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On “Donbass” Free Economic Zone

Law of Ukraine

 

On “Donbass” Free Economic Zone

 

This Law defines the features of economic, economic, investment and innovation activities, is aimed at restoring the agro-industrial complex, modernization of economic and social infrastructure, resumption of life in the Autonomous Region of Donbass, creates a “Donbass” free economic zone (hereinafter – the Donbass FEZ).

Article 1. Status and territory of the “Donbass” Free Economic Zone

The Donbass FEZ is created in the territory of the Autonomous Region of Donbass for a period of 10 years which can be extended by the law of Ukraine.

On the territory of the Donbass a special legal regime of free economic activity applies, features of regulation of legal relations of physical and legal entities in economic, social and humanitarian spheres are established.

Article 2. Tasks and the purpose of the Donbass FEZ

The Donbass FEZ is created to restore life, economy, attract investments, create new jobs, create new and modernize existing industries, restore and develop production, transport and social infrastructure, ensure the restoration of energy and energy supply complexes and gas and heat supply facilities within the territory of the Donbass FEZ.

Preferential, customs, tax, currency and financial and other conditions of activity for national and foreign business entities are introduced on the territory of the Donbass FEZ for the purpose of attraction of investments, revival of market methods of management, restoration of productive forces of this region.

Article 3. Management of the “Donbass” Free Economic Zone

The body of management and economic development of the FEZ is the Authority of Territorial Administration of the “Donbass” Free Economic Zone (hereinafter – the Administration Authority).

The Head of the Authority is appointed and dismissed by the President of Ukraine upon the recommendation of the Chairman of the Council of Ministers of the Autonomous Region of Donbass. 

The functions and competence of the Administration Authority, of the Head of the Administration Authority, are carried out on the basis of this Law and the Regulations on the Authority of Territorial Administration of the Donbass Free Economic Zone approved by the Verkhovna Rada of the Autonomous Region of Donbass.

The Authority consists of members of the Council of Ministers of the Autonomous Region of Donbass, other representatives of the executive authorities of the Autonomous Region of Donbass and local governments, representatives of economic and economic entities of Ukraine.

To ensure the organization of the functioning of the free economic zone by the decision of the Head of the Authority, a permanent Executive Committee of the Authority (hereinafter – the Committee) is created, whose powers are determined by the Head of the Authority within the powers granted to the Authority.

The Committee consists of representatives of the executive authorities of the Autonomous Region of Donbass and local governments, national and foreign economic and economic entities, authorized by the customs and tax services, control and administrative structures of the Authority.

Article 4. Powers of the Administration Authority

The Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass exercises the following powers:

ensuring interaction and coordination of the activities of the governing bodies of the free economic zone with state bodies and self-government bodies;

determination of strategic directions of restoration of national economic complexes of development of the Donbass FEZ;

development and implementation of programs for economic reconstruction and development of the Donbass FEZ;

organization of arrangement of the territory of the Donbass FEZ;

organization of restoration and construction of industrial facilities, production, transport, social infrastructure, housing, as well as the development of communication networks and other infrastructure; 

control over the construction of such facilities and issuance of permits to the entities of the Donbass FEZ for their construction;

establishment of benefits for individual business entities regarding the preemptive right to receive land and other property for use;

conclusion of agreements on transfer for use of land plots, infrastructure objects, which are located on the territory of the Donbass FEZ, other property and natural resources;

conclusion of agreements for performance of contractual works, operation of objects of infrastructure of the Donbass FEZ and other agreements;

consideration and approval of investment projects, as well as the conclusion of an agreement with the investor (investors) regarding the conditions for implementing the investment project;

conducting international tenders for the selection of investment projects;

implementation of proper control over the investment activities of business entities of the Donbass FEZ;

development and implementation of a set of organizational measures to ensure the attraction of financial resources, including own funds of enterprises and organizations (including foreign ones), budget funds, extra budgetary funds, as well as charitable foundations, public organizations and individuals;

issuance to a business entity without creating a legal entity of permits to conduct business activities in the Donbass FEZ;

issuance of a permit for state registration of a business entity in the territory of the Donbass FEZ;

regulation of attracting foreign labor force to work in the Donbass FEZ;

conclusion of agreements on border cooperation, cross-border cooperation in the economic sphere with the constituent entities of the Russian Federation and other administrative-territorial units, receiving assistance from foreign states and individual regions of these states;

conclusion of trade and economic agreements with representatives of the member states of the Free Trade Agreement, foreign economic agreements with the relevant structures of other states, public and private corporations, other business and economic entities;

acts as a subject of contractual relations for the improvement of production cooperation, development of the industrial and economic complex of the Donbass FEZ, the use of cross-border capacities in the field of economic integration.

performance of functions transferred to the Administration Authority in accordance with the legislation of Ukraine.

concludes agreements on economic, social and cultural development with the Cabinet of Ministers of Ukraine, ministries and other central executive bodies.

The procedure for consideration and approval of investment projects, issuance of a business entity permit for activities in the “Donbass” free economic zone is determined by the Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass.

Article 5. Realization of economic and business activity in the territory of the Donbass FEZ

Entities of entrepreneurial activity on the territory of the Donbass FEZ carry out economic, entrepreneurial activity on the basis of the corresponding permission of the Administration Authority issued in coordination with the Verkhovna Rada of the Autonomous region of Donbass.

A certificate of the Administration Authority on the investment project approval, agreed with the Verkhovna Rada of the Autonomous Region of Donbass, is the basis for concluding an agreement with an investor and state registration of the business entity, concluding lease agreements for land, premises and other property.  The procedure for concluding an agreement is determined by the Administration Authority.

In case of carrying out by the economic, business activity entity subject to licensing, the corresponding licenses are issued by the decision of the Administration Authority on the basis of the conclusion of Committee and the coordination received from the Verkhovna Rada of the Autonomous Region of Donbass.

Establishment of banking institutions, insurance, stock and other financial organizations, the activity of which is subject to licensing, on the territory of the Donbass FEZ is carried out in accordance with the established procedure after preliminary coordination with the Administration Authority and the Verkhovna Rada of the Autonomous Region of Donbass.

For the state registration of a business entity, except for banking institutions, in the Donbass FEZ and the issuance of a permit to conduct business activities without establishing a legal entity is charged in the amount set by the Administration Authority in coordination with the Ministry of Finance of Ukraine and the Verkhovna Rada of the Autonomous Region of Donbass.  The amount of the payment is identical for entrepreneurs of one kind of activity. Funds from the payments are bound for the development of the Donbass FEZ in the procedure determined by the Administration Authority and agreed with the Verkhovna Rada of the Autonomous Region of Donbass.

In case of violation by business entities (investors) of the legislation of Ukraine, constituent documents and conditions of an agreement the Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass has the right to cancel the issued permission for business activity in the Donbass FEZ or the certificate of approval of the investment project.

Cancellation of the state registration of the business activity entity, its liquidation and cancellation of the license for exercising certain types of business activity is carried out in the order established by the legislation.

The Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass determines: the procedure for maintaining a single register of participants of the free economic zone;  the procedure for concluding an agreement on the conditions of activity in a free economic zone, making changes to it and terminating its validity;  the procedure for issuing and terminating a certificate of inclusion of a legal entity (individual entrepreneur) into a single register of participants of a free economic zone;  the procedure for exercising control over the fulfillment by the participants of the free economic zone of the terms of an agreement on carrying out activities in the free economic zone.

Maintains a single register of participants of the free economic zone and issues at the request of the participants of the free economic zone or at the request of interested persons extracts from it.

Article 6. Resource potential of the Donbass FEZ

The Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass may transfer land plots, infrastructure facilities and natural resources for use.

The basis for the transfer of land for use is an investment project.

On the issue of subsoil use, the Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass creates a commission for licensing the rights to use subsoil and other natural resources within the territory of the Donbass FEZ.

Article 7. Labor resources, movement of persons in the Donbass FEZ

In the territory of the Donbass FEZ the labor legislation of Ukraine operates, measures of social protection of citizens taking into account features of labor legal relations and working conditions in the free economic zone function.

The Cabinet of Ministers of Ukraine upon the recommendation of the Authority, agreed with the Verkhovna Rada of the Autonomous Region of Donbass, may establish a special procedure for crossing the border of Ukraine by foreigners and stateless persons heading to the Donbass FEZ, as well as a special procedure for entry into / out the Donbass FEZ of citizens of Ukraine, foreigners and stateless persons.

Article 8. Characteristics of taxation in the territory of the Donbass FEZ

In the territory of the Donbass FEZ according to the legislation of Ukraine and features of a special regime of the territory structures of tax bodies are created.

Taxation of individuals with a tax address (residence) in the Donbass FEZ is carried out in accordance with current tax legislation of Ukraine.

In the territory of the Donbass FEZ the territorial principle of taxation excluding division of physical and legal persons on residents and non-residents is introduced.  Income received from activities in the Donbass FEZ is subject to taxation.

For legal entities, a preferential income tax is introduced, providing for a zero income tax rate for a period of 10 years, followed by a reduction in the amount of taxable income for the amount of reinvestment after 10 years, a 50% reduction in value added tax on own goods being sold on the territory of Ukraine.  The criteria for compliance of economic entities for the provision of tax benefits are determined by the Administration Authority in coordination with the Verkhovna Rada of the Autonomous Region of Donbass.

Based on the financial agreement of the Administration Authority, the Verkhovna Rada of the Autonomous Region of Donbass and the Ministry of Finance of Ukraine, reimbursement of value added tax from the local budget is not allowed until the receipt of these amounts from the State Budget of Ukraine.

Rent payments for the extraction of minerals, payments for the privatization and lease of movable and immovable property and land are transferred to local budgets in the procedure agreed with the Verkhovna Rada of the Autonomous Region of Donbass.

Upon the decision of the Administration Authority, agreed with the Verkhovna Rada of the Autonomous Region of Donbass, selected taxes, fees, charges and other non-tax rates, amounts of fees, charges and non-tax payments may be set (canceled) for legal entities, as well as tax benefits, fees, charges and other non-tax payments, the grounds and procedure for their application, as well as the features of tax registration of taxpayers may be determined.

Taxpayers who have a tax address in the Donbass FEZ pay national and local taxes and fees established by the Tax Code of Ukraine, taking into account the peculiarities agreed with the Verkhovna Rada of the Autonomous Region of Donbass.

Article 9. Final provisions

This Law shall enter into force on the day following the date of its publication.

Laws and other legislative acts are valid in the part that does not contradict to this Law.

To the Cabinet of Ministers of Ukraine:

1) within a month:

to adopt legislative acts, the adoption of which is provided by this Law;

to bring their own acts in line with this Law;

to ensure that the central executive bodies of Ukraine bring their own acts in line with this Law.

2) within two months in coordination with the Verkhovna Rada of the Autonomous Region of Donbass to submit to the Verkhovna Rada of Ukraine proposals for bringing legislative acts in compliance with this Law.

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