On 3 November 2016, the Verkhovna Rada of Ukraine adopted the Draft Law No. 4496 "On Introduction of Changes and Amendments to Certain Legislative Acts (Regarding Elimination of Administrative Barriers for Export of Services)" (Draft Law). On 30 November 2016, the Draft Law was signed by the President of Ukraine.
Among other things, the Draft Law's key goals include simplification of the procedure for entry into foreign economic agreements, simplification of accounting and liberalization of currency control with regard to the export of services.
Following are the key changes introduced by the Draft Law with a breakdown by regulatory acts to be amended.
Changes in the Law of Ukraine No. 959-XII "On Foreign Economic Activities"
Foreign economic contracts (agreements) may now be concluded electronically (that is, as electronic documents). Provided that, an electronic document should contain all mandatory requirements including signatures. For identification of parties to electronic documents, electronic signatures may be used in either of their two forms: (і) electronic digital signature and (іі) other types of electronic signatures used on a negotiable basis.
It is now sufficient to accept a public offer, exchange electronic messages or simply draw an invoice (including electronic invoices) for entry into a service export agreement. That is, there is no need to execute a contract (agreement) as a separate document in such cases. These provisions, however, do not apply to transport and insurance services.
Changes in the Law of Ukraine No. 185/94-VR "On the Procedure of Settlements in Foreign Currency"
The requirement of the entry of foreign currency proceeds within 180 days (120 days according to the NBU Resolution No. 386 of 14.09.2016) of the signing of the service delivery act is no more applied to transactions on export of services (except transport and insurance) and intellectual property rights. In addition, identification of foreign currency proceeds from export of services and intellectual property rights may be performed based on the bill (invoice) from now on. As a result, acts or other documents that confirm provision of services or export of intellectual property rights is not mandatory in such cases.
The requirement of mandatory translation of the documents executed in a foreign language is not applied to documents in English any more. Banks themselves will have to translate such documents into Ukrainian. In addition, the translation requirement does not apply to bilingual documents on condition that one of the languages is Ukrainian.
Changes in the Law of Ukraine No. 996-XIV "On Accounting and Financial Reporting"
The provision that a primary document must confirm completion of a business transaction has been cancelled. Now the primary document simply contains information on the transaction. Also, the regulation requiring the primary document to be executed either at the time of the business transaction or immediately after its completion has been cancelled. In line with these changes, invoices may be potentially recognized as primary documents (as they do not confirm the completion of business transactions and may be drawn before their completion).
From now on, primary documents may also be executed electronically. The place of execution has been excluded from the list of mandatory attributes of a primary document. Digital signature as a type of electronic signature is not the only one required to sign electronic documents any more. Consequently, electronic primary documents may potentially be signed using other types of electronic signatures (for instance, the signatures that the parties agreed to use). Also, any electronic primary documents that meet the requirements of Ukrainian legislation on electronic documents and electronic correspondence may be used for accounting purposes.
Changes in the Law of Ukraine No. 2709-IV "On International Private Law"
According to a newly adopted provision the requirement to the form of transaction may be regulated not only by the legislation of the place of residence but also by the legislation of the place of registration of the party that offered a transaction. Since the wording on application of the law of the "place of residence" to the form of transaction rather applies to individuals, this clarification is aimed to eliminate possible uncertainties in foreign economic transactions between legal entities.
The requirement concerning a written form of foreign economic agreements has been replaced with the requirement to the form envisaged by Ukrainian legislation. This means that foreign economic agreements may now be concluded in the electronic form as it is envisaged by the Law of Ukraine "On Foreign Economic Activities" (see the details above).
Entry into force
The Draft Law comes into force on the day following its publication and comes into effect within a month upon enactment. Consequently, the Cabinet of Ministers and NBU will have to make a number of changes into subordinate legislation within one month in order to bring them into compliance with the Draft Law.
Who will be affected by the changes
In general, adoption of the Draft Law is expected to improve business climate in Ukraine.
The changes introduced via the Draft Law with regard to simplification of the requirements to primary documents, as well as the possibility of their execution electronically, will definitely impact all Ukrainian residents both engaged in activities in Ukraine and exporting their services.
The changes with regard to simplification of currency control over export of services and intellectual property rights will impact all Ukrainian residents providing their services to non-residents based on foreign economic agreements including IT services, telecommunication, consulting, legal services, etc. It is expected that the changes will simplify currency control over those transactions, primarily, for freelancers (self-employed individuals), as the currency control formalities often created barriers for them to receive foreign currency proceeds into Ukrainian bank accounts. At the same time, these simplifications will most likely be less relevant for large Ukrainian companies considering their well-coordinated document flow for compliance with currency control rules, as well as the desire to have documentary proof of service provision and transfer of the intellectual property rights created in the course of service provision.