The Verkhovna Rada votes for localization in public procurement and incentives for industrial parks

On December 16, 2021, the Verkhovna Rada voted for draft laws to introduce localization requirements in the field of public procurement and to set tax and customs benefits for industrial parks.

Draft law on localization in public procurement

The draft law No. 3739 "On Amendments to the Law of Ukraine "On Public Procurement" was adopted in the second reading. The draft law aims at creating conditions for sustainable development and modernization of the domestic industry and suggests that application of the degree of localization in public procurement shall be a mandatory criterion for admission to tenders of certain categories of goods. Localization requirement will apply to railway transport, urban passenger transport, municipal vehicles and special equipment, electrical machinery and aero-cosmic sphere, provided the expected purchase value exceeds 200,000 UAH (6,500 EUR).

The localization requirement will apply for ten years starting from 2022. The degree of localization for 2022 will be 10% and grow by 5% each year, until reaching 40% in 2028.

The localization requirement will not apply to products manufactured in the EU, the US, and states that are parties to the WTO Agreement on Government Procurement and other countries that signed an agreement on access to public procurement with Ukraine.

The draft law is pending signature of the President and will enter into force in six months after the official publication.

Draft laws on amendments to the Tax and Customs Codes of Ukraine

The Verkhovna Rada also adopted as a basis draft law No. 5688 "On amendments to the Tax Law" and passed in the first reading draft law No. 5689 "On amendments to the Customs Law". The amendments are aimed at attracting large-scale investments in industrial production by providing economic incentives to industrial parks. The draft laws suggest introducing:

• CIT exemption for 10 years. CIT Exemption will apply to income eared form the business activity within the industrial park;
• VAT exemption on imports of certain categories of new equipment imported by participants of industrial parks for their own use;
• possible reduction of duty land tax;
• customs exemption on imports of certain categories of new equipment (components) imported by participants of industrial parks for their own use.

The draft laws are subject to further discussion and review by the Verkhovna Rada in the second reading.

Earlier Ukraine has adopted the changes to the Law "On Industrial Parks" providing simplification of the establishment of industrial parks and stimulation of their activity. For more details, please see our press-release on this matter.

For more information, please, contact Counsel Nadiia Dmytrenko and Managing Partner Dmytro Vidsota.