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Author: Viktoriia Staryk, lawyer at F&P

In the context of Russia’s full-scale invasion, which led to significant damage to Ukraine’s energy infrastructure, the government has introduced a number of measures to accelerate the recovery and development of the renewable energy sector. In particular, in 2024-2025, temporary customs and tax incentives were introduced for the import of energy equipment aimed at the rapid deployment of generating and balancing capacities. These incentives were part of a broader energy security strategy that includes diversification of energy sources, strengthening of decentralized generation, and integration with European energy networks. According to the State Customs Service, in August 2025, 14.5 thousand tons of energy equipment worth UAH 6.55 billion were imported due to these benefits, which indicates a significant impact on the industry. In addition, the volume of customs privileges granted in September 2025 increased by 26% compared to the previous month, reaching record levels. This article analyzes the regulatory framework, material limits, application practice, risks, as well as current trends and prospects for the continuation of the regime as of November 2025.

Regulatory framework: key laws and regulations

The regulatory core of the preferential regime is formed by two key laws adopted by the Verkhovna Rada of Ukraine in 2024 and signed by President Volodymyr Zelenskyy on July 26, 2024. They entered into force on July 27, 2024 and are temporarily in effect for the period of martial law in Ukraine (introduced by Presidential Decree No. 64/2022 of February 24, 2022, approved by Law No. 2102-IX), but no longer than until January 1, 2026. As of November 4, 2025, martial law was extended until February 3, 2026, which does not affect the deadline for benefits unless the legislator makes changes.

• Law of Ukraine No. 3854-IX : Integrates temporary exemptions from import duties for certain groups of energy equipment into Chapter XXI of the Customs Code of Ukraine (CCU). The law also covers goods for mechanized demining and security, but the focus on energy is on exemptions for infrastructure rehabilitation.
• Law of Ukraine No. 3853-IX : Synchronizes value-added tax (VAT) exemption for imports of eligible goods with customs privileges. Additionally, it creates a separate mechanism of VAT exemption for imports under agreements financed by the Energy Community Secretariat (the Energy Community is an international organization that Ukraine joined in 2011 to integrate with the European energy market).

The bylaws complement the resolutions of the Cabinet of Ministers of Ukraine (CMU). In particular, CMU Resolution No. 860 of July 15, 2025 sets out in a new version the list of goods for exemption from customs duties and VAT under Energy Community projects, expanding it to additional categories of renewable energy equipment. The central executive authority (the Ministry of Energy of Ukraine) issues confirmations for such imports.

Material limits of benefits: list of goods

The material composition of the exemptions is determined by an enumerative reference to the classification of goods in foreign economic activity, which minimizes the discretion of customs authorities and requires accurate classification of goods. The benefits apply to imports for free circulation, including international postal and express shipments, provided that the goods do not originate from Russia or the occupied territory.

The key list of goods exempted from import duties (paragraphs 9-36 of Section XXI of the Customs Code) covers the following categories hydraulic turbines and parts thereof, individual gas turbines, electric generating sets, electric motors of a certain capacity, inverter converters (with the exception of inverter welding machines), energy storage systems (subject to power and capacity thresholds), photovoltaic cells and modules, control panel equipment (with certain exceptions), parts of electric generators (only for wind power plants), and other components such as steam turbines or gears.

For Energy Community projects, the list was expanded by CMU Resolution No. 860 to include additional goods such as transformers and cables, with a focus on grid rehabilitation.

Tax dimension: synchronization with VAT

The tax exemptions are fully synchronized with the customs ones. The VAT exemption applies to the same goods as the duty exemption within the same timeframe (until January 1, 2026). There is a separate exemption for imports under the Energy Community agreements, where the list of goods is determined by the CMU (current version – Resolution No. 860 of 2025). Important: the exemptions apply only to the customs regime of imports; further domestic supplies are subject to VAT under the general rules (20%), unless otherwise provided. This stimulates the rapid use of equipment in RES projects, but does not affect the supply chain within the country.

Procedural aspects: declaration requirements

Successful application of the benefits depends on compliance with the procedures. The declarant (importer or authorized representative) must submit a full package of documents: contract, invoice, waybills, technical specifications and certificates of origin. The goods must be properly classified, and the customs declaration must indicate the “benefit code” (for example, “999” for duty exemption). For postal/express shipments, customs emphasizes the need for complete technical information; without it, the exemption does not apply.

For Energy Community projects, additional confirmation from the Ministry of Energy is required in accordance with the procedure established by the CMU. The State Customs Service (SCS) provides clarifications through its website and hotlines, recommending prior consultation to avoid mistakes. In 2025, the SCS introduced online tools for checking the classification of goods, which simplified the process for businesses.

Risks and common mistakes

The risks of applying the benefits are concentrated in three main areas:

1. Time limits: Deliveries imported after January 1, 2026 will be taxed in full unless the regime is extended. Delays in logistics (e.g. due to port blockades) may result in losses.
2. Subject matter.: Incorrect classification (e.g., declaring welding inverters as energy inverters) or inclusion of inappropriate goods results in refusal, additional customs duty/VAT and fines (up to 300% of the amount of unpaid payments).
3. Formal conditions: For Energy Community projects, the lack of confirmation or reference to an outdated list (before the update No. 860) leads to the loss of the benefit. Additionally, customs may require an audit of the origin of goods.

Prospects: possible extension of the regime

As of November 2025, the Ukrainian authorities are actively considering extending the preferential import regime for energy equipment for another year, given Russia’s ongoing attacks on energy infrastructure. A number of bills have been registered in the Verkhovna Rada that would extend the preferential import regime until January 1, 2027. If the preferential regime is extended, it will allow businesses to avoid a 15-20% increase in costs and accelerate the sector’s recovery.

Conclusion.

The current regime of customs and tax incentives for green energy is a targeted, list-based and time-bound instrument that provides cheaper imports of key components for renewable energy and energy storage systems. It has proven to be effective in promoting infrastructure renewal and sector growth, but requires strict adherence to classification, declaration, and procedures. With a deadline of January 1, 2026, and prospects for an extension until 2027, businesses should synchronize contracts and logistics, and keep an eye on legislative decisions. In the long run, such benefits may become the basis for Ukraine’s integration into the European green transition.

Author: Anastasia Holovatyuk, Lawyer at F&P

1. Relevance of the topic

In 2025, Ukrainian businesses will face tighter control over customs clearance of imported goods. Legislative changes, in particular the entry into force of Law No. 3926-IX, are aimed at harmonizing customs legislation with EU standards and increasing the transparency of foreign economic activity. In this context, the responsibility of importers for providing false information in customs declarations is gaining special attention.( PwC)

2. Legislative changes: new rules of the game

On October 31, 2024, amendments to the Customs Code of Ukraine came into force, which provide for:

• implementation of updated customs clearance and post-audit procedures; 
• strengthening liability for submitting false information in customs declarations; 
• introducing criminal liability for intentional submission of false information that leads to customs evasion. 

In particular, Article 485 of the Customs Code of Ukraine provides for a fine of 50% to 100% of unpaid customs duties for submitting false information that affected the determination of the customs value, product code or country of origin.

3. Case law: emphasis on intent and evidence

In its decisions, the Supreme Court of Ukraine emphasizes the need to prove the importer’s intent in submitting false information. In particular, in case No. 760/14721/16-a, the court noted that the mere fact of incorrect determination of the UKTZED product code is not a violation if there is no evidence of intentional underpayment of customs duties.(KPMG)

4. Practical implications for business

Inaccurate information in customs declarations may result in:

• charging additional customs duties and fines; 
• delays in customs clearance of goods; 
• loss of business reputation and trust on the part of partners. 

Particular attention should be paid to the correct determination of the customs value of goods. In case of doubts about the accuracy of the information provided, the customs authorities have the right to request additional documents to confirm the declared value.(DLF)

5. Recommendations for importers

It is recommended to minimize the risks associated with submitting false information in customs declarations:

• ensure that all documents submitted to the customs authorities are thoroughly checked; 
• use the services of qualified customs brokers and lawyers; 
• implement internal procedures for controlling the correctness of customs documents; 
• conduct regular staff training on current changes in customs legislation. 

6. Conclusion

In 2025, the liability of importers for submitting inaccurate information in customs declarations will become particularly relevant. Changes in legislation and increased control by the customs authorities require businesses to pay increased attention to the correctness of customs documents. Ensuring transparency and compliance of customs clearance with legal requirements is a key factor in successful foreign economic activity.

Author: Olena Andriyko, lawyer at F&P

Introduction

In 2025, Ukrainian residents who have stakes in or control over foreign companies will be required to file reports on controlled foreign companies (CFCs). This is part of the government’s efforts to combat tax evasion and ensure transparency in international business. Given the changes in legislation and increased scrutiny by tax authorities, it is important to know how to properly prepare for a tax audit in the area of CFCs. (tax.gov.ua)

1. Who is obliged to submit a CFC report?

According to the Tax Code of Ukraine, individuals and legal entities-residents of Ukraine who:(Law firm “Pravova Dopomoga”)

• own more than 50% of a share in a foreign company;
• own 10% or more if the total shareholding of Ukrainian residents in the company exceeds 50%;
• have actual control over a foreign company.

Starting from 2024, the ownership threshold has been reduced to 10%, which expands the range of persons required to report.

2. Reporting deadlines in 2025

For individuals:

• by May 1, 2025, together with the declaration of property and income.(ck.tax.gov.ua)

For legal entities:(Law firm “Pravova Dopomoga”)

• by March 1, 2025, together with the corporate income tax return.

3. Penalties for violation of CFC rules

The following fines apply in 2025:(Victoria)

• Late submission of the report: 1 subsistence minimum (SM) for each day of delay, but not more than 50 SM (maximum UAH 151,400).
• Submission of inaccurate or incomplete information: 3% of the CFC’s income or 25% of the adjusted profit, whichever is higher, but not more than 1000 PM (approximately UAH 3.028 million).
• Failure to notify of acquisition or termination of control: 300 PM for each fact (over UAH 900,000) .

It is worth noting that during the period of martial law, there is a temporary suspension of fines for violations committed since January 1, 2022, provided that the reporting is submitted within 6 months after the lifting of martial law.Victoria)

4. Preparing for a tax audit

To avoid problems during a tax audit, it is recommended:

• Ensure timely and complete submission of CFC reporting.
• Prepare financial statements of the CFC certified in accordance with the requirements of the law.
• Keep all documents confirming control over the foreign company and its financial performance.
• Seek expert advice to verify the correctness of the reporting and compliance with legal requirements.

5. Recommendations for business

• Assess the ownership structure of foreign companies and determine whether they fall within the definition of a CFC.
• Check the availability of all necessary documents to confirm the control and financial performance of the CFC.
• Ensure timely submission of CFC reports and notifications.
• In case of doubt or difficulties, seek professional legal assistance.

Conclusion

In 2025, compliance with the reporting requirements for controlled foreign companies is critical to avoiding significant fines and ensuring business transparency. Timely preparation, proper execution of documents and consultation with experts will help you successfully pass a tax audit and ensure the stability of your business in the face of changing legislation.

Contact our law firm for professional support in matters related to CFCs and tax legislation.

Author: Uliana Luchkevych, lawyer at F&P

In the context of increasing export control measures and military assistance, Ukraine increasingly faces the need for a precise and cautious approach to customs clearance of dual-use goods. Errors at this stage can be either financial implicationsand criminal risks for companies and their officials.

What are dual-use goods?

Dual-use goods are products, equipment, technologies or software that can be used for both civilian and military purposes. For example:

• drones and their components, 
• optical devices, 
• encryption software, 
• materials for the manufacture of armor, 
• equipment for the chemical industry. 

The list of such goods is regulated by the CMU Resolution and international agreements, in particular The Wassenaar Regime.

Main legal risks

1. False declaration
   A company that submits a declaration without properly identifying the goods as dual-use may be accused of violating export control laws. 
2. Lack of permits
   Export or import of dual-use goods requires a special permit of the State Export Control Service of Ukraine. Its absence is grounds for detention of goods and penalties.  
3. Criminal liability
   In some cases, the violation is qualified as smuggling or violation of the rules of the international regime of control over military goods. 

What should businesses pay attention to?

• Accurate classification of goods
  Before customs clearance, it is recommended that you contact a technical specialist or lawyer to help determine whether the goods fall under the “dual-use” criteria.
• Obtaining preliminary clarifications
  You can request a preliminary assessment from the State Export Control Service to reduce the risk of incorrect declaration.
• Correct execution of contracts
  A foreign economic agreement must clearly reflect the purpose of the goods, their technical characteristics, and the end user.
• Staff training
  Accountants, logisticians, and foreign trade managers should be familiar with the criteria for determining such goods and the requirements for clearance.

How we help

Law firm Fedoryshyn & Partners advises businesses on:

• classification of goods in accordance with national and international controls, 
• obtaining import/export permits, 
• execution of foreign economic contracts with minimization of risks, 
• representation in customs disputes and cases of cargo detention. 

Contact us if your company works with sensitive products or plans to enter foreign markets. The right legal strategy today is a guarantee of security and business continuity tomorrow.

Author: Aliona Yevtushenko, lawyer at F&P

Despite the war, rising inflation, and macroeconomic uncertainty, Ukrainian companies demonstrate resilience and adapt to challenging realities. Investors are focusing on promising sectors, and companies that know how to effectively use M&A tools gain competitive advantages. How does instability affect this market, and what strategies can ensure successful deals?

Ukrainian M&A Trends

The global M&A market has undergone significant changes due to rising inflation, increasing interest rates, and economic uncertainty. In 2023, , global M&A activity sharply declined, reaching one of the lowest levels in the past 10 years in terms of deal value. However, it can be said that despite the war, the M&A market is showing resilience. The volume of announced and completed M&A deals in 2024 amounted to $1.2 billion.

Interestingly, the total value of the top ten deals was $743 million.Key sectors attracting investors were IT, agriculture, energy, and privatization. It is especially worth noting the activity of Ukrainian companies, which not only attracted foreign investments but also made acquisitions abroad.

In 2025, the trend of M&A market growth is expected to continue. So despite the challenges, M&A in Ukraine will operate this year.

Will the M&A Market Fully Recover?

Obviously, prospects depend primarily on achieving peace. This could contribute to the restoration of investor confidence, macroeconomic stabilization, improved economic conditions, increased external funding, and the recovery of critical infrastructure. However, to fully capitalize on these opportunities, Ukrainian companies must continue to improve their investment readiness and adapt to international standards.

One can predict the rise in the cost of Ukrainian assets after the end of the war due to reduced risks, potential capital inflows, and the restoration of business activity. The most attractive sectors for investors will be traditional ones for our market—IT and agriculture—as well as the defense-industrial complex. Investments may also flow into post-war recovery sectors, such as energy and infrastructure. However, realizing this potential depends on the depth and duration of stabilization, government reforms to improve the investment climate, and global economic conditions.

Among the factors that will influence the ability to attract investment:

• Stable external funding. It currently covers 40% of Ukraine’s budget and is critical for the survival of the economy (and the country as a whole).
• Economic conditions: availability of sufficient labor, the risk of further devaluation of the national currency.
• The state of the energy system, which depends on the ability to protect key assets from Russian attacks and the resources available to businesses to implement alternative generation methods.
• The work of Ukraine’s defense industry. It accounts for 26.3% of the projected GDP. Ukraine has significant potential in this area, so it makes sense to search for and attract foreign partners.
• Insurance of war risks. This includes, in particular, FortuneGuard programs covering $50 million per asset and URGF with coverage of $11 million.

What’s Slowing Down M&A Deals in Ukraine?

We cannot forget the challenges: 80% of companies in Ukraine lack investment projects developed according to international standards. This significantly narrows opportunities for attracting capital.

In other words, companies are not ready for investment due to insufficient understanding of M&A processes, risks, and legal aspects of such deals. Focusing on internal operations without considering opportunities for mergers and acquisitions limits the prospects for scaling and entering new markets.

To avoid losing competitive advantages and being left out of global economic processes, businesses need to change their approach. By seeking expert assistance, companies will be able to prepare effectively for capital raising and take advantage of M&A opportunities for growth and resilience in difficult conditions.

However, successful M&A deals require not only a deep understanding of market trends but also proper legal and financial support. Due diligence becomes of particular importance. It helps identify risks associated with deals and ensures their compliance with international standards.

What Happens to Due Diligence in High-Risk Conditions?

In Ukraine, due diligence includes checking asset ownership, judicial risks, sanction restrictions, and compliance with legislation. However, on May 24, 2024, the European Union Council officially adopted the Corporate Sustainability Due Diligence Directive. It requires large companies operating in the EU to be accountable for the impact of their activities on human rights and the environment.

The directive is aimed at making large businesses take responsibility for the transition to a green economy and social justice. Companies with over 1000 employees and revenues exceeding €450 million will have to implement a risk assessment system to identify and eliminate negative impacts on human rights and the environment. Sanctions and the obligation to compensate for harm will be imposed in case of violations.

Ukrainian companies with trade relations with the EU must consider the requirements of this directive. It applies not only to the activities of companies but also to their subsidiaries and business partners throughout the entire supply chain.

It is worth noting that in unstable times, conducting thorough due diligence becomes critically important. To minimize risks in international M&A deals in Ukraine, the following are necessary:

• Assessment of potential restrictions and development of strategies to circumvent them.
• Use of insurance tools to protect the interests of the parties.
• Compliance with the antitrust legislation of Ukraine and other jurisdictions.

Despite instability, the M&A market in Ukraine continues to function and opens up new opportunities for business. Companies that can quickly adapt to new realities, consider international requirements, and ensure proper deal preparation will gain significant advantages.

Author: Oleksandr Fedoryshyn, Managing Partner at F&P

Adjustment of the customs value of goods is a common practice among customs authorities, which can significantly affect the tax liabilities of importers. Determining the customs value is a key element in the customs clearance process, as the amount of customs duties, excise taxes, and value-added taxes depend on this indicator.

In many cases, customs authorities recognize the declared value of goods as understated and make adjustments, leading to increased payments. However, such decisions are not always justified. Therefore, entities engaged in foreign economic activity find it necessary to challenge them.

In this article, we will examine the legal aspects of customs value adjustment, the grounds for its appeal, and the mechanisms for protecting the interests of importers.

The customs value of goods imported into Ukraine is determined in accordance with the provisions of the Customs Code of Ukraine and international agreements ratified by Ukraine.

The primary method for determining customs value is the contract price method; however, customs authorities may apply alternative methods if:

• The submitted documents contain discrepancies or conflicting data;
• there is no reliable confirmation of the transaction price;
• The declared value significantly differs from the market value of similar goods;
• A connection has been established between the seller and the buyer, which could have influenced the price of the product.

If customs authorities believe that the declared value of the goods does not correspond to the actual value, they have the right to adjust it. This leads to an increase in customs duties, which is a basis for a dispute between the importer and the customs authority.

In our practice, we recommend appealing decisions on the adjustment of customs value of goods in court, as this significantly increases the importer’s chances of obtaining a positive result.

The analysis of judicial practice that has developed over the past few years allows for the identification of several specific grounds on the basis of which courts annul decisions on the adjustment of the customs value of goods.

I. Unjustified demand for additional documents by customs

The Customs Code provides for three grounds for requesting additional documents from a declarant:

1. the presence of discrepancies in the documents;
2. the presence of signs of document forgery;
3. the absence in the documents of all information confirming the numerical values of the components of the customs value of the goods, or information regarding the price that was actually paid or is payable for these goods.

Exclusively conclusions based on the examination of documents attached to the customs declaration may be the basis for requesting additional documents.

At the same time, customs authorities often do not provide any confirmed information about discrepancies and deficiencies in the documents submitted by the declarant in their decisions on the adjustment of customs value, nor do they provide information about specific facts or circumstances established during customs clearance, which, when assessed collectively, led the customs authority to decide that the first method for determining the customs value of the goods imported by the plaintiff could not be applied.

Indeed, customs authorities have the right to control the accuracy of the customs value calculated by the declarant, but these powers are exercised in a manner defined by law. In particular, the request for additional documents to confirm the declared customs value may only occur in the presence of reasonable doubts about the accuracy of the information provided by the declarant. Such doubts may arise from the incompleteness of the submitted documents to confirm the declared customs value of the goods, discrepancies between the characteristics of the goods specified in the submitted documents and the customs inspection of these goods, the comparison of the level of the declared customs value of the goods with the level of the customs value of identical or similar goods for which customs clearance has already been completed, and so on.

The presence of reasonable doubts regarding the accuracy of the declared customs value of goods is an imperative condition, as the law associates this circumstance with the possibility of requesting additional documents from the declarant and grants the customs authority the right to take subsequent actions aimed at determining the actual customs value of the goods. Such doubts are justified if the documents provided by the declarant contain discrepancies, signs of forgery, or do not contain all the information confirming the numerical values of the components of the customs value of the goods, or information regarding the price that was actually paid or is to be paid for these goods. In this regard, the customs authority is obliged to specify the specific circumstances that caused the respective doubts, the reasons for the impossibility of verifying them based on the documents provided by the declarant, as well as to justify the necessity of verifying the doubtful information and indicate the documents whose provision can eliminate doubts about the reliability of this information.

That is, the customs authority is obliged to provide the declarant with a comprehensive list of documents regarding which there are doubts, as well as a list of documents that must be provided to resolve such doubts. Failure to comply with these requirements may be grounds for canceling the decision on the adjustment of the customs value of goods.

II. Failure to specify in the adjustment decision the detailed information about the product to the level of its value to which the adjustment is made

The Supreme Court has established a consistent judicial practice according to which a formally lower level of customs value of the goods imported by the plaintiff compared to the customs value of other customs clearances cannot be considered as an undervaluation of the customs value by the plaintiff and does not constitute an obstacle to the application of the first method of determining the customs value of the goods, nor can it be a sufficient and independent basis for refusing to carry out the customs clearance of the goods according to the first method of determining their customs value.

The decision to adjust the customs value of goods cannot be based solely on information from the UAIS, as the procedure for its formation, maintenance, and obtaining information, as well as the procedure for using its data by economic entities during their foreign economic activities, is not provided for by the Customs Code of Ukraine. It should also be taken into account that the UAIS lacks information on the adjustment of the declared customs value of goods, as well as information on court decisions regarding the determination of the customs value of goods and the methods for its determination, which means that such an information base does not contain all objective data on goods imported into Ukraine, which are documented and subject to calculation.

At the same time, if the customs authority nevertheless decides to adjust the customs value of goods, such decision, in addition to referring to the number and date of the declaration under which the same/similar goods were imported, must contain information on: the country of origin of such goods, the basis of delivery, the procedure applied, the quantity and value of the goods, the supplier and the country of shipment.

A number of resolutions of the Supreme Court have established the practice that if the decision on adjustment of the customs value contains only references to the numbers and dates of customs declarations used by the customs authority as a source of information when adjusting the customs value of the disputed goods, without explanations of the adjustments made to the volume of the consignment of identical or similar goods, delivery terms, commercial terms, it indicates the unlawful nature of the disputed decision on adjustment of the customs value of the goods.

Thus, the failure to provide detailed information on the terms of delivery of the goods to which the adjustment was made is an independent ground for cancellation of the decision on adjustment of the customs value of goods.

It is worth emphasising that it is important to follow the following recommendations when conducting import operations:

• 1) Documentary confirmation of the customs value: a full package of documents (contracts, invoices, payment orders) should be provided.
• 2) Preliminary verification: check the value of similar goods using open sources (customs statistics, stock exchange quotes).
• 3) Legal support: in case of adjustments to the customs value, engage customs brokers and lawyers to prepare a reasonable position.
• 4) Timely appeal: comply with the statutory appeal deadlines in order not to lose the opportunity to protect your rights.

Appealing against a decision to adjust the customs value of goods is an effective way to protect the rights of importers. It is important to properly substantiate your position and provide proper evidence of the real customs value. The main thing to remember is that an appeal requires a clear legal strategy and timely response, which can be provided by the specialists of FEDORYSHYN&PARTNERS.

Author: Maryna Pokotylo, Partner at F&P

Reputation is more than just a set of characteristics. For a financial institution, it is the foundation of trust, the basis of relationships with clients, partners, and investors.

Current legislation in Ukraine provides provisions that allow the National Bank of Ukraine (hereinafter referred to as the NBU), as the regulator of the relevant market, to recognize an individual’s business reputation as unsatisfactory. Such recognition is based on documented information about a natural or legal person, which allows for a conclusion to be made about the compliance of their activities with the requirements of legislation, business practices, and professional ethics, as well as information about the professional and managerial abilities of the individual.

The detection of signs of an imperfect business reputation is carried out in the following cases:

1. Independent verification by a financial institution of the compliance of its executives with the qualification requirements regarding business reputation and professional suitability.
2. Assessments of business reputation by the National Bank:

1) if the applicant submits a package of documents for obtaining a license for the type of financial services activity, a license for conducting currency transactions in terms of trading in currency values in cash;

2) in the event of approval/notification of the acquisition or increase of substantial participation in a non-banking financial institution (excluding credit unions), a postal operator authorized to engage in currency trading activities;

3) in the event of approval for the position of manager, key person of the united credit union, significant credit union, and insurer (candidates for these positions);

4) throughout the entire term of the license of a non-banking financial institution for the type of activity of providing financial services;

5) in the case of accreditation / registration / licensing of a branch of a non-resident insurer, a branch of a foreign institution in Ukraine;

6) in the event of a request for the appointment of a proxy who is granted the right to participate in the voting.

When assessing business reputation, the National Bank identifies the following criteria as signs of an imperfect business reputation:

1.  A conviction for economic, selfish, or official crimes, if it is not expunged, which includes:

• The imposition of sanctions on an individual by Ukraine or other countries (except aggressors), international organizations.
• Inclusion of an individual in terrorist or sanctions lists.
• Prohibition from holding certain positions by court decision.
• Providing false information to the National Bank.
• Failure to fulfill personal financial obligations to the National Bank.
• Citizenship or tax residency in the aggressor country.
• Ownership or management of companies subject to international sanctions.

2. Providing false information, including cases where an individual or their representatives submitted documents with false data to the National Bank that could have influenced the regulator’s decision, is considered a violation.
3. Violation of financial obligations, namely:

• Non-payment of taxes or fees in significant amounts.
• Significant debts to banks or other creditors.
• Declaration of a person as bankrupt.

4. Functioning of payment systems.

A person is considered to have an impeccable business reputation if they:

• Managed or owned a significant share in the payment system that was shut down due to violations.
• I was the head of such a company for over six months before its closure.
• Had real control over the activities of the payment system, which threatened the security of Ukraine.

5. Violations of anti-corruption and financial legislation, which include cases where individuals have received a court ruling for corrupt actions or violations of financial monitoring, their reputation is considered unsatisfactory for three years.
6. Professional activity:

• Dismissal from work for gross misconduct, corruption, or abuse.
• Appointment to a managerial position without the approval of the National Bank.
• Deprivation of the right to engage in advocacy, notarial, or arbitration activities.
• Disciplinary sanctions in the civil service, law enforcement agencies, or the judicial system.

7. Ownership or management of financial institutions:

• Ownership of a share or management of an institution before its bankruptcy or license revocation.
• Work in managerial positions at the institution during the year before its liquidation.
• The possibility to influence the institution’s decisions before its bankruptcy.
• Dismissal due to the requirement of the National Bank or due to violations of financial legislation.

If an individual or legal entity has signs of an impeccable business reputation, they can submit a request to the National Bank for their non-application. To do this, it is necessary to explain the reasons for the emergence of such signs and provide appropriate evidence confirming the absence of violations.

The petition must contain a reasoned position of the person and may also be supplemented by documents that support their arguments. Individuals may also submit assurances of their good business reputation.

During the consideration of the application, the National Bank analyzes the submitted documents and information from official sources. Based on the results of the review, it can make one of two decisions:

1) To recognize a person’s business reputation as unsatisfactory (if the provided information is insufficient or unsubstantiated).

2) Remove the mark of impeccable business reputation (if the request is supported by appropriate evidence).

When making a decision, the National Bank also considers whether the individual could have influenced the situation that led to a negative assessment of their reputation and analyzes the presence or absence of a causal link between their actions and the financial problems of the institution.

If the National Bank denied the request, a reconsideration is possible no earlier than one year after the decision is made.

Thus, the rehabilitation of business reputation is an important tool for restoring trust in financial institutions and their leaders. In cases where the National Bank detects signs of questionable business reputation, individuals are given the opportunity to appeal this decision by submitting a petition with appropriate evidence. This process requires detailed justification, documentary confirmation, and compliance with regulatory requirements. Therefore, legal support plays a crucial role at every stage. The team of specialists at FEDORYSHYN & PARTNERS is ready to provide you with professional legal assistance, from document preparation to comprehensive analysis and protection of individuals’ interests in the matter at hand.

 

Author: Anastasia Holovatyuk, Lawyer at F&P

Non-compete clauses are provisions in a contract (agreement) under which an employee agrees not to work for the competitors of their employer, nor to engage in any activities that compete or may compete with the activities of the employer for a certain period of time, in a certain territory, or in certain positions. In most European countries and in the USA, the use of non-compete clauses / non-competing agreements is quite a common practice. Yes, recently the state of California (USA) has been increasingly attracting employees, particularly IT specialists. Employers promote the conclusion of non-compete agreements, as such transactions have become an effective tool for preventing employees from engaging in competitive activities. However, California law has changed in the context of invalidating contractual provisions that prevent a person from engaging in a lawful profession, trade, or business. The cancellation of non-compete agreements is interpreted as the invalidation of any non-compete agreements in the context of employment or any non-compete clause in a contract, including an employment contract. Therefore, any agreement that restricts the entrepreneurial activity or profession of any person is invalid, except under certain circumstances:

• The sale of a business, under which non-compete agreements may be valid if they are part of the business sale agreement or its assets.
• confidential information, when the restrictions may pertain to the protection of confidential information or trade secrets.

However, in Ukraine, the practice of applying non-competition clauses is just gaining popularity. For the first time at the legislative level, a non-compete agreement was enshrined in the Law of Ukraine “On Stimulating the Development of the Digital Economy in Ukraine,” which regulates the activities of Diya City Residents. This has given new meaning to the conclusion of such agreements in the IT sector, as the legislator has clearly defined the possibility of their conclusion, established key conditions, and provided for the consequences of violating the requirements regarding the content and form of the agreement. The specified law defines that the essential terms of such a contract are:

• the term of the obligation, which shall terminate no later than 12 months from the date of termination of employment, civil, or economic relations between the specialist and the Diia City resident;
• the territory to which the obligation applies;
• an exhaustive list of activities considered to be competing activities, and/or individuals engaged in competing activities;
• material goods that the specialist receives in return for the obligation to refrain from engaging in competitive activities.

The contract may provide for obligations to refrain from such actions:

• conclusion of employment contracts, gig contracts, or other civil law or commercial law contracts with other persons engaged in activities similar to those of such a Diia City resident (competing activities);
• engaging in competing activities as an individual entrepreneur;
• ownership directly or indirectly of a share in another legal entity that engages in competing activities;
• holding the position of a member of the governing body of another legal entity that engages in competing activities, etc.

It should be noted that failure to comply with the requirement for agreeing on essential terms when concluding such a contract renders it null and void. There is a diverse practice regarding the application of such agreements, considering the long-term development of similar regulations. Usually, when addressing this issue, attention should be paid to the following conditions for the operation of non-compete provisions:

• the circle of individuals to whom the non-compete provision may apply (usually this pertains to employee-employer relationships);
• written provision in the employment contract or the conclusion of a separate non-compete agreement;
• the person engaging in activities similar to those of the company;
• the presence of a restriction regarding a specific territory, which should not exceed the territory where the company is usually located;
• the duration of such provisions should be within a reasonable timeframe (as mentioned in Ukraine, no more than 12 months);
• the procedure for establishing a breach of a non-compete agreement and liability for it.

It is important to note that for violating the non-compete clause, the employee will have to reimburse the employer for the provided compensation and pay an additional amount equivalent to that compensation. Undoubtedly, the non-compete clause should be based on one of the fundamental principles of labor law—the invalidity of conditions that worsen the position of employees, as well as the coercion of an employee to enter into agreements without mutual consent. In summary, we would like to note that non-compete clauses are an effective tool for protecting businesses from unfair competition by former employees; however, their application must comply with legislative requirements. In Ukraine, the legal regulation of such agreements is still being developed, and to date, they are only established in the IT sector, specifically for residents of Diya City. The law firm Fedoryshyn & Partners can assist with drafting non-compete agreements, develop individual terms considering the specifics of the business, and provide legal consultation on the application of non-compete terms in a specific case.

Author: Aliona Yevtushenko, lawyer at F&P

The Law of Ukraine 3813-IX dated 18.06.2024 amended the Tax Code of Ukraine with subparagraph 69.41, which stipulates that during the period of martial law in Ukraine and until December 31 of the year in which martial law is terminated or canceled, special features of tax, fee, and payment administration are established for taxpayers with a high level of voluntary compliance with tax legislation, as determined by the controlling bodies specified in subparagraph 41.1.1 of paragraph 41.1 of Article 41 of the Tax Code of Ukraine (tax administration), as defined by this subparagraph.

In turn, on November 11, 2024, the Procedure for the Formation and Publication of the List of Taxpayers with a High Level of Voluntary Compliance with Tax Legislation, approved by the Order of the Ministry of Finance of Ukraine No. 495 dated October 7, 2024, registered with the Ministry of Justice of Ukraine under No. 1539/42884 dated October 14, 2024 (hereinafter referred to as the Procedure), came into force.

According to the Procedure, the List of taxpayers with a high level of voluntary compliance with tax legislation (hereinafter referred to as the List of taxpayers) is formed based on the tax reporting of the taxpayer submitted to the controlling authority within the deadlines established by the Tax Code of Ukraine, tax information from the information and communication systems of the State Tax Service, and other sources obtained in the manner and method defined by the Code.

The State Tax Service ensures the formation and approval of the List of Payers no later than the last working day of March, May, August, and November.

To determine the compliance of taxpayers with the criteria of taxpayers with a high level of voluntary compliance with tax legislation, the following data is taken into account:

1) tax reporting and amendments to it, submitted as of the calculation date:

– in March – for the previous reporting (tax) year;

– in May – for the first quarter of the current year and the second to fourth quarters of the preceding year;

– in August – for the I-II quarters of the current year and the III-IV quarters of the preceding year;

– in November – for the I-III quarters of the current year and the IV quarter of the preceding year.

2) paid amounts of tax, fee, and payment revenues.

Taxpayers with a high level of voluntary compliance with tax legislation include legal entities and individual entrepreneurs who simultaneously meet all of the following requirements:

1) The tax debt and/or arrears on other payments, the collection of which is entrusted to the controlling authorities, does not exceed 3000 non-taxable minimum incomes of citizens and no more than 30 days have passed since their occurrence.

2) absence of arrears in the payment of the single contribution to mandatory state social insurance.

3) compliance with the criteria defined in subparagraph 69.41.2 of subparagraph 69.41 of subparagraph 69 of section 10 of chapter XX “Transitional Provisions” of the Tax Code of Ukraine, depending on the chosen taxation system.

4) the absence of facts of violation by the taxpayer of tax obligations regarding the submission of reports and/or documents (notifications), including those provided for in Articles 39 and 39^-2 of Section I, paragraph 46.2 of Article 46 of Chapter 2 of Section II of the Tax Code of Ukraine.

To determine the compliance of a taxpayer with this requirement, information regarding the absence of tax notification decisions in the form “PS,” issued for violations of the taxpayer’s obligations to submit reports and/or documents (notifications), including those provided for in Articles 39 and 39^-2 of Section I, paragraph 46.2 of Article 46 of Chapter 2 of Section II of the Code for the last 12 months preceding the month of approval of the List of taxpayers, is used.

5) the absence of tax notifications-decisions issued to the taxpayer regarding violations of the deadlines for settlements on export and/or import operations over the past consecutive 12 months;

6) the absence of a decision on the compliance of the taxpayer with the risk criteria for value-added tax, made in accordance with the Procedure for suspending the registration of tax invoices / adjustment calculations in the Unified Register of Tax Invoices, approved by the Resolution of the Cabinet of Ministers of Ukraine dated December 11, 2019, No. 1165;

7) the absence of initiated procedures for the termination of a legal entity or the business activities of an individual entrepreneur;

8) absence of initiated bankruptcy proceedings (insolvency) against the taxpayer;

9) the absence of a decision regarding the taxpayer and/or its founders (participants), ultimate beneficial owners on the application of special economic and other restrictive measures (sanctions) in the manner prescribed by the Law of Ukraine “On Sanctions”;

10) the absence of the taxpayer and/or its founders (participants), ultimate beneficial owners being citizens of a state that is conducting armed aggression against Ukraine (except for citizens of such a state who have been granted the status of combatants after April 14, 2014);

11) the absence among the founders (participants), ultimate beneficial owners of the taxpayer of persons whose place of residence (location) is a state that is conducting armed aggression against Ukraine.

Therefore, as can be seen from the above, the taxpayer’s verification is carried out by the tax authority independently using electronic registers, in accordance with the Procedure. In turn, the taxpayer is not involved in any way in the process of verifying compliance with the criteria for taxpayers with a high level of voluntary compliance with tax legislation.

The list of taxpayers is published by the State Tax Service (STS) on its official website. The STS notifies the taxpayer about their inclusion/exclusion from the list of taxpayers by sending an informational message through the taxpayer’s electronic cabinet within 5 working days after the approval of the list of taxpayers in accordance with the relevant forms and procedures established by the Ministry of Finance (clause 2 of section VI of the Procedure).

Additionally, we inform you that the State Tax Service does not publish information about a taxpayer in the Register of Taxpayers if the taxpayer submits a refusal to disclose their data within 5 working days after receiving an informational notification from the State Tax Service about their inclusion in the Register of Taxpayers.

 

Features of tax administration for individuals included in the Register of taxpayers:

1) by the regulatory authorities are not initiated:

• actual inspections regarding the licensing of fuel storage activities exclusively for the purposes of personal consumption and/or industrial processing;

documentary unscheduled inspections, except for inspections:

• conducted exclusively at the request of the taxpayer;
• conducted on the grounds specified in subparagraphs 78.1.1 and 78.1.2 regarding transfer pricing control, 78.1.3, 78.1.5, 78.1.7, 78.1.8, 78.1.9, 78.1.12, 78.1.14, 78.1.15, 78.1.16, 78.1.19, 78.1.21, and 78.1.22 of paragraph 78.1 of Article 78 of the Tax Code of Ukraine;
• taxpayers for whom tax information has been received indicating violations of foreign exchange legislation by the taxpayer in terms of compliance with the deadlines for the arrival of goods in import operations and/or foreign exchange earnings in export operations;
• taxpayers engaged in the production and/or sale of excise goods, the organization and conduct of gambling activities in Ukraine (gambling business), taxpayers providing financial and payment services;
• documentary planned inspections, except for inspections of taxpayers engaged in the production and/or sale of excise goods, the organization and conduct of gambling activities in Ukraine (gambling business), and taxpayers providing financial and payment services;

2) The period for conducting desk and documentary audits of the taxpayer, as specified in subparagraphs 200.10 and 200.11 of Article 200 of this Code, is 5 and 10 working days, respectively. The provisions of this subparagraph apply to applications for the refund of the budgetary value-added tax compensation submitted by the taxpayer during the period of the taxpayer’s inclusion in the List of Taxpayers with a High Level of Voluntary Compliance with Tax Legislation;

3) Individual tax consultations are provided to the taxpayer exclusively by the central executive body implementing state tax policy within 15 calendar days following the day of receipt of the request, without the possibility of extending the review period. In case the territorial body of the central executive body implementing state tax policy receives the request mentioned in this paragraph, it is obliged to send it to the central executive body implementing state tax policy within the next working day after receiving such a request;

4) assignment of an official from the territorial body of the central executive authority responsible for implementing state tax policy to interact with the taxpayer (compliance manager);

5) the taxpayer’s receipt, upon request, within five days of information held by the controlling authority that may indicate tax risks in the activities of such a taxpayer, as well as consultations on mitigating such risks.

As of today, it is impossible to assess the effectiveness of the introduced features of tax administration for taxpayers with a high level of voluntary compliance with tax legislation. The main reason is the lack of established cases that would illustrate the practical application of these measures and their implementation in terms of tax compliance.

The success of the implemented institution will depend on the practical effectiveness of mechanisms such as automated compliance checks for taxpayers, provision of tax consultations, reduction in the number of audits, and the introduction of a compliance manager. Several clients of the law firm FEDORYSHYN & PARTNERS have expressed interest in implementing such an initiative; however, further observation and analysis are necessary for well-founded conclusions and recommendations.

Author: Olena Andriyko, lawyer at F&P

The Republic of Cyprus has long remained one of the most popular jurisdictions for foreign investment due to its favorable tax regime and advantageous provisions in bilateral double taxation avoidance agreements.

In this article, we will examine the key aspects of dividend payments to non-residents from the Republic of Cyprus and the possibilities of applying a reduced withholding tax rate on repatriated income.

What does the legislation say?

The Tax Code of Ukraine defines that income sourced in Ukraine includes any income received on the territory of Ukraine by residents or non-residents. This can include income from activities, interest, dividends, royalties, and other investment income paid by Ukrainian residents or representatives of foreign companies.

Dividends are considered both classical payments to founders from profits and any payments by legal entities to their participants in connection with the distribution of net profit.

When Ukrainian companies or branches of foreign companies pay income to non-residents, they must withhold tax at a rate of 15%. This tax is paid at the time of income payment, unless otherwise stipulated by international treaties of Ukraine with the country of residence of the income recipient.

On November 8, 2012, a Convention on the Avoidance of Double Taxation was signed between Ukraine and the Republic of Cyprus, ratified by the Law of Ukraine. According to Article 10 of the Convention, dividends paid by a company resident in one state to a resident of another state may be taxed in the country of the recipient. They may also be taxed in the state of the payer, but at a reduced rate: 5% if the beneficial owner of the dividends holds at least 20% of the company’s capital or has invested no less than 100,000 euros, and 15% in other cases.

Thus, de jure, the legislation stipulates that the payment of dividends to a resident of the Republic of Cyprus can be made at a reduced rate of 5%.

At the same time, in practice, everything is not so straightforward.

Ukrainian tax authorities, during audits of resident enterprises, often conclude that non-residents are conducting activities on the territory of Ukraine without registering a permanent establishment. In such cases, tax authorities assess additional liabilities, asserting that the resident taxpayer must withhold 15% of the income tax paid to the non-resident.

Permanent Representation: Legal Basis

According to Article 5 of the Double Taxation Conventions, a permanent establishment is a place of business through which a non-resident’s business is carried on in whole or in part. Such places include:

• office, branch, factory, warehouse;
• mine, quarry, facility for extracting natural resources;
• any other place where entrepreneurial activities are carried out.

At the same time, activities that are purely preparatory or auxiliary in nature do not create a permanent establishment. Such activities include:

• storage or display of goods;
• gathering information;
• procurement of goods or other auxiliary functions.

The main activity that generates profit and constitutes an important part of the business is considered as the activity of a permanent establishment. In contrast, auxiliary activities only perform a supportive function and do not create obligations for registration.

According to the OECD Model Convention recommendations, the decisive criterion is whether the activity at a specific location is substantial for the enterprise. Therefore, to distinguish between core activities and preparatory or auxiliary activities, it is necessary to keep in mind that:

• preparatory or auxiliary activities were carried out for the benefit of the foreign company itself, and not at the expense of third parties;
• the main activity is usually perceived as the activity that is essential and important based on the content of the organization’s commercial goals and objectives;
• preparatory activities precede the commencement of the main activities of a non-resident in the territory of Ukraine;
• Auxiliary activities ensure the process of conducting the main economic activities by a non-resident, are carried out simultaneously with the main activities, but are not considered part of the main activities.

For enterprises, it is important to clearly distinguish between core and auxiliary activities. In the event of an audit, it should be confirmed that the activities of a non-resident do not create a permanent establishment. If the activities are auxiliary in nature, this should be documented to avoid the risk of tax reassessment.

Therefore, determining the status of a non-resident’s activities is crucial for the correct application of tax regulations and avoiding double taxation.

What do tax officials pay attention to?

The main arguments used by regulatory bodies can be summarized in the following theses:

• the main activity of the representative office is identical to the activity of the non-resident (parent company) as defined in the statutory documents of the non-resident.
• the nature of the non-resident’s activities indicates that the sole purpose of registering the company is to distribute dividends.
• the funds transferred to the non-resident are “transit” funds and, within a short period after being credited to the account, are transferred to the accounts of third parties;
• authorized and/or trusted persons of a non-resident are citizens of Ukraine who reside permanently in Ukraine, carry out activities here, receive payments, etc.;
• the analysis of the decisions/protocols of the non-resident indicates that such decisions were signed by persons under powers of attorney who are citizens of Ukraine and are directly or indirectly related to the resident;
• the presence of corporate dependence of a non-resident on another non-resident legal entity controlled by a citizen of Ukraine;
• conclusion of contracts or signing any documents on behalf of such a non-resident dividend recipient by the actual beneficiary (individual);
• absence of employees and substance in the non-resident;
• the actual (real) management of a non-resident and a resident by the same individuals (group of individuals);
• the payment of dividends in non-cash form, in particular through further reinvestments;
• the acquisition of a share from the charter capital of a resident company by a non-resident was carried out by a third non-resident party;
• conclusion of contracts by officials or related parties of a non-resident / signing documents as representatives of a non-resident;
• the absence of any other source of income for the non-resident, except for dividends from the resident;
• absence of evidence of any economic activity by the non-resident;
• do non-residents have any obligations regarding the further transfer of the received income to another non-resident;
• a non-resident is restricted in the right to independently determine the further economic fate of the specified income;
• a non-resident does not have the authority to determine the further economic fate of such income, that is, they are not the beneficial (actual) recipient of the income;
• the “technical” nature of the activities of non-resident companies
• the presence of only one certificate confirming residency status is not a basis for applying a reduced rate.
• the resident is a related party to the non-resident (considering the common beneficiaries), and the activities carried out by the representatives of the non-resident in Ukraine cannot be considered auxiliary;
• the founders of the non-resident / KBV are citizens of Ukraine;
• non-resident directors do not receive a salary;
• the non-resident does not have personnel, the functions of the company are performed by its directors and secretary. In fact, the functions are carried out on the territory of Ukraine – in terms of the acquisition and sale of corporate rights and the management of corporate rights;
• the type of activity of the non-resident is investment management and financing. The company’s assets consist exclusively of investments in legal entities established under the laws of Ukraine.
• all income of a non-resident is income sourced from Ukraine;
• all contracts for the acquisition and sale of corporate rights were concluded in Ukraine.

How to avoid additional charges?

To avoid receiving additional assessments from the tax authority or to increase the chances of successfully contesting such assessments, specialists from FEDORYSHYN & PARTNERS recommend ensuring the following conditions of the non-resident’s activities before transferring dividends:

1) the presence of other income for a non-resident, apart from dividends from residents of Ukraine;

2) the presence of substance, employees, real wage payments;

3) analyze the signatories of documents on behalf of the non-resident – whether they are connected to the resident;

4) ensure that funds received from a resident are not transferred from a non-resident’s account for at least 6 months;

5) ensure that a non-resident engages in activities that are not similar to those of a resident.

The implementation of the mentioned points does not guarantee the avoidance of additional assessments by tax authorities, but it provides a real chance of obtaining a positive court decision when appealing such assessments.

Author: Oleksandr Fedoryshyn, Managing Partner at F&P

In 2024, the National Anti-Corruption Agency resumed full audits of declarations by declarants, which had been suspended since February 22, 2022.

First of all, it should be noted that during full audits, the NACP began using the “declaration risk rating indicator” – a numerical indicator of the degree of identified discrepancies (risks) in the declaration, which consists of the sum of the weighted coefficients of discrepancies (risks), calculated by the software of the Unified State Register of Declarations of Persons Authorized to Perform Functions of the State or Local Self-Government (hereinafter referred to as the Register) based on the results of logical and arithmetic control.

Logical and arithmetic control is carried out by the system (LAC software) of the NACP, which automatically checks the information specified in the declaration for compliance with the information displayed in the register. The more errors the system finds, the higher the declaration of the declarant will rank for a full audit. Therefore, to minimize risks, it is advisable to use the reference formed in the Register for filling out the declaration. Let’s analyze several risks that are often found in the subjects of declaration during full inspections.

1. Open enforcement proceedings.

Having many years of experience in accompanying the process of full verification of declarations of declarants and protecting their interests in court and pre-trial proceedings, we can conclude that obtaining a conclusion from the NACP about the establishment of false information is almost 100% if the declarant did not provide information about an open enforcement proceeding, regardless of the status of the declarant in such enforcement proceeding (debtor or creditor).

In such a case, in order to prevent a person from being held liable due to excessive formalism, it is extremely important to prove the absence of an offense by the declarant.

Such a case became the first victory for the law firm Fedorishin and Partners in 2025, as on January 2, our company’s lawyers successfully defended the interests of a client in court, who was accused of committing a corrupt administrative offense due to the failure to provide information about an open enforcement proceeding.

2. Information about the payment of fines for traffic rule violations.

If it has already happened that the National Agency has started a full verification of the declaration of the declarant, it should be taken into account that, in addition to data from: the Unified State Demographic Register, the State Register of Property Rights to Real Estate, the State Register of Civil Status Acts of Citizens, the Unified State Register, the State Land Cadastre, the Unified State Register of Vehicles, the State Ship Register of Ukraine, the Unified Register of Powers of Attorney, the Inheritance Register, etc., the NACP can gain access to the information and communication system “Information Portal of the National Police of Ukraine” (hereinafter – the IPNP system).

From the IPNP system, the NACP can obtain information about the payment of fines for traffic rule violations and information about traffic rule violations recorded automatically.

Yes, in the case of a declarant paying a fine for violating traffic rules on a vehicle that does not belong to them, several times during the reporting period, the NACP may conclude that the declarant used the vehicle.

3. Information obtained during the special verification.

Although, a special verification is conducted for candidates for certain positions and is carried out to ensure the incompatibility of corrupt practices and public service and, as a result, the exclusion from positions of individuals who have assets not confirmed by legal income, who have submitted false documents for appointment, cooperate with the enemy, etc. That is, the special verification has a preventive function to prevent corruption risks.

However, the NACP uses information obtained during the special verification of the declarant to conduct a full verification of the declaration. Thus, if certain information is established during the special verification and is not reflected in the annual declaration (for example, property that is owned and/or used, termination of rights to objects, etc.), the National Agency may conclude that false information has been established during the full verification of the declaration.

4. Property and assets abroad.

It is impossible to overlook the international cooperation of the National Agency, which it reports on its official resources. Yes, during a full verification of a declaration, the NACP can receive information from foreign bodies engaged in financial monitoring. In this regard, the National Agency can obtain information from international systems, such as the Egmont Group, which contains financial intelligence information from various countries.

At the same time, the NACP is expanding cooperation with international anti-corruption organizations, particularly GRECO and FATF. Such activities of the anti-corruption agency make it possible to obtain information about the property and assets of the declarant outside of Ukraine during a full verification of the declaration.

5. Monitoring of lifestyle.

Additionally, the National Agency uses the results of lifestyle monitoring (LSM) during inspections.

LSM is carried out based on information obtained from individuals and legal entities, as well as from media and other open sources of information. A large amount of information may be used to obtain information about the declarant within the framework of conducting LSM, including from surveillance cameras, social media posts, hotel visits, and other places.

For reference, it is worth noting that the Procedure for the Implementation of Asset Declarations by Declarants currently complies with the requirements of the regulatory legal act, as it has been registered with the Ministry of Justice of Ukraine.

Yes, during the implementation of the LSM, the National Agency may, in particular, but not exclusively:

• Check the movement of vehicles and their location with other vehicles and individuals;
• Fix the systematic residence of the declarant at the address. For example, the declarant did not declare a person with whom they lived for 183 days or more during the reporting period. In turn, the NACP has confirmation from surveillance cameras placed as part of the implementation of the “Safe City” project or placed by other entities that the declarant systematically visited a certain address and stayed there for some time, for example, overnight. Establishing that the person with whom the declarant interacts resides at that address, the National Agency may conclude that the declarant concealed a person with whom they have shared responsibilities, shared household, and have mutual rights and obligations, and did not declare such a person during the reporting period. In this case, the NACP will apply paragraph b) part 1 article 1 of the Law of Ukraine “On Prevention of Corruption” (any persons who live together, are connected by a common household, have mutual rights and obligations with the subject specified in part one of article 3 of this Law (except for persons whose mutual rights and obligations do not have a family nature), including persons who live together but are not married).
• A similar method for documenting the joint presence of the declarant with another person within the framework of conducting an LSM can include the fixation of mobile devices in the same area, photos on social networks and location tags, purchased tickets for the same period in one direction, tickets purchased by one person for the benefit of another, crossing the border for entry and exit by individuals in the same or very close time period, the use of property by another person belonging to the declarant or their family members, etc.

In summary, we would like to note that since the second half of 2024, the NACP has significantly strengthened the processes of verifying declaration subjects, which is undoubtedly an important step in ensuring transparency and preventing corruption. However, a thorough verification of declarations requires declaration subjects to pay careful attention to filling out documents to avoid potential violations. In particular, it is important to consider information about open enforcement proceedings, payment of fines, property abroad, and other aspects.

Author: Uliana Luchkevych, lawyer at F&P

Managing accounts payable is a key element of the financial stability of any enterprise. For effective accounting and risk minimization, it is important to understand the criteria for recognizing debt as uncollectible.

A client approached the specialists at FEDORYSHYN&PARTNERS with a request to provide a legal assessment of the possibility of classifying an advance received from a counterparty as a bad debt, considering that more than 3 years have passed since the funds were received and any contact with the counterparty has been lost.

According to paragraph 5 of P(S)BO 11 “Liabilities”, a liability is recognized if its value can be reliably determined and there is a probability of a decrease in future economic benefits due to its settlement. If, as of the balance sheet date, a previously recognized liability is not to be settled, its amount is included in the income of the reporting period.

Thus, in the event that circumstances arise on the balance sheet date indicating that a previously recognized liability is not to be settled, the corresponding amounts should be recognized as income for the relevant reporting period.

Therefore, the key question that arises in this case is the possibility of classifying the received advance payment as bad debt and, accordingly, recognizing such funds as income.

To determine whether the obligation is subject to repayment, it is necessary to refer to the legislative interpretation of the concept of bad debt, which is contained in subparagraph 14.1.11 of paragraph 14.1 of Article 14 of the Tax Code of Ukraine. In particular, according to the specified norm, a debt is considered bad if the statute of limitations has expired.

At first glance, it seems that the advance received by the client can be classified as bad debt, as more than 3 years have passed since it was transferred. However, such a conclusion would be premature.

Due to the implementation of quarantine in Ukraine, and subsequently, martial law, points 12 and 19 were added to the Final and Transitional Provisions of the Civil Code of Ukraine, which provide for the suspension of the statute of limitations.

Thus, if as of March 12, 2020 (the date the quarantine was introduced), the statute of limitations for the return of the advance payment had not expired, the counterparty has the right to go to court to recover the paid funds, and therefore classifying such funds as bad debt is premature.

It is worth noting that the contract concluded by the client with the counterparty provided for the application of Ukrainian legislation to its provisions, which, as we have already mentioned, effectively suspended the statute of limitations during the period of martial law.

At the same time, in the event that the contract concluded with the counterparty stipulates the application of another substantive law to the relations, under which the statute of limitations has expired, the payment received from the counterparty may be classified as bad debt.

It should be noted that the expiration of the statute of limitations for debt recovery is not the only reason for classifying a debt as uncollectible. In case you have doubts about the possibility of classifying the debt as uncollectible, the specialists at FEDORYSHYN&PARTNERS will offer a detailed analysis of the relationships that have arisen with the counterparty and provide a detailed roadmap for your further actions.