In the wake of the rapidly spreading coronavirus disease (COVID-19), which has taken global dimensions and has been declared a pandemic, the vast majority of countries have resorted to severe restrictive measures and adopted legislation to provide an adequate response to the various problems that governments, businesses and ordinary people are currently facing. The Ukrainian government has quickly followed suit and enacted several important pieces of legislation in order to effectively address the developing crisis. Please find below an update on this legislation as of March 31, 2020.
1. General Quarantine Measures Extended
On Mach 25, 2020, the Cabinet of Ministers of Ukraine extended until April 24, 2020 the general quarantine measures initially approved by Resolution No. 211 dated March 11, 2020 and declared an emergency situation on the whole territory of Ukraine.
At the same time, the government has added stores selling veterinary substances, pesticides and agrochemicals, seeds and seedlings, means of communication, as well as veterinary clinics, service stations, workshops repairing computers, utensils and consumer goods, postal offices to the businesses excluded from the general lockdown.
In addition, the number of passengers permitted to be transported by local public transit (bus, tram, trolleybus) was increased to 50% of the available seats per vehicle.
On March 29, 2020, the Cabinet of Ministers additionally resolved that persons diagnosed with COVID-19 and not treated in hospital as well as those who have been in contact with sick persons require self-isolation. The duration of self-isolation shall be determined by a physician. Those who have arrived from countries/regions with a local transmission of the virus in a community, are subject to a mandatory 14-day observation (isolation) in a specialized institution.
2. Specific legislation to prevent and combat coronavirus (COVID-19) and provide relief to businesses
On March 30, 2020, Ukrainian Parliament adopted several legislative acts aimed at preventing and combating coronavirus as well as providing relief to businesses. The most essential of them is the Law of Ukraine “On Amending Certain Legislative Acts Aimed at Providing Additional Social and Economic Guarantees due to the Spread of the Coronavirus Disease (COVID-19)” (draft registration No. 3275). As of April 1, 2020, the law has not been signed by the President of Ukraine and published.
The following measures provided by the above law are of particular importance for the national economy and businesses:
1) Taxes and customs
(a) The annual income threshold of individual entrepreneurs and companies eligible for unified tax / simplified taxation is increased:
Group I – from UAH 300,000 to 1,000,000;
Group II – from UAH 1,500,000 to 5,000,000;
Group III – from UAH 5,000,000 to 7,000,000.
(b) Until May 31, 2020, excise tax charged on ethyl alcohol used in the manufacture of disinfectors shall be 0% per 1 liter of 100% alcohol.
(c) Land tax, including rent payments for land plots of municipal and state property, as well as commercial real estate tax are not charged only for the period March 1, 2020 – March 31, 2020. Thus, the exemption period is shortened by one month and for April 2020 these taxes must be paid.
(d) Local self-government authorities shall be entitled to decrease local taxes in 2020.
(e) The statutory deadlines for administrative tax complaint procedures, individual tax consultations and providing responses to the tax office’s requests are suspended until May 31, 2020.
(f) The period during which no sanctions for late or incomplete payment of unified social tax and late submission of reporting on this tax are not charged and no tax audits are conducted is extended until May 31, 2020. The deadlines for the submission and consideration of taxpayers’ claims related to the same tax are also extended until May 31, 2020.
(g) Corporate profit taxpayers may fully deduct the cost of COVID-19 related goods and cash amounts donated to non-profit organizations and healthcare institutions. Thus, the existing 4% limitation (in relation to the taxable profit for the previous year) on such deduction shall not apply.
2) Employment / labor relations
(a) The Labor Code has been amended with some detailed provisions on a flexible working schedule and remote work (home office:
Generally, the consent of employees concerned is required to transfer them to a flexible schedule or remote work.
Written form shall be mandatory for remote work (home office) employment agreements.
As an exception, no employee’s consent and written agreement are required during a threat of an epidemic or pandemic spread and/or a threat of a military, man-made, natural or other character. In this case, the employer may introduce remote work (home office) or a flexible schedule unilaterally by its order (“nakaz”).
A flexible working schedule does not apply where it would be incompatible with the specific of work (continuous production, retail trade in stores, certain customer services, transportation, etc.) or labor safety requirements.
The fact that employees are employed under a flexible working schedule or engaged in remote work shall in no way affect the scope of their labor rights, including remuneration.
(b) Importantly, it is clarified that employees affected by idle time resulting from quarantine established by the Cabinet of Ministers of Ukraine shall be paid at 2/3 of their tariff rate (salary).
(c) The limitation periods in labor disputes shall be suspended for the period of the COVID-19 quarantine.
(d) Another important amendment to labor laws is the introduction of partial unemployment benefits specifically during the period of quarantine due to COVID-19:
Partial unemployment benefits shall be provided by local employment centers and covered by the Social Insurance Fund Against Unemployment (the “Fund”).
Entitled to receive these benefits are employees who have lost part of their salary due to a forced reduction of their working time duration in connection with an interruption (reduction) of production following the quarantine imposed by the Cabinet of Ministers of Ukraine to combat the spread COVID-19.
Only small and middle-sized business entities can enroll in this governmental relief program specifically for the quarantine period.
No benefits shall be provided to an employer that in the last five years has been is in arrears with salary payments or has outstanding unified social tax payments.
In order to enroll in the partial unemployment benefit program, an employer has to apply with a local employment center and submit the following documents: (i) a free-form application; (ii) a copy of an internal order (“nakaz”) indicating, inter alia, the start date of the interruption (reduction) of production and measures taken to prevent the commencement and spread of COVID-19; (iii) data of employees who are entitled to receive partial unemployment benefits; (iv) a certificate confirming that the employer does not have outstanding salary and unified social tax payments for the last five years.
An application has to be filed within 30 calendar days of the first day of production interruption (reduction). The local employment center shall make a decision on benefit payment within three business days of filing.
Partial unemployment benefits shall be paid for each hour of working time reduction at 2/3 of an employee’s regular tariff rate (salary). However, the actual benefit amount depends on the Fund’s financial capacity and the maximum benefit amount may not exceed the minimum statutory salary established by law (currently UAH 4,723 per month).
Affected employees shall be entitled to receive benefits from the first day of their working time reduction for the whole period of quarantine.
The employer is obliged to repay the received benefit sums if, within six months of the last day of benefit payment, the employment relationship is terminated due to staff redundancy, violations of employees’ rights by the employer or by mutual agreement of the parties.
Despite the intended positive effect of the new relief measures, it does not follow clearly from the law whether all businesses are eligible for COVID-19 partial unemployment benefits or only companies manufacturing goods (since the wording of the law explicitly mentions only cases of an “interruption or reduction of production”).
(e) For the duration of COVID-19 quarantine, the Cabinet of Ministers of Ukraine may suspend the issuance of work permits to foreign citizens.
(f) For the duration of COVID-19 quarantine, the rules for the enrollment of unemployed persons in regular unemployment benefit programs shall be relaxed.
3) Business regulation
(a) Certain statutory terms, limitation periods and deadlines are suspended (extended) for the time of quarantine, in particular:
The period for charging penalties due to breach of contract (failure to fulfill a commercial obligation).
The limitation period for claims related to the quality of supplied goods.
The limitation periods for claims related to quality deficiencies under construction and research/design development services agreements.
The general 3-year limitation period as well as special limitation periods under the Civil Code of Ukraine, in particular, the limitation period regarding: breaches of pre-emptive purchase rights; a creditor’s claims to a pledgor under a pledge agreement; claims related to the quality of purchased goods; claims under lease agreements related to damages caused to the leased object.
Certain limitation periods under the Family Code of Ukraine.
(b) It shall be prohibited to increase interest rates under loan agreements in a period when measures to prevent an epidemic or pandemic (in particular, COVID-19) are being implemented.
(c) From the moment quarantine was declared by the Cabinet of Ministers of Ukraine (Resolution No. 211 dated March 11, 2020) and until its termination pursuant to the procedure established by law, the lessee/tenant shall be released from lease/rent payments in accordance with Art. 762 (6) of the Civil Code of Ukraine. The latter norm provides that “the lessee/tenant shall be released from lease/rent payments for the whole period during which the leased object could not be used due to reasons for which the lessee/tenant is not responsible”. Thus, the possibility to suspend rent payments under this new regulation is not straightforward. It is still contingent upon the answer to the question whether the lessee/tenant is or is not able to use the leased object in the circumstances of quarantine.
(d) In 2020, companies shall have extended deadlines for disclosing (publishing) their financial reporting for the year 2019. Such reporting shall be disclosed (published) within 90 calendar days after the end of quarantine but not later than on December 31, 2020. Likewise, issuers of securities (such as joint stock companies) shall enjoy extended deadlines in 2020 for disclosing their annual information for 2019. The deadline for television and radio broadcasting companies to submit reports on their shareholding structure is extended by 30 days after the end of COVID-19 quarantine.
(e) The terms/deadlines for holding annual shareholders’ meetings by joint stock companies, corporate investment funds, limited liability companies (only if the latter are issuers of some securities), credit unions are extended in 2020. Such meetings shall be held within three months after the end of quarantine. It should be possible to conduct meetings remotely in accordance with a temporary procedure to be approved by the National Securities and Stock Exchange Commission.
(f) Supervisory board members of a joint stock company or a credit union whose term of office expires in 2020 shall remain in office until a general shareholders’ meeting for their re-election has been conducted.
(g) During the period of COVID-19 quarantine, plenary meetings of local councils, their permanent commissions, executive committees may be held remotely (via a video or audioconference) in order to consider urgent/emergency issues, except for issues decided by secret ballot.
(h) Liability for certain breaches of the legislation on price regulation has been increased.
(i) For the period of COVID-19 quarantine, no privatization (sale) of large privatization objects is conducted.
(j) The period during which no ordinary state supervision (control) measures (audits) of businesses are conducted is extended till June 30, 2020.
(k) The Cabinet of Ministers of Ukraine shall have the power to establish maximum prices for goods intended to combat an epidemic and essential social goods as well as ensure control of compliance with such maximum prices.
(l) For the period of COVID-19 quarantine it shall be permitted to manufacture and utilize disinfectors without the requirement of their state registration, provided they do not contain any substances dangerous to human health.
(m) For the period of COVID-19 quarantine, protective equipment and clothing, including single-use masks and medical overalls, are subject to certification with respect to compliance with the due level of protection. Certificates (or refusals) shall be issued within five days.
4) Dispute resolution / litigation
(a) All procedural terms and deadlines under the Code of Administrative Procedure of Ukraine, Commercial Procedural Code of Ukraine, and Civil Procedural Code of Ukraine are extended for the duration of COVID-19 quarantine.
(b) During COVID-19 quarantine, participants of a court case are allowed to take part in court sessions outside the courtroom through videoconferences (except for criminal cases).
(c) During quarantine, the court may limit access to the courtroom of persons who are not participants of a court process.
5) Perspective measures
(a) The Cabinet of Ministers of Ukraine is instructed to develop, within one month:
A national program of targeted loans with a discounted interest rate to support payroll budgets;
A program to stimulate the economy and overcome negative consequences of restrictive measures related to COVID-19 and including a list of economic branches securing the largest number of workplaces;
A program to support economy branches and protect their goods/services from import alternatives taking into consideration Ukraine’s international obligations.
As noted above, the coronavirus situation is rapidly developing. Therefore, new measures can be taken and fresh legislation enacted at short notice. We are constantly monitoring the current development and will keep you posted about any significant changes.
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