Decree

of the President of Ukraine
On the Special Economic Zone “Transcarpathia” (Zakarpattya)

With a view to providing for the allocation of investments, promotion of foreign economic ties development, increase in the deliveries of high quality goods and services, creation of modern industrial, transport and market infrastructure and in conformity with point 4 Chapter XV “Transnational Provisions” of Constitution of Ukraine I shall hereby d e c r e e the following:

1. A special economic zone “Transcarpathia” shall be formed on the territory of Transcarpathian region covering the area of 737,9 ha in accordance with the map of the region for the term of 30 years.

2. Special customs, taxation and other regulations shall be established on the territory of the special economic zone in accordance with this Decree for the term stated in article 1 of this Decree.

A special regulation of investment activities shall stipulate putting into effect tax, customs and other preferential benefits (duties) envisages by this Decree for the subjects of en trepreneurial (business) activities that realize investment projects.

The legislation of Ukraine in the special economic zone “Transcarpathia” shall be effected with due regard for the specific peculiarities stipulated by the Law of Ukraine “On the General Provisions concerning the Formation and Functioning of Special (Free) Economic Zones” and this Decree.

3. The bodies of power in the special economic zone “Transcarpathia” shall be:

the Transcarpathian Regional Rada (Zakarpats’ka Oblasna Rada) and

the Transcarpathian Regional State Administration;

the body (organ) of the economic development of the special economic zone “Transcarpathia”.

4. The Transcarpathian Regional Rada and Transcarpathian Regional State Administration exercise their authority in keeping with the legislation of Ukraine with due regard for the specific peculiarities determined (set) by this Decree.

The authority of the Transcarpathian Regional Rada shall also comprise:

- submitting proposals concerning changes in the regulations of economic activities on the territory of the special economic zone “Transcarpathia” in keeping with the procedures set by the legislation of Ukraine;

- making contracts (agreements) with the body of the economic development of the special economic zone of “Transcarpathia” on the transfer of land into its tenure, objects of infrastructure located on this territory and natural resources of local significance.

5. The body of the economic development of the special economic zone “Transcarpathia” (Zakarpattia) (hereinafter referred to as the body of economic development) shall be the legal entity (juridical person) authorized or specially formed by the Transcarpathian regional State Administration in the organizational and legal form in conformity with the legislation of Ukraine.

The authority of the body of economic development shall comprise:

working out and providing the realization of the strategy and the current economic development programs (projects) of the zone;

concluding making agreement (contract) with the investor (investors);

elaborating and implementing the set of organizational measures to ensure allocation of financial resources, including the funds of enterprises and organizations (foreign ones inclusive) as well as charity funds, those of public organizations and physical entities (persons);

organizing personnel training and extension courses;

realizing measures providing law and order, economic and ecological security on the zone territory together with respective bodies;

arranging the equipment of the special economic zone;

building the objects of the industrial and non-industrial infrastructure;

concluding leasehold agreements concerning land lots and infrastructure objects with the subjects of business activities within the authority limits granted by the bodies of local self-government;

realizing other kinds of authority envisaged by this Decree and delegated by the bodies of local self-government.

6. All kinds of business activities shall be conducted (carried out) on the territory of the special economic zone with the exception of the activities directly forbidden by the legislation of Ukraine.

The formation of business activities subjects on the territory of the special economic zone shall be done with the consent of the body of economic development.

The subjects of business activities registered on the territory of the special economic zone must (shall) not have any branch offices, subsidiary institutions and other separated departments beyond the zone borders.

On the territory of the special economic zone there shall be located enterprises that carry out operations of transit good services, their storage, completion, assortment, packaging, rendering transportation – agent and forwarding dispatching services, trade (merchandising) as well as enterprises that make use of modern technology with a view of producing goods for the export and inner market supplies.

The objects of industrial and non-industrial infrastructure may be located on the territory of the special economic zone.

The establishment of the casino, other gambling houses (places) and gambling business shall be forbidden on the territory of the special economic zone.

Pursuing business activities liable to licensing on the territory of the special economic zone shall be effected on the ground of respective permits (license) issued in accordance with the legislation of Ukraine.

A fee shall be paid for the state registration of the subject of business activities on the territory of the special economic zone the amount of which shall be determined by the Transcarpathian Regional State Administration with the consent of the Ministry of Finance of Ukraine. The amount of the said fee shall be equal for all subjects of business activities of the same kind.

7. Special customs zone regulations shall be established in the special economic zone of “Transcarpathia”

8. In the special economic zone “Transcarpathia” the following procedures for the movement (transportation into/ transportation out of) of goods and other objects shall be established:

in case of the transportation of goods and other objects (with the exception of excise tax goods) across the borders of the customs area of Ukraine to the territory of the special (free) economic zone to be used within zone boundaries they shall be exempt from the import customs duty and value-added tax;

in case of the transportation of goods and other objects that were previously brought across the borders of the customs area of Ukraine to the special economic zone and from this zone to the customs area of Ukraine, taxation shall be done in accordance with the legislation of Ukraine as on the import of goods to Ukraine;

in case of the transportation of goods and other objects completely produced or sufficiently processed in the special economic zone to the customs area of Ukraine from the territory of the special economic zone value-added tax and excise tax shall be payable as for the internal consumption in Ukraine;

in case of the transportation of goods and other objects produced, inclusive completely produced or sufficiently processed, in the special economic zone, from the territory of the zone across the borders of the customs area of Ukraine they shall be exempt from export customs duty and excise tax while value-added tax shall be paid at the zero tax rate;

in case of the transportation of goods, previously brought across the borders of the customs area of Ukraine to the territory of the special economic zone, from this zone across the customs area of Ukraine, export duty tax, value-added tax and excise tax shall not be payable;

in case of the transportation of goods and other object from the customs area of Ukraine to the territory of the special economic zone export duty tax shall not be payable while value-added tax shall be paid at the zero tax rate;

in case of the transportation of goods and other objects to the territory of the special economic zone for the purpose of transit taxation shall be paid in accordance with the legislation of Ukraine;

in other cases taxation shall be paid in accordance with the legislation of Ukraine.

Whether goods satisfy the criteria as fully produced or sufficiently processed in the special economic zone shall be determined on the basis of Article 18 of the Law of Ukraine “On the Uniform Customs Tariff”.

The term of the goods storing in the special economic zone shall not be limited with the exception of cases concerning the goods and other objects with a limited term of storage.

The customs value of goods and other objects listed in point “b” of this Article shall not include the cost of services connected with shipment (transport) of goods, their storage, completion, assortment packaging, etc. done on the territory of the special economic zone. The said services shall be exempt from the value-added tax.

9. Article 8 shall not be effective (applicable) for the exchange of goods (barter) operations.

10. Customs control of the goods transport across the borders of the special economic zone shall ensure (guarantee) the observance of the goods transport procedures (regulations) by the state bodies, enterprises, offices and organizations, their officials as well as citizens in keeping with the legislation applicable on crossing the border of Ukraine taking into account norms specified by this Decree.

In order to prevent the non-sanctioned and non-controlled penetration of the physical persons, transport means, as well as bringing inside to the territory of the special customs zone or taking outside goods and other objects, beyond its borders, the territory of the special customs zone shall be guarded with barriers on the perimeter and shall be equipped to meet the requirements of the State Customs Service of Ukraine.

The State Customs Service of Ukraine shall determine the territories of customs control zones for the special economic zone, their boundaries and regulations of transport of goods, means of transport, citizens.

Customs duties in the special economic zone shall be imposed (paid) in keeping with the legislation of Ukraine.

The body of economic development shall finance the organization of customs and the special customs zone barriers.

The regulations (procedure) of the special customs zone shall be put into effect pursuant the date of the approval of the Act on putting into operation the objects of the customs infrastructure by the State Customs Service of Ukraine.

11. The import of goods to the territory of the special economic zone by the subjects of business activities to meet the needs of their own production and the export of goods completely produced or sufficiently processed in the special economic zone shall not be liable to licensing and quoting unless the international agreements of Ukraine otherwise stipulate.

The regulations concerning the export (import) of goods and other measures of non-tariff regulations of foreign economic activities shall be valid in respect to foreign economic operations pursued in the special economic zone in keeping (agreement) with the legislation of Ukraine.

12. The Cabinet of Ministers of Ukraine may establish limitations on the transportation of some kinds of goods to the customs area of Ukraine from the territory of the special economic zone and on their transportation from the customs area of Ukraine to the special economic zone.

13. Special preferential taxation (tax deductions) regulations shall be established in the special economic zone of “Transcarpathia”:

a) the duties of the income payers on the revenues registered in the special economic zone shall be payable at the rate of 20 per cent to the object of taxation;

d) profits made by non-residents from the source originating in the zone as a result of business activities shall be subject to taxation at the 2/3 rate established in Article 13 of the Law of Ukraine “On the Taxation of Enterprises’ Income”. This normative shall be invalid in respect to profits generated by involving investment activities into securities issued at the decision of the authorized state body or local self-government and to profits listed in point 13.6 of the Law of Ukraine “On the Taxation of Enterprises’ Income”;

f) taxes (levies) to the State Innovation Fund shall not be payable.

Special preferential taxation (tax deduction) regulations shall be applied to the subjects of business activities registered in the special economic zone in respect to the volume of the activities pursued in this zone.

14. Revenue in the foreign currency gained from the realization of products, goods (work, services), produced or offered in the special economic zone shall be exempt from the compulsory sale.

15. The Ukrainian Cabinet of Ministers may establish special regulations concerning the crossing of Ukrainian borders by foreign citizens and persons without citizenship who travel to the special economic zone as well as special regulations concerning the entry into the special economic zone and the departure from it of Ukrainian citizens foreign citizens, and persons without citizenship.

16. In the event that the investor or the subject of the business activities inadequately fulfils or fails to fulfil the agreement (contract) terms concluded with the body of economic development, such an investor (subject of the business activities) shall bear responsibility stipulated by the legislation of Ukraine and the respective agreement (contract).

17. In the event of the liquidation of the enterprise set up in the territory of the special economic zone or its reorganization (at the decision of its owner or his proxy) before the term specified in the agreement (contract) concluded between the investor and the economic development body, the investor (the person authorized by him) shall be liable to notify the administrative bodies of the special economic zone concerning the reasons for the enterprise liquidation (reorganization) within ten days pursuant the said decision hereof.

18. The special economic zone shall be regarded as liquidated pursuant to the expiry term granted at its formation unless it shall be prolonged in the set procedure.

The special economic zone may be liquidated before its expiry term in keeping with the procedure envisaged by the legislation of Ukraine.

19. The state shall guarantee the protection in the full volume, as stipulated by the legislation of Ukraine, of all the ownership and non-ownership rights of the investors and subjects of business activities pursued in the zone at its liquidation.

Ukrainian courts of law shall have jurisdiction to settle any disputes between the administrative bodies of the special economic zone, subjects of business activities operating in the zone, investors and the liquidation committee (commission) arising from and in connection with the zone liquidation and all other disputes with the foreign subject of business activities as a party shall be subject to the courts of law and in the event that parties so agree to those of foreign arbitration tribunals.

20. Ukraine’s Cabinet of Ministers shall be charged with responsibility for official explanation concerning the provisions of this Decree.

21. The following Decree shall be put into effect in keeping with the procedures specified in point 4 chapter XV “Transitional Provisions” of the Constitution of Ukraine.

President of Ukraine L. Kuchma

Kyiv
9 December 1998 N 1339 / 98