Ukraine Market Entry

Ukraine Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

During the first weeks since the start of the war, business and production activity in Ukraine was paralyzed, there was a sudden break in logistics, production and trade chains. Since mid-March, part of the enterprises gradually adapted to the war situation and at least partially resumed production and business activities, namely in territories that are not occupied and (or) not close to the front line, i.e. mainly the central and western regions of Ukraine. Currently, companies operating on the Ukrainian market strive to preserve the sales and distribution channels that existed before the war, primarily based on personal contacts with sales representatives and dealers who remained in the country, did not evacuate or enlist in the army. Local dealers and sales representatives are trying to restore sales channels, move warehouses with goods to safer territory, maintain contacts with end customers or subscribers. For the logistics of goods, the services of the private postal company Nova Pošta, which has an extensive network of branches and courier delivery in the country, has now become extremely important, delivering both parcels and containers. It is necessary to note that the international trade activity was limited mainly to the supply of production for three segments of the Ukrainian economy: defense, healthcare, agriculture and processing industry. Other market segments are in the doldrums. that international trade activity was limited mainly to the supply of production for three segments of the Ukrainian economy: defense, healthcare, agriculture and processing industry. Other market segments are in the doldrums. that international trade activity was limited mainly to the supply of production for three segments of the Ukrainian economy: defense, healthcare, agriculture and processing industry. Other market segments are in the doldrums. Check smber for agriculture and fishing facts of Ukraine.

International trade with Ukraine during martial law is also limited by the so-called moratorium on foreign currency payments abroad: resolution of the National Bank of Ukraine No. 18 “On the functioning of the banking system during martial law”. Resolution No. 153 of the Cabinet of Ministers of Ukraine dated February 24, 2022, however, established a list of so-called critical import items that were allowed to be imported and paid for, initially these were exclusively items related to state security and medical goods. However, that list is gradually being expanded to include new commodities that are permitted for import. However, it still lacks a number of items that are important for Czech exporters – e.g. certain types of machines, transformers, etc. The current list of items that are allowed to be imported into Ukraine can be found at the link: Kriticky_dovoz. When closing the deal, it is necessary to check,

Truck transport remains the most unused way of transporting goods from the Czech Republic to Ukraine, where now, however, only Ukrainian transport companies move. During a state of war, international transport companies do not operate on the territory of Ukraine, and international insurance companies do not provide insurance on the territory of a country where a state of war is declared. This fact, together with the increase in the price of fuel, caused a two- to three-fold increase in the price of transport services.

In March, the Verkhovna Rada of Ukraine’s parliament approved laws introducing a simplified method of customs control, which exempts certain types of businesses from paying VAT, excise duty and import duties, provides for the submission of a preliminary customs declaration and does not require customs control. However, all changes must be consulted with local corporate accountants to avoid unforeseen complications and delays directly at the border or during customs clearance. At the same time, the Ukrainian government canceled local certification for certain types of commodities (e.g. seeds) and registration of agricultural machinery for the duration of the martial law.

Forms and conditions of operation on the market

Before the war, more than 200 representative offices and offices of Czech companies operated on the Ukrainian market, with the majority of them being led by Ukrainian representatives. In most cases, these are limited liability companies with 100% Czech capital or Ukrainian participation. During the martial law period, most of the businesses slowed down their activities, for various reasons: the headquarters of the business is located in the now occupied territory, most of the customers or buyers are located in the occupied territory or were affected by war events, distribution channels and logistics were interrupted, there is no market demand for that type of commodity and more.

On March 3, 2022, Laws No. 2115-IX “On Protection of Interests of Entities Submitting Tax Reports and Other Documents During Martial Law or State of War” and No. 2118-IX “On Amendments to the Tax Code of Ukraine and Other Legal Acts of Ukraine” were approved on the Peculiarities of Taxation and Reporting During Martial Law’. According to the approved laws, legal entities and natural persons are allowed to submit accounting, financial, audit reports and any other documents that must be submitted in accordance with applicable legal regulations within 3 months after the termination or abolition of martial law. During the period of martial law or a state of war, as well as up to 3 months after its end, taxpayers are not subject to administrative and/or criminal liability for failure to submit or delayed submission of the above-mentioned reports and/or documents. Persons, who will not be able to submit those reports within 3 months after the end of the war tent in connection with the direct consequences of their participation in war events, have the right to submit the relevant reports within one month from the date of resolution/liquidation of the consequences that made their submission impossible. During periods of martial law or a state of war, there are no checks on the timeliness and completeness of the submission of any reports or documents of a reporting nature to the authorized authorities.

Since the first day of the war, the electronic commercial register and other publicly accessible databases have been temporarily blocked by the Ukrainian government for security reasons. On March 24, access was partially restored through the OpenDataBot information system (https://opendatabot.ua/). During martial law, the access of state registrars to various types of state registers is limited, which limits and/or leads to delays in all actions related to registration or changing the form of business. In the case of registration of the company seat in the territory that is now temporarily occupied, no changes are possible.

Marketing and communication

On the Ukrainian marketing market, all available forms of advertising are used (television, radio, social networks, periodicals, billboards, etc.), the dominant position is occupied by television advertising, but its share is gradually decreasing. In recent years, “digital advertising” has been developing very dynamically in the media and also on social networks, which is connected, among other things, to the rapid development of digitization in Ukraine. The use of advertising agencies is widespread, a number of larger companies have their own marketing department.

Advertising is used on the Ukrainian market by a number of Czech companies, the most visible being the ŠKODA Auto company (through its Ukrainian representative – the Eurocar company), as well as some beer producers from the Czech Republic and the Hamé company (food products). Czech companies often use participation in various specialized international and regional fairs to promote their products in Ukraine.

Issues of intellectual property protection

The intellectual property protection system in Ukraine is gradually being shaped towards international standards, also in connection with the obligations of the Ukrainian side in this area resulting from Ukraine’s membership in the World Trade Organization (since 2008) and the EU-Ukraine Association Agreement. The Ukrainian Institute of Intellectual Property Protection (UkrPatent) deals with the registration of patents and trademarks, the Antimonopoly Office covers the protection of trade secrets. The weak point is the still widespread sale of imported counterfeit goods on the markets in Ukraine. In the last 2 years or so, a number of new laws have been adopted in this area with the aim of improving the protection of intellectual property in Ukraine. For now, foreign companies have to reckon with a lower level of law enforcement in this area in Ukraine.

Public procurement market

State governing bodies and local (regional) councils have the right to award contracts (on a competitive basis) to entities for the production, import and export of the required goods. In the case of a tender (public tender) for the award of a state contract, foreign economic entities have – in accordance with the Act on Foreign Economic Activities – the same rights and obligations as domestic entities. In order to fulfill all conditions of the tender, the given foreign company should be registered in Ukraine (e.g. have a subsidiary company established).

The Ministry of Economy of Ukraine is responsible for the coordination of announced tenders. Information on state contracts can be found, for example, on the website https://tender.me.gov.ua. Since April 2016, the electronic public procurement portal ProZorro (prozorro.gov.ua), which all state institutions are obliged to use, has been in operation.

It is also possible to participate in tenders announced by international financial institutions in Ukraine such as the EBRD, EIB, etc. (taking into account the tender rules of these institutions). More affordable financing is provided by international financial institutions for projects in priority areas such as “green technologies”.

Payment terms, payment ethics and resolution of commercial disputes

Payment transactions in Ukraine follow the same basic standards as in EU countries. However, the possibility of payment in advance or through a letter of credit is more often used (especially for newly established business relationships). It is also necessary to take into account the possibility of fluctuations in the exchange rate of the national currency, the hryvnia. Since 2019, there has been a significant relaxation of restrictions on the handling of foreign currency in Ukraine (i.e. also for foreign companies). According to the OECD model, as of May 20, 2022, Ukraine is classified as level 6 according to the level of risk (level 7 is the riskiest).

Potential disputes are resolved in Ukraine through the courts, another possibility is the decision of commercial disputes by an arbitration (arbitration) court at the Chamber of Commerce and Industry of Ukraine, which is located in every regional city. Business partners from different countries can agree that their disputes will be decided by a foreign arbitration (arbitration) court or a court of another country. The Business Ombudsman (advisory institution of the government of Ukraine) has been serving the Ukrainian market for several years to help resolve disputes between individual companies and state institutions, and “anti-raider teams” have been established in individual Ukrainian regions.

The mechanism of the Czech – Ukrainian intergovernmental commission for economic, industrial and scientific and technical cooperation (MVK) can also be used to resolve disputes between Czech companies and state institutions on the Ukrainian market. The ninth session of the MVK took place in October 2021 in Kyiv.

Visas, fees, specific conditions for traveling to the territory

Ukraine was attacked by Russia on 24/02/2022 and the country is under a state of war.

The Embassy of the Czech Republic in Kyiv and the Consulate General of the Czech Republic in Lviv are not accepting applications for short-term visas, long-term visas or stays until further notice.

The current situation in relation to travel recommendations can be followed on the website of the Ministry of Foreign Affairs of the Czech Republic. In general, we strongly advise against travel to Ukraine, but especially to areas near active combat operations and to areas that have been affected by combat operations in the past. The entire territory of Ukraine is threatened by air and missile attacks. The measures introduced in connection with the COVID-19 epidemic have been gradually canceled, if the epidemic returns, we recommend following the current information, also regarding the return of possible anti-epidemiological measures.

The Ministry of Foreign Affairs of the Czech Republic recommends travelers to register in the DROZD traveler database on the website http://drozd.mzv.cz before any trip to Ukraine.

Air connections to Ukraine were interrupted. It is possible to use both bus and train transport from long-distance lines. Traveling by car is made difficult by the problematic accessibility of PHM.

A state of high vigilance and special protection applies to the entire territory of Ukraine to ensure the safety of strategic objects. Checkpoints are set up in a number of places, where it is necessary to present personal documents and document the purpose of the trip. It is essential to always have personal documents and possibly vehicle documents with you. Night curfews are in place in the country, the exact time of these curfews varies from region to region. During the curfew, it is not possible to be on the street, nor to travel by car without special permits. Your movement around Ukraine and your travel itinerary must be adapted to these regulations.

Other information is available on the website of the Embassy of the Czech Republic in Kyiv www.mzv.cz/kyjev and the Consulate General of the Czech Republic in Lviv www.mzv.cz/lvov.

Employment of citizens from the Czech Republic

In accordance with the applicable Ukrainian laws (Law on Employment of the Population), an employer who wants to employ a foreigner in Ukraine must go through the established procedure of registration and obtaining the appropriate permits. Work permits for the employment of foreigners are issued by the State Employment Center at the Ministry of Economy of Ukraine, unless this issue is otherwise regulated by valid international agreements. The permit is issued for a specific term (mostly for 1 year or for the term of the employment contract, no longer than 3 years, for special categories of foreigners) and for a specific function. After the permit expires, if the justification is confirmed, it can be renewed. The validity can be extended on the condition that the employer submits a corresponding application to the competent authority before the expiry of the original permit. A foreigner can work in several positions at one or several employers, subject to obtaining a permit for each position. For highly paid specialists, there is a possibility of secondary employment without obtaining a special permit, if the validity of the employment contract for the secondary occupation does not exceed the validity period of the permit at the main workplace.

The decision to issue a work permit is taken on the basis of a reasoned request from the employer, to which, in addition to documents relating to a specific employee/foreigner (passport copy, personal data, photo), a copy of the draft employment contract and a document confirming payment of the application fee are attached. There is no need to apply for a work permit if a foreigner has a long-term (permanent) residence in Ukraine, has received refugee status according to Ukrainian legislation, is a representative of a foreign sea or river fleet, is an employee of foreign media accredited to work in Ukraine, etc.

The employer pays health and social insurance benefits for the employee in the amount of 22% of the set salary. The minimum wage in Ukraine is at the level of 6,500 hryvnias. The average salary in Ukraine is 14577 UAH (January 2022), with the amount varying in different regions.

Fairs and events

Planned major fairs in Ukraine in 2022 (in Kyiv)

AutoTechServis (vehicle service): 31.5.-2. 6.2022, www.ats-expo.com.ua

AGRO (technology for agriculture): June 7-10, 2022, www.agroexpo.in.ua – the exhibition is postponed indefinitely

Ukrainian Food Expo 2022 (food industry): 9-10 June 2022, https://worldexpo.pro/ukrainian-food-expo

BEZPEKA/SECURITY (security equipment and systems): 20-22 September 2022, www.bezpeka.ua

AVIASVIT – XXI (aviation industry): 27.-30.9.2022, https://www.iec-expo.com.ua/avia-2022.html

ARMS and SECURITY (security): 27.-30.9.2022, https://arms-security.com.ua/

UITT (tourism): 29.- 30.9.2022, https://www.uitt-kiev.com/uk-UA/

UKRAINE INTERNATIONAL TRAVEL MARKET (tourism): 29.-30.9.2022, www.ukraine-itm.com.ua

PUBLIC HEALTH: 5-7 October 2022, www.publichealth.com.ua

OILGASEXPO (gas industry): 18.-20.10.2022, https://worldexpo.pro/neftegazekspo

AQUA UKRAINE (water management): 18-20 October 2022, https://www.iec-expo.com.ua/aqua-2022.html

WORLD FOOD UKRAINE (food industry): 2-4 November 2022, www.worldfood.com.ua

INDUSTRIAL FORUM (industrial equipment and technology): 15-18 November 2022, https://www.iec-expo.com.ua/ru/pfru-2022.html

The Czech Trade office in Kyiv organizes a Czech stand at selected trade fairs.

Selected organizers of exhibitions and fairs:

International Exhibition Centre, www.iec-expo.com.ua

Kyiv International Contract Fair, www.kmkya.kiev.ua

Acco International, http://acco.ua

PremierExpo, www.pe.com.ua EUROINDEX, www.euroindex.ua

Ukraine Market Entry