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Doing Agricultural Business in Ukraine: Legal Aspects 2016

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Doing Agricultural Business in Ukraine: Legal Aspects 2016 DOING AGRICULTURAL BUSINESS IN UKRAINE: LEGAL ASPECTS 2016 INTRODUCTION Agriculture is one of the most attractive sec- agriculture (including in the areas of veteri- tors of the Ukrainian economy. According to nary, agro-chemicals, livestock, food products, the Ministry of Agrarian Policy and Food of fisheries, use of natural resources), powers Ukraine, agriculture provides 14% of the total of certain state authorities were limited, risks GDP of Ukraine. Exports of agricultural sector of corruption were reduced, simplification of in 2015 amounted to USD 14.6 billion, repre- registration procedures for water use, as well senting the unprecedented 38.2% of Ukraine's as turnover of fertilizers and plant protection total exports. Last year the agricultural sector products were implemented, etc. attracted over one billion USD of investment. There are over 3 million people employed in ag- In this brochure, we provide an overview of the ricultural industry, which constitutes more than legal regulations applicable to agribusiness, 17% of all employed persons in Ukraine. including legislative framework for sale and purchase and lease of agricultural land, various Given the importance of this sector to the state, aspects of employment relations and taxation there were significant changes in legislation regime, etc. Our publication will be helpful for regulating economic activity in the agricultural potential agriculture investors, agriculture-ori- industry in 2015. The primary objective of these ented producing and processing enterprises changes was to simplify doing business in the and other persons interested in the Ukrainian agricultural sector. agriculture sector. In particular, more than twenty licensing pro- cedures were cancelled and some other man- Truly yours, datory licenses and permits were revised in DLF attorneys-at-law February 2016 DLF attorneys-at-law Torus Business Centre | 17 d Hlybochytska Street | 04050 Kyiv, Ukraine | www.DLF.ua | [email protected] | T +380 44 384 24 54 TABLE OF CONTENTS 1. SALE AND PURCHASE OF AGRICULTURAL LAND ....................................... 4 3.4. Employment of foreigners ............................................................................12 1.1. Agricultural lands ............................................................................................4 3.5. Residence permit ..........................................................................................13 1.2. Transfer of agricultural land ...........................................................................4 3.6. Leave .............................................................................................................13 1.3. Moratorium on sale of agricultural land ........................................................5 3.7. Minimum wage .............................................................................................14 2. LEASE OF LAND ......................................................................................... 7 4. TAXATION IN AGRICULTURE ..................................................................... 15 2.1. Agreement on lease of land ............................................................................7 4.1. Terms for single tax application ...................................................................15 2.2. Essential terms of the agreement on lease of land .......................................7 4.2. Object and tax base .......................................................................................16 2.3. Duration of the lease agreement ....................................................................8 4.3. Single tax rates .............................................................................................16 2.4. Rent .................................................................................................................8 4.4. Reporting period and procedure for payment of single tax ........................16 2.5. Rights and obligations of the parties .............................................................8 4.5. Procedure for registration as a single taxpayer ..........................................16 2.6. Termination of agreement ..............................................................................8 4.6. Peculiarities of VAT .......................................................................................16 3. EMPLOYMENT RELATIONS .......................................................................... 9 4.7. Transfer pricing .............................................................................................17 3.1. Employment agreement .................................................................................9 5. PROTECTION OF FOREIGN INVESTMENT ....................................................18 5.1. International agreements .............................................................................18 3.2. Employee probation ......................................................................................10 5.2. Safeguards of Ukrainian legislation .............................................................18 3.3. Termination of employment agreement ......................................................10 DLF attorneys-at-Law DOING AGRICULTURAL BUSINESS IN UKRAINE: LEGAL ASPECTS 3 1. SALE AND PURCHASE OF AGRICULTURAL LAND 1.1. Agricultural lands 1.2. Transfer of agricultural land Agricultural lands are lands available for agri- Agricultural land is transferred into ownership cultural production, implementation of agricul- or for use to: tural research and training activities, placing of relevant production infrastructure, including in- a) citizens - for individual farming, gardening, frastructure of wholesale markets for agricul- mowing and grazing, agricultural commodity tural products, or designed for such purposes. production; Agricultural lands comprise of: b) agricultural enterprises - for agricultural commodity production; a) agricultural areas (arable lands, perennial plants, hayfields, pastures and fallows); c) agricultural research institutions and educa- tional establishments, rural vocational b) non-agricultural areas (farm roads and trails, schools and secondary schools - for research shelter belts and other protective plantings, and educational purposes, propagation of except those classified as land for forestry the best practices in agriculture; purposes, land under farm buildings and yards, land under the infrastructure of who- d) non-agricultural enterprises, institutions lesale markets for agricultural products, and organizations, religious organizations temporary land conservation, etc.). and associations of citizens - for subsidiary farming; The state recognizes the priority of agricultu- ral land. Land suitable for agriculture must be e) the wholesale markets for agricultural pro- available primarily for agricultural use. ducts - for accommodation of their own in- frastructure. DLF attorneys-at-Law DOING AGRICULTURAL BUSINESS IN UKRAINE: LEGAL ASPECTS 4 Agricultural land shall not be transferred into but in any event not earlier than 1 January ownership to foreigners, stateless persons, 2017, it is prohibited to: foreign legal entities and foreign states. • sell state-owned and municipal land plots Foreigners and stateless persons may acquire designated for agricultural use, except for ownership of non-agricultural land plots with- the withdrawal (buy-out) of such land plots in settlements, as well as non-agricultural for public needs; land plots outside settlements, on which im- • sell and purchase or otherwise alienate movable property owned by them is located in agricultural land plots or change the desig- case of: nation of agricultural land plots owned by a) acquisition by way of sale and purchase individuals or legal entities for agricultural agreement, lease, gift, barter, or other commodity production, for individual farm- agreements; ing, except for inheritance, for barter one land plot to another and for withdraw- b) purchase of land plots, on which their own al (buy-out) of such land plots for public immovable property is located; needs, and other than changing the desig- c) inheritance. nation of land for the purpose of providing to investors-participants of the production However, agricultural land inherited by for- sharing agreements for activities under eigners and stateless persons is subject to such agreements. alienation within one year from the time of in- heritance. Any agreements (including powers of attorney) concluded under the effective prohibition in the part of sale, purchase or other alienation of 1.3. Moratorium on sale of agricultur- agricultural land plots and similarly in the part al land of transfer of the rights for future alienation of these land plots shall be null and void from the time of conclusion thereof. The moratorium on sale of agricultural land in Ukraine has been introduced in 2002. In It should be noted that the said prohibition shall N ovember 2015 the effect of the moratorium not apply to land plots, which at the time of was prolonged until 1 January 2017. their transfer into private ownership were de- signated other than "for agricultural commodi- The law stipulates that until the law regulating ty production". In particular, such designations turnover of agricultural land comes into force, include for subsidiary farming, for gardening, DLF attorneys-at-Law DOING AGRICULTURAL BUSINESS IN UKRAINE: LEGAL ASPECTS 5 for mowing and grazing, for research and educa- infrastructure of wholesale markets
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