Member Article

On 30 March 2020, the Ukrainian Parliament adopted the Law "On Amendments to Certain Legislative Acts Aimed to Ensure Additional Social and Economic Guarantees Due to the Coronavirus Disease (COVID-2019) Spread" (the Law), which introduces to the Ukrainian legislative environment new complex rules aimed at minimizing the negative impact of the spread of the COVID-19 in Ukraine.

The below summary focuses on key changes introduced by the Law.

 

"Quarantine" changes in labor laws: remote work, flexible schedule and salary for business interruption period

The Law envisages certain changes to the Labor Code of Ukraine (the "Labor Code"), particularly:

• from now the Labor Code will specifically regulate remote work and flexible work schedule;
  
  
• an employer and employee may agree on distant work, including work from the employee's home or any other place outside the employer's premises (previously, law allowed only work from home). The parties shall sign a written-form employment agreement for work from home (except for work from home during an epidemic or pandemic thread or a thread of military, technology-related or natural character);
  
  
• an employer and employee may agree on temporary or permanent flexible work schedule either upon commencement of employment or later;
  
  
• during an epidemic or pandemic thread or a thread of military, technology-related or natural character, an employer may formalize remote work and flexible work schedule in simplified manner through issuance of the employer's order;
  
  
• flexible work schedule does not affect remuneration or employment rights of an employee; remote work does not affect employment rights of an employee but the parties may agree on different remuneration terms;
  
  
• an employer shall pay 2/3 of the base salary of its employees for the time of business interruption during the quarantine period;
  
  
• for the period of quarantine, the Law extends the procedural time limits for filing court claims by both employers and employees.

Tax

VAT

VAT exemption for medicines, medical devices and other products required to address COVID-19 outbreak (as per the list approved by the Government) extended to cover not only import, but also supplies inside Ukraine. VAT exemption applies till last day of the month when quarantine ends.

Corporate income tax ("CIT")

• For corporate donors: when calculating taxable profits for 2020 the corporates can claim CIT deduction for the full amount of "anti-coronavirus" cash or in-kind donations granted to nonprofit organizations, national and local healthcare authorities or public healthcare providers. Previously, such deductions were capped at 4% of thecompany'staxable profit for the previous year;
  
  
• For donation recipients: "anticoronavirus" cash and in-kind donations are fully exempted from CIT if received by public healthcare providers or SE "Medical Procurements of Ukraine".

 
Personal income tax ("PIT")

• For individual donors: Individuals can claim PIT deductions for the full amount of "anti-coronavirus" cash or in-kind donations granted to nonprofit organizations, national and local healthcare authorities or public healthcare providers. Previously, such deductions were capped at 4% of theindividual'staxable income for the previous year.

Price regulation

• Government empowered to establish threshold wholesale and retail prices for anti-epidemic and other socially significant products;
  
  
• General fines for breach of regulated pricing increased up to UAH 3,400 for officials.
  
  
• If regulation is (i) breached during COVID-19 quarantine in respect of anti-epidemic or other socially significant products (as per the list to be approved by the Government) and (ii) price is by at least 1.2 times above the level established by the Government, fines may reach up to UAH 5,100 for officials;
  
  
• For corporates fines for failure to provide state authorities with fair information on pricing and comply with orders of price control authorities increased up to UAH 17,000 and UAH 34,000, respectively.

Disinfectants

For the period of quarantine state registration requirement is waived for disinfectors manufactured and used in Ukraine, provided that they do not contain active substances hazardous for human health.

Off-label and unlicensed medicines

Off-label or unlicensed use of medicines for treatment of COVID-19 shall be permitted, subject to the following: (i) it is recommended by regulatory authority of the U.S., EU member states, UK, Switzerland, Japan, Australia, Canada, China or Israel (and/or their efficacy for COVID-19 is proved – only for off-label use), (ii) it is provided by Ukrainian clinical guideline approved by the Ministry of Health ("MOH"), and (iii) patient has provided an informed consent. The procedure for such off-label and unlicensed use shall be separately established by the MOH.

Expedited marketing authorization process and approval of clinical trials of medicines for treatment of COVID-19

• The timeline for marketing authorization of medicines for treatment of COVID-19 (as well as for approval of variations to registration dossiers) shall be up to 7 days;
  
  
• Regulatory review of clinical trial materials (as well as substantial amendments thereto) for medicines for treatment of COVID-19 shall take up to 5 days.

Changes shall be in effect until 30 June 2020.

Certification of personal protective equipment

For the period of quarantine, personal protective equipment (including medical masks and gowns) shall be subject to safety certification. Timeline for issuance of certificates: 5 days.

Protection of property rights

The Law simplifies certain possibilities for protection of property rights. Particularly, it extends a one-year statute of limitations for claims on termination of gift contracts. For the period of quarantine, the heirs, their legal representatives, as well as the bodies of trusteeship and guardianship are granted with an extended time limit to challenge in court the actions of the executor of the will if such actions violate the interests of the heirs. The Law also extends the statute of limitations for claims regarding separation of property being filed after the dissolution of marriage.

However, we note that the quarantine period has also extended the statute of limitations for claims on recognition of assets as unjustified and their recovery for the benefit of the state.

Also, the Law relaxes the ban for the acquisition of property an receiving services by state and municipal authorities, as set forth by anti-corruption laws. From now such ban does not cover funds and goods aimed at combating serious illnesses (according to the list of the Cabinet of Ministers of Ukraine), which are transferred to state bodies and institutions during the quarantine period.

Amendments to three procedural codes

The Law, among other things, made amendments to the procedural codes, designed to regulate the procedure for holding court hearings during the quarantine period. Learn more following the link >>

Amendments to Commercial and Civil Codes

The Law made amendments to the Commercial and Civil Codes regulating terms (including limitation periods) in different legal relations. Learn more following the link >>

Changes on holding general meetings

The Law makes a number of important amendments to the legislation governing activities of joint stock companies and operation of their governing bodies.

In particular, the Law establishes a temporary procedure for calling and holding in 2020 of the JSC general meetings of shareholders. Learn more following the link >>

Energy & Construction

The Law influences energy & construction projects in respect of contractual terms. As a general rule the terms of penalty application, claims application for defects on the delivered goods, responsibility for breach of construction contracts and relating contracts for design and research works continue for the duration of such quarantine. It means that the terms are postponed during the quarantine which started on 12 March 2020 by enacting the Resolution of the Cabinet of Ministers in Ukraine No. 215 dated 16 March 2020 and presumably will end on 24 April 2020.

From the practical standpoint, the Law introduces the following changes:

• Accrual of penalties for delayed fulfillment of the obligation, unless otherwise provided by law or contract, shall be suspended six months after the date on which the obligation was to be fulfilled plus the quarantine duration.
  
  
• Claims arising from the delivery of goods of improper quality may be brought within six months from the date of the buyer's establishment of defects in the goods delivered to him in due course plus the quarantine duration.
  
  
• The limitation period for claims arising from improper quality of works under the construction contract, shall be determined from the date of acceptance of the work by the customer and shall be from one to thirty years plus the quarantine duration.
  
  
• A claim for compensation to the customer for damage caused by the project defects can be filed within ten years plus the quarantine period, and if the damage caused to the contractor by unlawful actions that led to the destruction, accidents, collapse - within thirty years from the date of acceptance of the constructed object plus the quarantine period.

Rent relief

The Law provides that, for the duration of the quarantine, tenants can be relievedfrom rent payments in accordance with p.6 of art.762 of the Civil Code of Ukraine (the "CCU"). The mentioned article of the Civil Code stipulates that tenants are exempt from the obligation to pay rent over the period when property could not be used due to circumstances for which it is not liable.

Currently, it is not clear whether the legal novelty will be construed as:

1) an added emphasis on the applicability of p.6 of art.762 of the CCU and the possibility of rent exemption for the tenants that cannotfullyuse anddo not usepremises due to the quarantine (e.g. cinemas, museums, shops,etc.); or

2) an extension of the conservative interpretation of art.762 of the CCU and the possibility of exemption of all the tenants exposed to the quarantine from rent irrespective of its level of impact on their activity (e.g., restaurants that continue working in the takeaway mode).

The risk of the latter interpretation was also addressed by the Chief Scientific and Expert Department in the Conclusion to the voted draft Law as of 30 March 2020, stating the following: "Please note that it is proposed in paragraph 14 to exempt from rent all tenants, including those that are using the property, which does not meet the requirements of p.6 of Art.762 of the CCU and violates the rights of landlords because it allows an unjustified free of charge use of the property".

Also remaining undetermined is the status of the so-called "service payments", such as security fees, cleaning costs,etc. In practice, such fees are usually not included in rent payments and charged separately according to lease agreements.

 

To get more information or discuss business and legal implications for your company caused by novel coronavirus outbreak please get in touch with Asters COVID-19 task force at[email protected]

 

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