• Creation of the Free Economic Zone Crimea
  • November 5, 2014
  • Law Firm: Dentons Canada LLP - Toronto Office
  • Law of Ukraine “On the creation of the free economic zone Crimea and on the peculiarities of realizing the economic activities of the temporarily occupied territory of Ukraine” No. 1636 dated 12 September 2014 effective from September 27, 2014.

    The Law defines the specifics of realizing economic activity on the temporarily occupied territory of Ukraine in accordance with article 13 of the Law of Ukraine “On Ensuring the Rights and Freedoms of Citizens and the Legal Regime on the Temporarily Occupied Territory of Ukraine,” creating a free economic zone “Crimea” (hereinafter - FEZ “Crimea”), and regulates other aspects of legal relations between individuals and legal entities located on the temporarily occupied territory or outside it.

    The provisions of the Law aimed at the regulation of relations between the individuals and legal entities that are on the temporarily occupied territory or outside it under ordinary conditions, and also partially govern relations arising between the temporarily occupied territory and other territory of Ukraine.

    Thus, in particular, the Law provides for the following peculiarities of doing business in/with the FEZ “Crimea”:

    • FEZ “Crimea” is established within two administrative-territorial units of Ukraine: the Autonomous Republic of Crimea and the city of Sevastopol
    • FEZ “Crimea” is introduced for the period of ten full calendar years
    • Within the FEZ “Crimea” a free customs zone is created which is by its functional type a free customs zone of commercial, service and industrial type in accordance with article 430 of the Customs Code of Ukraine
    • State taxes and duties defined by article 9 of the Tax Code of Ukraine, and the mandatory state pension insurance provided by the law of Ukraine “On mandatory State pension insurance” are not withdrawn on the territory of FEZ “Crimea”
    • The relationship between persons who have the tax address on the territory of FEZ “Crimea” and persons who have a tax address on another Ukrainian territory is deemed to be controlled operations in accordance with article 39 of the Tax Code of Ukraine
    • An individual who has the tax address (residence) and a legal entity (branch), which has a tax address (location) on the territory of FEZ “Crimea”, are treated as non-residents for tax purposes
    • Any income sourced from the territory of FEZ “Crimea” received by a person treated as a resident, are taxed as foreign income under the general rules established by the Tax Code of Ukraine
    • The expenses of the legal entity, treated as the resident, that were incurred on payment of the cost of goods (works, services), supplied by the person treated as the non-resident, may be reflected as deductible expenses of such person in the amount contemplated by paragraph 161.2 of the article 161 of the Tax Code of Ukraine for offshore companies (i.e., 85 percent)
    • Multicurrency regime may apply on the territory of FEZ “Crimea” under which the payment of the cost of goods (works, services) sold (provided) within the FEZ “Crimea” is accepted in such currency as Hryvnia and currencies of foreign countries, included by the National Bank of Ukraine to the 1-2 group of classifier of foreign currencies and precious metals