"You know that there are quite a lot of things happening in Ukraine now,” says Vadim Medvedev, Partner at Avellum in Kyiv, who begins by talking about the recent election in April of Volodymyr Zelensky to the Ukrainian Presidency. “Everyone is looking forward to the inauguration to see what changes in policies may follow, Medvedev says, while pointing out that, although Zelensky has asked for May 19, the specific date has not been scheduled yet. He explains that outgoing President Petro Poroshenko was considered to be a “'business-as-usual' candidate,” but the business community is uncertain about Zelensky’s plans, “as there are a lot of gray areas and open issues with respect to his policies and programs — it’s simply unclear.”
"Another thing which is currently on the business agenda,” Medvedev says, "is the reform of the Ukrainian Fiscal Service.” Although the Tax and Customs departments were brought under a single roof in 2012, that experiment has apparently not been successful, and the "tax focus has often overwhelmed the customs concerns,” so the two are being once again split into separate state authorities. Medvedev says that no definitive timetable has been approved yet, “but what we have seen during the recent months is an open competition for the positions of head of both new services, and that process has been delayed by multiple challenges in court by various interested parties, some claiming an entitlement to one position or the other, and others accusing the process of lacking transparency.” Medvedev smiles, though, calling it “part of the political process.” He also reports that former Deputy Minister of Finance Serhii Verlanov, a tax lawyer with significance experience in the Big 4 and various law firms, has just been announced as new head of the country's Tax service. The likely head of the Customs service is Maxim Nefyodov, who was in charge of designing the country’s widely-praised public procurement system.
Otherwise, Medvedev reports, on April 15, Ukraine’s President signed a new Bankruptcy Code into law. "One of the most interesting elements,” he says of the Code, which will come into effect on October 21,"is the ability of private individuals to claim insolvency, which is expected to significantly clean up the accounts of banks that have struggled to handle non-performing loans and mortgages for the past ten years.” He describes this as a positive step. "It’s not exactly a cash-in for the banks, but it will make their accounts cleaner and easier, and help many individuals to achieve the u-shape to recover from serious financial difficulties.”
He also refers to “two or three major tax changes that are being discussed." The first is the implementation of the OECD’s G20 BEPS plan. The Ukrainian government, Medvedev reports, has already developed a BEPS-implementation bill, but it has not yet formally submitted it to the Parliament. He reports that the business community "is eager to have it submitted and voted on, because it will obviously affect their approach to various transactions." The second issue, he says, “is the widely-discussed implementation of Distributed Capital Tax, which will replace the Corporate Income Tax, so you don’t pay corporate tax until you make a profit distribution.” According to him, it follows similar models in Estonia, Latvia, and Georgia, "and it’s been debated heavily for the past three years in Ukraine. It was approved by the Parliamentary Tax Committee not long ago, and it may be pushed for, but I doubt the Parliament will vote on such controversial things before the Parliamentary election.” The third thing, he says, "is a tax amnesty for any capital which was not properly taxed before, involving scrutiny for potential hidden capital and unpaid tax.”
Finally, Medvedev says that things are going well in a general sense, and he reports that "there is no real frustration on the legal business side.” Still, last month’s Presidential election and the upcoming parliamentary elections in October are putting a temporary chill on new projects. "The biggest problem with election years is that certain projects are put on hold,” he explains, "so we are looking forward to the political situation resolving itself, and the business situation returning to business as usual.” As a result of the elections, he says, "the concern is that the uncertainty will remain until the end of this year, and it may slow down business, so we are not expecting this to be an overactive year.”