Law of Ukraine
"On Government Aid for Business Entities"
Date of entry into force:
August 2, 2017
The Law establishes the legal principles for monitoring of government aid for business entities, controlling the acceptability of such aid for competition, and is directed at ensuring protection and development of competition, increasing transparency of the government aid system, and observing international obligations of Ukraine in the sphere of government aid.
Article 1 of the Law provides definitions of terms used in it.
Government aid is not acceptable for competition (Article 2 of the Law).
The Law applies to any support of business entities by providers of government aid at the expense of the state or local resources, for manufacture of goods or conducting specific types of economic activity (Article 3 of the Law). This Law does not apply to support:
- in the sphere of agricultural production and fishery, manufacture of arms and military gear for the needs of the Armed Forces of Ukraine, other military formations created according to the laws of Ukraine, special law enforcement forces, the State Special Transportation Service, and the State Service of Special Communication and Information Protection of Ukraine;
- economic activity related to: 1) investments in infrastructure objects involving government procurement procedures; 2) providing services of public economic interest, in the part of compensation of feasible expenses incurred to provide such services. The list of services of public economic interest is established by the Cabinet of Ministers of Ukraine.
According to Article 4 of the Law, government aid entails transferring state or local resources to specific business entities, and loss of revenues of appropriate budgets. Government aid can be implemented, in particular, in the following forms:
- providing subsidies and grants;
- providing subventions;
- providing tax reliefs, granting grace periods or payment by installments for taxes, fees or other mandatory payments;
- writing off debts, inclusive of outstanding debt for state services providing, writing off penalties, compensating losses of business entities;
- providing guarantees, credits on preferential terms, credit servicing with preferential tariffs;
- decreasing the amount of financial liabilities of business entities before mandatory state social insurance funds;
- directly or indirectly supplying business entities with goods or services at prices below market prices, or purchasing goods or services from business entities at prices above market prices;
- selling state property at prices below market prices;
- increasing the state-owned share in the statutory capital of business entities, or increasing the value of the state-owned share on conditions unacceptable for private investors.
Article 5 of the Law establishes that government aid is acceptable if provided with the objective of:
- supplying consumers with socially important products, provided that such aid is not discriminating on the grounds of the place of origin of such products;
- compensating damages to persons who suffered as a result of man-made or natural disasters, according to law.
According to Article 6 of the Law, government aid can be deemed acceptable if provided with the following objectives:
- contributing to the social and economic development of regions with a low standard of living or high unemployment levels;
- implementing national development programs or solving social and economic problems of national nature;
- facilitating certain types of economic activity or business entities in specific economic zones, provided that does not conflict international agreements of Ukraine ratified by the Verkhovna Rada of Ukraine;
- supporting and preserving national cultural heritage, if the impact of such government aid on the competition is insubstantial.
The Cabinet of Ministers of Ukraine determines the criteria for assessing acceptability of specific categories of government aid provided with the above objectives, in particular, the following categories:
- assistance for ensuring development of regions;
- support for small and medium business;
- aid for professional training of employees;
- aid for employment of certain categories of employees and creation of new work places;
- aid for restoring the solvency of business entities and their restructuring;
- aid for environmental protection;
- aid for scientific research, technical development, and innovation activity;
- aid for supporting specific branches of the economy.
The scope of authority of the Competent Authority (the Antimonopoly Committee of Ukraine) is determined by Article 8 of the Law.
Article 9 of the Law establishes the procedure for submitting a notification of new government aid.
According to Article 10 of the Law, if the information in a notification of new government aid does not correspond to the established requirements or is insufficient to make a decision as to whether such government aid is acceptable for competition, the Competent Authority shall inform the provider of government aid accordingly within 15 days of receiving the notification, forwards a query for additional information to it, and establishes the deadline for submission of additional information – no longer than 30 days after the query receipt. The Competent Authority can extend the above deadline based on a substantiated petition of the provider of government aid. The notification of new government aid is considered accepted for review after 15 days of its receipt, if, within this term, the Competent Authority did not notify the provider of government aid about the information in the notification not corresponding to the established requirements or being insufficient to make a decision as to the acceptability of such government aid, and did not forward a query for additional information. If the provider of government aid fails to supply information according to the query of the Competent Authority within the established term, the notification is considered withdrawn. In that case, the Competent Authority makes a decision to deny review to the notification, and informs the provider of government aid accordingly in writing. Based on the results of reviewing the notification of new government aid, the Competent Authority, acting according to the procedure established by it, makes a decision to:
- declare that the new government aid is acceptable for competition;
- declare that the aid for the business entity specified in the notification is not government aid according to the Law;
- initiate review of a government aid case.
Article 11 of the Law establishes that the Competent Authority initiates review of a government aid case, according to the procedure established by it, if it finds substantiated reasons to conclude that such government aid is unacceptable for competition, or that in-depth analysis of the acceptability of government aid for competition is required, based on the results of:
- reviewing a new government aid notification;
- verification of information about illegal government aid or inappropriate utilization of the existing government aid;
- withdrawal of a decision by the Competent Authority.
Based on the results of reviewing a government aid case, the Competent Authority makes a decision to:
- declare that aid for the business entity specified in the new government aid notification is not government aid according to the Law, including as a result of changes made to the aid provision terms by the provider of government aid;
- declare new government aid acceptable for competition, including as a result of changes made to the aid provision terms by the provider of government aid;
- declare new government aid acceptable for competition, subject to fulfillment of obligations set by the Competent Authority, by the government aid provider and recipients;
- declare new government aid unacceptable for competition;
- terminate and recall illegal government aid that was declared unacceptable for competition.
Verification of information about illegal government aid is regulated by Article 12 of the Law.
If the Competent Authority, in the course of monitoring government aid or from any other sources, receives substantiated information about inappropriate utilization of government aid that comes in conflict with its decision to declare such aid acceptable for competition, or to declare it acceptable for competition subject to fulfillment of obligations set by the Competent Authority, by the government aid provider and recipients, the Competent Authority shall verify such information in the part of conformance to the requirements of the Law. In order to verify information about inappropriate utilization of government aid, the Competent Authority can forward a request for necessary information to the provider and recipients of government aid (Article 13 of the Law).
The procedure for recalling government aid unacceptable for competition is established by Article 14 of the Law.
According to Article 15 of the Law, if the Competent Authority, based on the results of reviewing a notification of existing government aid, or on the results of monitoring government aid according to Chapter 8 of the Law, discovered indications of the fact that existing government aid is not or can no longer be considered acceptable for competition, it shall forward to the provider of such aid a written request for information and documents confirming such aid, to be complied with within 30 days. If, based on the results of analyzing the information received from the provider of government aid, the Competent Authority receives confirmation of the fact that existing government aid is not or can no longer be considered acceptable for competition, it shall forward to the provider of the government aid recommendations to:
- make changes to the government aid program;
- implement an additional procedure for executing the government aid program;
- terminate implementation of the government aid program.
The register of government aid is compiled and maintained by the Competent Authority, based on the results of government aid monitoring and information about current government aid supplied by providers of such aid (Article 16 of the Law).
The Law also introduces appropriate amendments to Article 26 of the Economic Code of Ukraine, Article 19 of the Code of Administrative Proceedings of Ukraine, and Articles 3, 5, 7, and 22-1 of the Law of Ukraine "On the Anti-Monopoly Committee of Ukraine".