Ukraine

Ukraine, located in the heart of Eastern Europe and occupying a land area of 603,700 square kilometres, is the second largest country in Europe after Russia. It is divided into 24 provinces (oblasts) and the Autonomous Republic of Crimea, with Kyiv as its capital and the largest city. Ukrainian is the official language, and the currency is the hryvnia (UAH). Ukraine's population was estimated at approximately 36.7 million people as of the beginning of 2023.

Ukraine's proximity to the European Union (EU), the sheer quantity of its consumers, and the physical size of the country makes it an opportunity for investments. The country's main asset is its extensive human capital. Ukraine's well-educated workforce provides a competitive advantage.

After rebounding from the 2008/09 financial crisis, with positive gross domestic product (GDP) growth in 2010 to 2013, Ukraine again suffered from a significant decline in GDP in 2014 and 2015. During 2014 to 2016, Ukraine faced a number of significant political, economic, and social problems, which resulted in a contraction of industrial production, a significant devaluation of the national currency, and an outflow of investments.

In 2020 and 2021, COVID-19 presented significant challenges to people and organisations around the globe. In response to the global effects of COVID-19 on businesses, Ukraine has implemented tax incentives to support its economy, introducing temporary changes to the tax and labour legislation, aimed at mitigating the impact of COVID-19 on Ukrainian businesses and individuals.

As a result of the ongoing confrontation with the Russian Federation, which escalated from 24 February 2022, the territories of Crimea and some territories of Donetsk, Luhansk, Kherson, and Zaporizhzhia regions are currently treated as ‘temporarily occupied’ with a specific legal regime. New territories that are de facto occupied by the Russian Federation as a result of escalation of the Russian Federation military invasion may be declared as Temporarily Occupied Territories subject to the decision of the National Security and Defense Council of Ukraine enacted by the Decree of the President of Ukraine. Active military actions between Ukraine and Russian armies take place in the East and South of Ukraine. The war had significant negative impact on the economy of Ukraine, with a 30% reduction of GDP in 2022. However, in 2023, Ukrainian GDP is expected to grow by 3.5% according to various reputable analysts and organisations (e.g. World Bank).

Ukraine signed the Association Agreement with the European Union, and it has come into force starting 1 September 2017. Moreover, Ukraine was granted the status of EU member candidate on 22 June 2022. Reforms and significant changes in local legislation are needed in order for Ukraine to meet the business standards and principles familiar to the EU investors.

The Ukrainian Tax Code, which took effect in 2011, has already been tested by businesses. It was also amended by legislators a number of times between 2012 and 2023.

The Customs Code of Ukraine, which took effect in 2012, introduced the provisions of the General Agreement on Tariffs and Trade (GATT), the Kyoto Convention, and World Customs Organisation (WCO) requirements. Currently, the government of Ukraine is working on implementing EU standards in customs legislation (AEO programme, accession to the Convention on Common Transit, protection of intellectual property rights at the moment of importation).

In late December 2023, the Ukrainian government published the National Revenue Strategy 2030. The respective documents outline a proposed plan to develop and introduce changes to many tax related rules, including alignment of VAT and excise rules and rates to the ones in the European Union, significant changes in the simplified tax regimes, changes in taxation of the resource extraction industries, progressive tax systems for individuals and some businesses (super profits tax), more strategic approach to tax benefits, as well as taxation of virtual assets and profits of digital companies.

PwC has been present in Ukraine’s market since 1993. Overseen by 20 partners and directors, and employing more than 430 specialists and support staff, PwC operates in Ukraine from its offices in Kyiv, L’viv, and Dnipro.

We rely on our significant experience in the local market, as well as the strength of our international network, to help our clients build value, manage risk, and improve the performance of their businesses in Ukraine. Our goal is to build an iconic professional services firm, always forward looking, because we aim to be the best. We set the standard and we drive the agenda for our profession. PwC Ukraine’s client base includes the largest Ukrainian and multinational companies, as well as government agencies.

Martial law enacted in Ukraine from 24 February 2022

Ukraine became subject to a military aggression of the Russian Federation, which led to the imposition of martial law from 05:30 on 24 February 2022 according to the Decree of the President of Ukraine dated 24 February 2022 № 64/2022 'On the Imposition of Martial Law in Ukraine'. The martial law was further extended till 14 February 2024 by a number of Decrees of the President of Ukraine approved by the Parliament of Ukraine.

The Ukrainian Chamber of Commerce and Industry (the 'CCI of Ukraine'), in its Letter dated 28 February 2022 № 2024/02.0-7.1, has recognised the military aggression of the Russian Federation against Ukraine as force majeure circumstances. The force majeure circumstances in question lasting from 24 February 2022 till their official ending are considered as extraordinary, unavoidable, and objective circumstances for business entities under agreements and contracts, certain tax liabilities, the duty of fulfilment of which emerged in accordance with the terms of the agreement/contract and the fulfilment of which became impossible in due time due to such force majeure circumstances.

Generally, the Ukrainian state bodies and courts keep functioning. At the same time, according to the recommendations of the Council of Judges of Ukraine, as well as certain relevant legislative acts adopted since the start of the war, (i) the work of the court should be determined based on the current situation in the region, (ii) the proceedings and hearings may be postponed by the court (except for urgent trials), and (iii) procedural terms shall be extended, if possible, at least until the end of martial law.

Some public registers do not function or function in a rather limited mode in the territories of active hostilities and/or temporarily occupied territories.

Payments abroad (with certain exceptions) are generally prohibited under the Resolution of the National Bank of Ukraine No. 18 as of 24 February 2022.

More details of the changes related to the introduction of martial law are provided in each respective section.