Investment Climate of Ukraine

As of January 1, 2011 total foreign direct investment in Ukraine was $44.7 billion (per capita $ 926.7), showing 8,5% growth compared to the previous year.

The growth of total foreign capital in the economy, including its revaluation, losses, exchange rate differences etc. in 2010, amounted to 4,66 billion USD.

The growth of foreign capital was observed in enterprises engaged in financial activities at the amount of 2,6 billion USD, industry – 0,8 billion USD,  real estate transactions, leasing, engineering and services for entrepreneurs – 0,5 billion USD, trade, repair of motor vehicles, household goods and personal consumption – 0,4 billion USD.

Leading countries-investors are Cyprus, Germany, the Netherlands, the Russian Federation, Austria, France and the United Kingdom.

Among the main advantages of investing in Ukraine are worth noting:

• 46 million consumers - one of the largest markets in Eastern Europe;
• High scientific and educational potential - powerful network of universities and research centres;
• A competitive skilled labour force - according to research company BrainBench, Ukraine has the 4th place in the world in number of certified professionals in the field of hi-tech;
• Strategic advantages of location - Ukraine is at the crossroads of trade routes East-West and North-South;
• Widely developed transport infrastructure - railways, ports in the Black Sea and the pan-European transport corridors;
• Large number of investor success of leading international companies - Kraft Foods, Coca-Cola, Hewlett Packard, Cargill, Knauf, Yazaki-Ukraine, Raiffeisen Bank others.

Foreign investors on the territory of Ukraine enjoy national treatment as to investment and other economic activity. Foreign investments in Ukraine shall not be nationalized.

In the event of termination of investment activity, a foreign investor has the right to recoup his investment in-kind or in the currency of investment in the amount of the actual contribution without payment of duty, along with profits from those investments in monetary form or in goods.

The State also guarantees to foreign investors an unimpeded and prompt remittance abroad of their profits and other sums in foreign currency obtained legally as a result of foreign investments.

To strengthen the protection of foreing investments in 2000 Ukraine ratified the 1965 Convention on the Settlment of Investment Disputes between States and Nationals of Other States.
Recently, Ukraine has seen a steady improvement of the legal business and investment environment.

Particularly the Verkhovna Rada (Parliament) of Ukraine adopted:

• the  Law of Ukraine dated 27.04/2011 ? 2155-VI  abolishing “double” state registration of foreign investment in National Bank of Ukraine;
• the Tax Code of Ukraine 02.12.2010 ? 2755-VI);
• the Law of Ukraine on Public-Private Partnership (01.07.2010 ?2404-VI) establishing legal, economic and organization framework of the relations between the State and private business in implementing projects in the field of social and infrastructure development, mining, municipal engineering etc.
• the Law of Ukraine on Preparation and Implementation of Investment Projects an a Single Window  (21.10.2010 ? 2623-VI);
• the Law of Ukraine on Amendments To Some Legislative Acts of Ukraine on the Deregulation of Economic Activities (19.10.2010 ? 2608-VI).

In order to facilitate relationships of foreign investors with state bodies and local authorities the State Agency of Ukraine for Investments and National Projects has been established.

In order to systematize the tax legislation by the Government developed the Tax Code has been adopted becoming the first codified legislative act in Ukraine regulating taxation issues.

The main innovations of the Tax Code relating to investment activities are:

• Promotion of Ukraine's transition to innovation model of development, including through the phased reduction of corporate tax rate from 25 to 16 percent (2011 – 23%, in 2012 - 21%, in 2013 – 19%, in 2014 – 16%);
• Temporary (until 1 January 2020) income tax exemption for producers of biofuels for electricity and thermal energy and profits from the extraction and use of gas (methane) of coal deposits;
• 10-years income tax exemption starting January 1, 2011 of hotel services for all categories of five, four and three stars hotels, including newly constructed or reconstructed, or in which an overhaul or restoration of existing buildings and structures, as well as enterprises of light industry sectors (except for companies that produce raw materials for) income from selling electricity produced from renewable energy sources, profit shipbuilding and aircraft industries;
• Classification of fixed assets in tax accounting is extended providing 16 asset groups instead of 4;
• The issue of taxation of financial leasing is settled to give new stimulus to this form of investment;
• Tax at 5% of income on deposits, interest or discount income from a personal savings (deposit) certificates, dividends and some other earnings related to investment activity is introduced;
• Gradual reduction of the VAT to 17%;
• Introduction of “automatic” refund of value added tax to the “honest” payers of taxes and the Single register of tax invoices and implemented the State's responsibility for late refund of value added tax for such payers.

In the area of the permit system:

• Expanded use of the declarative principle of starting a business in accordance with the adopted Law of Ukraine on Amending the Law of Ukraine on Licensing in the Sphere of Economic Activity concerning economic activities on the basis of the declaration dated 07.07.2010 ? 2451-VI.

According to this principle, an entity acquires rights to perform certain actions to undertake business activities without obtaining permits by notification to the administrator or the appropriate licensing authority on compliance with its material and technical basis of the legislation (hereinafter - the declarative principle).

The Decree of the Cabinet of Ministers of Ukraine dated August 25, 2010 ? 725 approved the list of specific actions on economic activities or economic activities that can not be conducted on the basis of the declaration of conformity logistics entity's legal requirements.

In the field of licensing:

• The Law of Ukraine on Amendments to Some Legislative Acts of Ukraine on the Deregulation of Economic Activities of 19.10.2010 ? 2608-VI, to whom licenses canceled 23 out of 66 species of activities that are not related to threats to the security of the state, life and health, the deterioration of the environment, and for which there are other methods of state regulation (state standards, building codes, technical specifications, international quality standards, etc.).