances that may arise when using them, and recommendations for avoiding problems.

Overview of Incoterms 2020

Incoterms 2020 includes 11 terms divided into two main groups depending on the mode of transport.

Terms for all types of transportation:

EXW (Ex Works) – Ex Works: the seller transfers the goods at his enterprise, the buyer bears all costs and risks from that moment on.

FCA (Free Carrier) – Free Carrier: the seller transfers the goods to the carrier chosen by the buyer.

CPT (Carriage Paid To: the seller pays for transportation to the specified location, but the risks are transferred to the buyer after the goods are handed over to the carrier.

CIP (Carriage and Insurance Paid To) – Carriage and insurance paid to: similar to CPT, but the seller also provides insurance.

DAP (Delivered at Place) – Delivery at the point: the seller bears the costs and risks until the goods arrive at the destination.

DPU (Delivered at Place Unloaded) – Delivery with unloading: the seller is responsible for the delivery and unloading of the goods at the destination.

DDP (Delivered Duty Paid) – Delivery with payment of duty: the seller bears all costs, including customs payments, before the goods are transferred to the buyer.

 

Terms for sea and inland water transportation:

FAS (Free Alongside Ship) – Free Alongside Ship: the seller delivers the goods to the ship’s side.

FOB (Free on Board): the seller bears the costs until the goods are placed on board the vessel.

CFR (Cost and Freight): the seller pays for transportation to the port of destination, but the risks are transferred after loading onto the ship.

CIF (Cost, Insurance and Freight: similar to CFR, but the seller also provides insurance.

Each term clearly defines the moment when risks, costs and responsibilities for transportation, insurance, customs clearance, etc. are transferred. However, misuse or insufficient understanding of these terms can lead to legal and financial problems.

Legal nuances and potential pitfalls

Despite the clarity of the Incoterms rules, there may be difficulties in their practical application due to legal aspects. The main pitfalls include:

• Unclear wording of delivery terms in the contract
• An incorrect or ambiguous definition of the term Incoterms in a contract may lead to disputes over who is responsible for certain costs or risks. For example, if a contract states “FCA” but does not specify a specific place of delivery, the parties may interpret their obligations differently.
• Incorrect choice of term
• Choosing a term that does not match the logistical capabilities, type of goods, or jurisdiction can complicate contract performance. For example, using EXW for international trade can be problematic for a buyer who has no experience in organizing export customs clearance.
• Failure to consider the moment of risk transfer. Incoterms clearly define the moment when the risks pass from the seller to the buyer. However, the parties often fail to take this into account, which can lead to disputes in case of damage or loss of goods. For example, under the FOB term, the risks pass after the goods are loaded on board the vessel, but the buyer may consider the seller to be responsible for the goods until they arrive at the port of destination.

Practical recommendations for avoiding legal problems

In order to effectively use Incoterms 2020 and minimize legal risks, it is recommended to follow the following practices:

• Thorough review of contracts

Before signing the contract, engage a lawyer specializing in international trade to analyze the terms of delivery. Make sure that the term Incoterms is clearly defined, with a specific location (for example, “FCA, seller’s warehouse, Kyiv, Ukraine”). This will help to avoid ambiguities.

• Staff training

Provide training for employees involved in contracting, logistics, or customs clearance. The team should understand the meaning of each Incoterms term and its impact on cost and risk allocation. For example, it is important to know that the term DDP gives the seller maximum responsibility, including customs procedures in the buyer’s country.

• Coordination with partners

Make sure that all parties, including the carrier, buyer, and insurance companies, have the same understanding of the term. For example, under the CIP term, the seller is obliged to provide minimum insurance coverage, but the buyer may require additional insurance, which should be specified in the contract.

• Monitoring changes and updates

Although Incoterms 2020 are up-to-date, the International Chamber of Commerce periodically reviews the rules. Follow the ICC news to be prepared for possible updates. For example, in 2020, the term DPU was replaced by DAT, which necessitated the adaptation of contracts.

Conclusions

Incoterms 2020 is an indispensable tool for structuring international trade transactions, helping to clearly allocate responsibilities, costs and risks between the seller and the buyer. However, their effective use requires a deep understanding of the legal nuances and a careful approach to contracting. Typical mistakes, such as unclear wording of terms or incorrect choice of terms, can be avoided by hiring qualified lawyers, training staff, agreeing on terms with partners, and monitoring changes in the rules.

Compliance with these recommendations will allow businesses to minimize legal risks, optimize logistics processes, and ensure the successful execution of international trade operations.

Author: Maryna Pokotylo, Partner at F&P

In the post-crisis economy and global competition for talent, Ukrainian businesses are looking for new ways to motivate employees. One of these tools is the Employee Stock Ownership Plan (ESOP), a model that allows employees to become co-owners of a company. This practice, which is widespread in the US, Israel, and Estonia, is just beginning to develop in Ukraine. According to the National Center for Employee Ownership (NCEO), more than 14 million employees participate in ESOPs in the United States. In Ukraine, we are taking the first steps towards a new culture of corporate ownership. This article explains the legal, tax and practical aspects of ESOP implementation and offers a clear action plan for companies.

Legal conditions: what is available today?

Ukrainian legislation does not yet have a separate regulation for ESOPs, but the Diia.City legal regime opens up opportunities for granting options for company shares to employees and contractors. This is especially relevant for IT companies, startups, and product teams looking to motivate employees through co-ownership. Companies outside of Diia.City can use direct corporate rights or options through foreign jurisdictions, but this complicates the process due to the need for notarization.

Tax features

Tax accounting is a key challenge for companies implementing ESOPs. Tax is charged at the time of vesting, when the employee receives the benefit – shares or cash compensation. To avoid mistakes, companies should clearly record these transactions and engage qualified accountants.

Practical steps to implement an ESOP

Before launching an ESOP, a company needs to assess whether this model meets its business goals: attracting talent, retaining key employees, or increasing their motivation. It is important to make sure that the corporate culture is conducive to the idea of co-ownership and that the company is financially prepared to transfer shares or buy back options in the future. The next step is to choose a model: direct ownership (transfer of shares or stakes, which requires notarization), options (the right to buy out a stake in the future, popular among startups), or using a foreign jurisdiction through a parent company.

Next, you need to develop the structure of the program. A gradual vesting schedule motivates long-term loyalty, for example, rights vest over four years with the first year as a “cliff”. The buyout terms define what will happen in the event of dismissal, IPO or sale of the company, for example, whether the employee can sell the shares back to the company. The option agreement should clearly set out the terms, conditions, tax consequences and scenarios for termination of employment. To do this, you should hire lawyers with experience in Diia.City or corporate law.

ESOPs should not violate the Ukrainian Labor Code or be perceived as a substitute for salary. Transparent communication with the team is critical: employees need to understand the rights they receive, the risks and rewards associated with options. Seminars or consultations can help explain how the shareholding works and how options are converted into shares or cash. For key employees, you can offer larger shares or flexible terms. It is worth starting with a pilot program, for example, granting options to top managers or key developers to test the model and adapt it to the company’s needs.

Benefits and challenges of ESOPs

ESOPs increase employee loyalty and productivity, as evidenced by NCEO data: companies with ESOPs in the US have 25% higher productivity. Options help to attract talent in the face of competition with international players and allow startups to save on salaries by offering potential profits in the future. At the same time, the lack of clear regulation outside of Diia.City complicates the process, incorrect tax accounting can lead to problems, and employees may not understand the value of options without proper explanation.

The future of ESOPs in Ukraine

The demand for ESOPs is growing, especially in the technology sector. Diya.City has more than 700 registered residents, and their number is growing.

In 2025-2026, more companies are expected to declare stock option programs. This is driven by the revitalization of the tech business, the return of Ukrainian specialists from abroad who are accustomed to similar models, and adaptation to European governance standards, where co-ownership is the norm.

Conclusions

An ESOP is not only a motivation tool, but also a way to align the interests of the company and its team. In the Ukrainian context, where legislation is still evolving, ESOPs offer a unique opportunity to reach a new level of corporate culture. A clear legal framework, transparent communication, and a willingness to invest in people are key components of success. Starting with pilot projects and using the capabilities of Diia.City, Ukrainian companies can lay the foundation for an effective model of co-ownership that will become the standard in the coming years.

Author: Anastasia Holovatyuk, Lawyer at F&P

In today’s business environment, PR, marketing and consulting expenses are an integral part of a company’s development strategy. However, from a tax perspective, these expenses are often subject to scrutiny by regulatory authorities. It is important not only to incur these expenses, but also to properly confirm their reality and connection with the company’s business activities.

1. Legislative framework

According to the Tax Code of Ukraine, marketing, advertising and consulting expenses may be taken into account when determining the object of taxation, provided they are documented and related to the taxpayer’s business activities.

According to the rules of clause 138.1 of Article 138 of the TC of Ukraine, expenses taken into account when calculating the taxable object consist of: operating expenses determined in accordance with clauses 138.4, 138.6-138.9, 138.11 of this Article; other expenses determined in accordance with clauses 138.5, 138.10-138.12 of this Article, clause 140.1 of Article 140 and Article 141 of this Code; except for expenses specified in clauses 138.3 of this Article and Article 139 of this Code.
Paragraph 138.2 of Article 138 of the Tax Code of Ukraine stipulates that expenses taken into account for determining the object of taxation are recognized on the basis of primary documents confirming the taxpayer’s expenses, the obligation to maintain and store which is provided for by the rules of accounting, and other documents established by Section II of this Code.
In accordance with subparagraph 139.1.9 of paragraph 139.1 of Article 139 of the Tax Code of Ukraine, expenses not supported by the relevant settlement, payment and other primary documents, the obligation to maintain and store which is provided for by the rules of accounting and tax calculation, are not included in the expenses.
Sub-clause 14.1.108 of clause 14.1 of Article 14 of the Tax Code of Ukraine defines marketing services as services that ensure the functioning of the taxpayer’s activities in the field of market research, sales promotion of products (works, services), pricing policy, organization and management of the movement of products (works, services) to the consumer and after-sales service to the consumer within the business activities of such taxpayer. Marketing services include, among other things: services for placement of the taxpayer’s products at points of sale, services for studying, researching and analyzing consumer demand, entering the taxpayer’s products (works, services) into sales information bases, services for collecting and disseminating information about products (works, services).
In order to carry out marketing activities, a company must conduct comprehensive market research, analyze the market, segment the market, position the product, develop a marketing mix (marketing mix), etc.
The main condition for deductibility of marketing services is their documentary confirmation and connection of such expenses with the taxpayer’s business activities.

2. Documentary evidence of services

To confirm the reality of the services rendered, it is necessary to have properly executed primary documents containing all the mandatory details provided for in part 2 of Article 9 of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”. Such documents include:
– Service acceptance certificates with a detailed description of the services provided, place and date of their provision, results and connection with business activities.
– Reports on work performed, which may include market analysis, competition assessment, market trends, forecast sales plans, financial plans and other analytical materials.
– Other documents, such as media plans, advertising campaign reports, photo and video reports of events, expense documents, correspondence with contractors, etc.

It is also important to have additional supporting documents and information on the use of such services, such as customer feedback, analysis of the effectiveness of marketing activities, documents confirming the use of marketing materials in business processes and justification of their economic feasibility.

3. Justification of the business purpose

The regulatory authorities pay attention to the existence of a business purpose when incurring expenses for marketing and consulting services. This means that the company must have a justification for the economic feasibility of such expenses, for example, in the form of an order from the head of the company to conduct a marketing event, defining its purpose, goal and expected benefits for the company.

It is also recommended to have a marketing policy – an internal document of the company that describes the approach to marketing activities, accounting for such operations, their purpose, business necessity, etc. Such a document can be a strong argument for the tax authorities in case of questions about the feasibility or reality of marketing activities.

4. Court practice

Court practice confirms the importance of proper documentation of marketing services. The decision of the Administrative Court of Cassation dated 18.10.2023 in case No. 814/1412/17 states that the main condition for deducting marketing services expenses is their documentary evidence and connection of such expenses with the taxpayer’s business activities.

The court also emphasized that the connection of marketing services expenses with business activities may be confirmed by orders of the company on the need to conduct such marketing research, contracts for marketing research indicating the type of research and the purpose of their conduct, as well as acts of acceptance and transfer of services or other documents confirming the actual provision of such services.

5. Recommendations for business

To avoid tax risks, companies are advised to:
– Ensure that all necessary primary documents with mandatory details are available.

– Prepare additional documents confirming the economic feasibility of the expenses.
– Develop and implement the company’s marketing policy.
– Ensure that the costs of marketing and consulting services are linked to the company’s business activities.
– Consult with experts to analyze tax risks and receive recommendations on how to minimize them.

In today’s business environment, it is important not only to incur PR, marketing and consulting expenses, but also to properly confirm their reality and connection with business activities. This will help to avoid tax risks and ensure the stable development of the company.