Ukraine: Tax incentives for large investment projects enter into force

Ukraine

On 28 March 2021, the Law No 1293 On Amendment of Tax Code of Ukraine on Specifics of Businesses Implementing Investment Projects with Large Investments in Ukraine (the “Tax Incentives Law”) entered into force.

This Tax Incentives Law was adopted as a continuation of Law No 1116 On State Support for Investment Projects with Large Investments in Ukraine (the “State Support Law”) and is another piece of legislation introduced as part of the Ukraine's investment promotion agenda.

An analysis of the State Support Law can be found here.

According to the Tax Incentives Law, the following tax incentives will be available until 1 January 2035 for the businesses implementing qualified projects with large investments:

Exemption from VAT and customs duties: 

  • For the duration of the project, import of equipment and spare parts intended for use within the project may be exempted from VAT and import duties;

  • Equipment and spare parts imported by the investor with exemption from VAT and customs duties should be used exclusively for its designated purpose within the investment project and may not be sold or otherwise alienated for at least five years after importation;

  • If equipment and spare parts are alienated (i.e. title or possession is transferred) less than five years after the importation, the investor will be liable for payment of VAT, customs duties and a penalty calculated for each day from the importation date to the date of alienation.

Exemption from corporate income tax (CIT):

  • Profits earned under the investment project may be exempted from CIT for five consecutive years (but no longer than duration of the project);

  • However, if the investor carries out controlled transactions within the activities related to the implementation of a special investment agreement, CIT will be determined separately for such transactions;

Incentivised land tax rates or exemption from land tax:

  • Local governmental bodies have the discretion to grant incentives or exemption from land tax for land used in the project.

In order to receive tax benefits, investors must be eligible under the State Support Law and must enter into a special investment contract with the Ukrainian state. The amount of tax benefits granted to the project is counted towards the total amount of state support allocated to the project under the special investment contract and may not exceed this amount.

The responsible state authorities will automatically exchange information contained in the register of qualified projects with large investments in order to monitor the total amount of tax benefits.

For more information on the State Support Law and Tax Incentives Law, contact your local CMS advisor or local CMS experts: Tetyana Dovgan, Viktoriia Stavchuk, Anna Pogrebna, Yuliia Pidlisna.