The segment of retail sales is growing rapidly in the world’s e-commerce market. In 2017, its volume amounted to $2.3 trillion, or 10.2% of the total retail sales index. Experts predict that the e-commerce share will be 17.5%, which is more than $4.8 trillion, by the end of 2021. In Ukraine, this index is lower – 3.2%, which the e-commerce market volume in 50 billion UAH demonstrated in 2017. At the same time, the country has the second fastest e-commerce growth rate* in Europe (about 31%), demonstrating the significant market potential. The main market players are online stores, marketplaces, classifieds, price comparison websites, logistic companies, etc.
The further market development depends on a number of factors: GDP per capita, the penetration level of banking services, the Internet and smartphones, the development of logistics infrastructure, the delivery reliability and the business environment. Ukraine is still lagging behind in most of them: it has the second lowest GDP in Europe (8.7 thousand per capita) and ranks the lowest in terms of the Internet penetration level (66%), even despite the significant growth in recent years. By the way, the average in Europe is 83%, and in Sweden – 99.7%. Similarly, we are lagging 10-20% behind our neighbors by the penetration level of bank cards, demonstrating just 63%. However, Ukraine is up there in terms of the penetration of smartphones and the level of urbanization.
The government, business, public and expert community representatives discussed the market problems during the Roundtable “E-commerce: Smart Regulation for a Progressive Market” on December 5. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue. BRDO experts conducted a systematic e-commerce market analysis and identified a number of additional barriers hindering the market development.
“A significant problem for the market is the seller’s obligation to provide a fiscal sales receipt in print upon crediting of funds for the goods. This virtually eliminates Internet acquiring services with the amount of payments over 7.5 billion UAH per year and the possibility to pay on delivery more than 12 billion UAH per year. The solution may be to permit providing fiscal sales receipts in electronic form,” the BRDO IT&Telecom sector head Oleksandr Kubrakov said.
For example, the Law “On the Use of Payment Transaction Recorders in Trade, Catering and Services” obliges buyers to provide a fiscal sales receipt upon crediting of funds. However, this is a problem when a buyer receives the goods from a delivery service and then pays on delivery, while a seller can not provide a printed sales receipt at this point of time. The same is to Internet acquiring services, when payments are received, say, outside working hours, or a warehouse with the goods and a cash register are in different places. In Europe, this is done with the help of electronic receipts, which are already used in Hungary, Croatia, Spain and Slovenia. In Ukraine, it is possible to resolve this issue by making amendments to the said Law, which will allow the use of electronic sales receipts.
Another problem is the protection of consumer rights, when some sellers do not specify the details of a business entity when trading online. Basically, this applies to marketplaces and classifieds, since owners of such web resources often do not have any information about the persons who sell on their websites. In case when such sellers provide poor quality goods, it is impossible to identify the entity, verify the proof of purchase and, accordingly, protect the consumer rights. The problem can be solved by introducing requirements for marketplaces regarding placing information that identifies sellers or providing electronic receipts with all the necessary details.
Another essential aspect for online trading is the need to determine the principle of exhaustion of copyright rights. In accordance with the international principle, the rights are exhausted after selling goods in any country, while the commercial goods movement between countries is almost not restricted. In such a way, making the relevant amendments to the Law “On Protection of Rights to Trademarks for Goods and Services” and introducing the international principle of exhaustion of intellectual property rights will establish the grounds for legal activities on the market of official distributors representing owners of a certain trademark in Ukraine as well as opportunities for parallel import by other suppliers on the market.
In general, according to BRDO experts, Ukrainian legislation should be improved to move the cash circulation out of the shadow economy, reduce smuggling volumes and protect consumer rights. This will be facilitated by the implementation of Directive 2006/112/EU, which provides for bringing the invoice concept, the invoice issue procedure, the use and keeping procedures for electronic accounts into conformity with the EU provisions by Ukraine by 31/10/2019.
At the same time, it is also necessary to resolve the issue of introducing modern technologies for registration of payment transactions as well as simplifying legal requirements on the administration and use of cash registers. Let us recall that the Verkhovna Rada adopted in the first reading a draft law No.4117, which stipulates the possibility of using smartphones, laptops and tablets as cash registers and providing electronic receipts that will enable entrepreneurs to simplify conducting payments and create preconditions for demonopolization of the PTRs market.
The event was also attended by the EUD representative Daniel Kramer, the Rozetka online store founder Vladislav Chechotkin, the president of the Internet Invest holding company Oleksandr Olshansky, the Hotline CEO Serhiy Arabadzhi, the Deputy Chairman of the Board of the Consumers Union of Ukraine Oleh Tsilvik, representatives of the Ministry of Finance, Ukrposhta, the European Business Association, the Internet Association of Ukraine, business and expert communities. More information – at www.brdo.com.ua and www.regulation.gov.ua.
*considered as retail sale of material goods to Ukrainian residents via the Internet.
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In Ukraine, the total volume of the taxi market is about 40 billion UAH per year. Only 1 billion UAH of this amount is the share of the “official” segment. The rest of it (about 96% of the market) is in the informal economy, and its participants hide their actual activities completely or partially, working without a license provided by law. For example, only 13 thousand out of 220 thousand taxi drivers are licensed carriers. Therefore, the market is characterized by low quality of services, a lack of responsibility of carriers and ineffective instruments for monitoring. At the same time, 200 thousand cars owned mainly by private persons are used in transportation services serving 280 million passengers annually.
The modern market is based on business models: now it is distributed between carriers (36 billion UAH) and mobility service providers (MSP), which are aggregators of orders (4 billion UAH) providing intermediary services to passengers and carriers without monitoring the movement of carriers, the technical condition of vehicles, the medical condition of drivers and so on. The current regulation can not ensure the efficient market operation and should be changed.
The government, business, public and expert community representatives discussed the market problems during the Roundtable “Taxi market: how to balance the market and guarantee the transportation safety ” on November 30. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.
BRDO experts conducted a systematic market analysis and found out that 9 of 40 regulatory acts were irrelevant and another 6 acts had signs of being illegal. Moreover, all 12 regulatory instruments have regulatory gaps and provoke high corruption risks due to unclear and non-transparent procedures.
“In fact, licenses for domestic carriage of passengers by taxi, which are the main instrument of market regulation, do not work and do not ensure the safety of passengers. The instruments designed to provide control over the performance and quality of services and financial estimates are also ineffective. This sector requires regulatory changes to create a competitive market, ensure the transportation safety and introduce transparent tax records in today’s realities,” Vladislav Prytomanov, the Infrastructure sector head at BRDO, said when presenting the research.
One of the significant market problems is unequal business conditions for legal and illegal operators. The latter do not face costs to obtain licenses and do not pay taxes, so they have significant competitive advantages in terms of price factor. For example, by avoiding paying taxes, illegal MSP can offer carriers a 20% lower fee than the legal ones. At the same time, there is no control over identifying illegal market participants, and regulation sometimes leads to the impossibility of conducting a legal business and moving to the informal economy. Only in 2017, 8 thousand licenses of carriers who closed corresponding IEs were cancelled, and this is one third of all licenses issued for this type of activity.
In addition, due to the mostly informal taxi market, the state budget receives only up to 1-3% of the minimum projected taxes and duties in this sector each year, while the UST, which has not been received, is 1.4% of the total revenues to the Pension Fund.
Viktor Sasin, the Director of the Department for Strategic Development of the Road Market and Road Transport of the Ministry of Infrastructure, agrees with above-mentioned problems. “The market should become legal and formal. We are ready to actively work on the relevant legislative changes together with all market participants. We hope to create a working group upon the order of the Minister this year,” he said.
In Ukraine, the average taxi fare is relatively low compared to other European countries – 60-90 UAH for 10 km within the city. However, the questionable transportation safety and a lack of responsibility of carriers are the negative aspects. According to the “Rules of providing passenger transport services” approved by the CMU Resolution, a taxi driver is responsible for the lives and health of passengers, but it is not clearly defined. And given the fact that most drivers do not work officially, this provision is ineffective. As for MSPs, they are not responsible for passengers at all, since, on paper, they provide only information services.
According to BRDO, improving the market situation requires:
– Cancelling licenses for “domestic carriage of passengers by taxi” and introducing a declarative principle of economic activity. This will minimize the possibilities for corruption and make the legal work in the market less burdensome.
– Implementing a transparent procedure to issue permits (for a period of no more than 1 year) for activities in this sector on a fixed fee-paying basis. The fee for issuing such a permit will include all taxes and fees paid by a carrier for the period without the need to register a legal entity or an IE. Such a document will simplify access to the market along with the tax administration process, as well as establish requirements for vehicles and drivers and formalize activities of participants for state control over the quality of services.
It should be noted that according to the Association Agreement with the EU, Ukraine is obliged to introduce mandatory testing of the operational suitability of vehicles used as taxis in one year after the date of their first registration and annually thereafter by 2022.
” In Europe, we managed to create a well-established regulatory system in taxi transportation: we have safe, comfortable transport and a transparent business environment. are ready to share our experience and support Ukraine in the reform of this sector,” Teodora Andreeva, transport project manager of EU Delegation to Ukraine, said.
The event was attended by Oleksandr Dyachenko, the representative of the Association of Responsible Carriers and Uklon, Taras Potichny, the Head of Taxify in Ukraine, Oleksandr Ilkov, the Kesarev Consulting partner, and business, expert community and media representatives.
More information is available at www.brdo.com.ua and www.regulation.gov.ua.
As a result of the audience voting, Zhytomyr with 82.22% of votes is ahead of Poltava with 17.78%. A number of tasks successfully performed by the leaders of these two cities included the following question: what, in your opinion, are the main reasons for studying and staying in Zhytomyr or in Poltava?
“Poltava has centuries-old traditions of many universities, one of which is the Poltava Pedagogical University. We have created all the conditions in the city to provide our citizens with opportunities to both receive the best education and get well-paid jobs, because the city has both well-developed sports, oil and gas and industrial sectors,” the secretary of the Poltava City Council Oleksandr Shamota said.
“First of all, we do not need an industrial city, but we need a city with a healthy environment, which is completely energy efficient while having beautiful parks and developed infrastructure, so that every Zhytomyr resident is happy to live and spend time with the whole family here,” the Zhytomyr city head Serhiy Sukhomlyn said.
“Your cities are an example of how Ukrainian cities should develop, because it is a modern nation that faces a happy future with inspiration and confidence. We would like to see friendly and smiling people in your cities. I would like you to ask yourself the main question: how do you see your cities in world rankings? As for me, I will bring investors both in Zhytomyr and Poltava, because we work only with the best and most progressive cities. We would implement all of our best practices in both Poltava and Zhytomyr,” the Director of the Ukraine Investment Promotion Office Danylo Bilak said.
“The local enterprises should be transparent and have international financial reporting to attract investments into your cities. There will be problems with investors without these aspects. Do not be afraid, engage auditors and pay special attention to the education and training of qualified specialists, as today the industrial production in Ukraine is even better than in Europe,” the Concorde Capital Director Oleksandr Hryban said.
As a reminder, on November 23, 2018, the mayors of the most progressive Ukrainian cities according to the rating of ease of doing business in Ukraine (Regional Doing Business 2018) Oleksandr Shamota from Poltava and Serhiy Sukhomlyn from Zhytomyr met on the City Invest Battle stage as part of the RED PM DAY 2018 and the 2nd National Forum on Construction Project Management.
The City Invest Battle was moderated by the International Mayors Summit founder and Local Economic Development Program manager at the Western NIS Enterprise Fund Iryna Ozymok and the BRDO Board Member and SUP’s Vice President Olena Shulyak.
Source: biz.nv.ua
The National Commission for State Regulation of Energy and Public Utilities (NKREKP) have to approve the rates for non-standard connection to electrical networks after November 19.
A proposed single tariff of 3,500 UAH per 1 kW is already a big step forward. But this is still not the balanced solution expected by the market and potential investors.
The problem is that it is very difficult to interact with oblenergos, which are monopolists, to connect facilities with a capacity higher than the standard one (more than 50 kW and more than 300 m from an electric substation). It is necessary to conclude a contract on connection to electrical networks, which should be supplemented with technical specifications. Oblenergos determine the scope of works and, accordingly, their cost independently because the information on networks status is restricted, so it can be overestimated.
For more acceptable cost estimates, investors are usually proposed to “negotiate” reducing the connection costs for some reward in the next room. At the same time, even the owners of energy supply companies do not control all the corruption in this area. But, honestly speaking, not all investors are capable and want to “negotiate”.
As part of the energy sector reform, it was decided that oblenergos became a “black box” to eliminate the “human factor” problem. Investors should not be interested in what works will be performed. There is a single tariff to pay for access to electrical networks, which oblenergos should distribute among all attachment points to make necessary reconstructions and provide customers with electricity. With this approach, investors can include the costs into their financial models in advance. To calculate the project cost recovery, it is necessary to understand how much you have to pay and when you get a connection service. These rules were provided in Article 21 of the Law on the Electricity Market.
The NKREKP was supposed to implement these rules in March this year. Actually, there was their first attempt earlier, and it was a real failure. The Commission approved differentiated rates by regions. As a result, the connection cost has become incredibly high even compared with the current situation along with all informal “wishes” of oblenergos. It turned out to be absurd: in Kyiv, the connection of 1 kW of capacity would cost from 3 thousand hryvnias (excluding VAT), and in the Poltava region – up to 9.4 thousand hryvnias. What crazy investor will do something in Poltava, if the connection here costs fabulous sums? This Commission’s decision was stopped and not published by market efforts.
Then, there were delayed changes in NKREKP’s membership, and, finally, the commissioners again have come close to solving this pressing problem. I would like to emphasize once again that the rate of 3,500 UAH per 1 kW proposed by the commission is quite acceptable as a calculated value. Now we need just to balance it with adjustment factors. There are not many of them.
First, it is necessary to take into account the general load of voltage classes of a particular oblenergo. For example, Kyivoblenergo’s electric substations are heavily loaded, and the Chernihivoblenergo doesn’t have such a load, since there is no such economic activity. This is not the consumption level that was in the USSR when the appropriate infrastructure facilities have been created. Accordingly, there is no need to perform expensive works, and hence, it is possible to use a lower load factor.
Second, oblenergo’s substations are not designed in such a way that all customers can connect all their facilities simultaneously, because this is potentially impossible. Here is a simultaneity factor. For example, it is higher for electric heating facilities. And where there are no regular consumers, for example, in the domestic sector, it is accordingly lower.
Another element of non-standard connection is a linear component. This is directly a cable connecting an oblenergo’s substation and a customer’s facility. An investor who will look for a potential location for his facility should understand that the less the distance between his land plot and networks, the less he will pay for the linear component. This is a good principle to find the best location. In addition, there are connection category and phase factors. The more capacity additions, the more expensive the connection is. Three-phase connection is more expensive than the single-phase one. This is a fact of life, and nobody argues with that.
These factors will result in an adequate basic rate. Somewhere, for example, in loaded Kyiv, it will remain unchanged. Somewhere, the load and simultaneity factors will reduce it by half or three times. Then the system will work properly, and this will provide additional incentives for investors, for example, to think about launching their businesses in a more depressed region, rather than trying to place it in the Kyiv-Svyatoshinsky district, which is already absolutely packed with facilities.
Therefore, it is important for us not to discredit the absolutely right idea of establishing the rate, but at еду same time, to balance it properly. And oblenergos have to include adequate costs in this rate, so they could provide a service on connection to electric networks. And then we will adjust the rate according to the inflation index, and it will work perfectly normal.
We are now talking not only about problem attachment points, but also about the ease of doing business in the country. Recently, the World Bank announced results of the Doing Business rating, in which Ukraine increased its progress by 5 positions from 76 to 71). At the same time, nothing has been done by the ‘getting electricity’ component, and Ukraine lose 7 positions (from 128 to 135). Currently, the connection process includes 5 procedures. When a single adequate rate, which is known in advance, is introduced, he number of required procedures will be reduced to one or three: applying and paying when all the works are performed and supplying electricity. This will provide much more positions in Doing Business. There will be no need to “bring something” to relevant officials. And this will really improve the investment climate.
The BRDO Office and the Union of Ukrainian Entrepreneurs (SUP) presented results of the Regional Doing Business 2018 rating in Zhytomyr.
The city became one of the three leaders and ranked 3rd with a total of 313 of maximum 600 points. The greatest progress was achieved in the ‘starting a business’ component.
“Zhytomyr can get the maximum amount of points in this component by minimizing the time of this procedure as much as possible. Today, it is 7 days, but it can be done just in one day. Besides, it is recommended to work on the possibility of online business registration,” Olena Shuliak, the Construction Sector head and Board Member of BRDO, said.
Olena Shuliak provided several suggestions on improving other components to local authority representatives. “It would be good to conduct consultations with business owners to review local tax rates, especially the single tax rate for the second group of payers. In addition, pay attention to a share participation, which is the most corrupt tax in the construction industry. It should be canceled or significantly reduced for non-residential premises and industrial buildings, as, for example, Chernihiv did,” she said.
Particular attention should be paid to the new rating component – “Electronic services”. As long as this trend is not developed in Zhytomyr, it will have only 18 of 100 points. In turn, representatives of the Zhytomyr City Council voiced their readiness to improve the procedures. Moreover, they are ready to cooperate closely both with experts and business owners in this area to provide satisfied results primarily for entrepreneurs.
On November 12, a public discussion on the results of the Regional Doing Business 2019 rating was held in Rivne. Government, business and expert community representatives analyzed together what advantages there are for entrepreneurs in the region, what hinders the development of own business, what should be changed to improve the investment climate and, similarly, what to keep and strengthen. Rivne with 306 points ranked 6th in the rating.
The Rivne region is a region where it is easy to launch a new business, and they scrupulously published 100% of data on the urban planning documentation portal – pmap.minregion.gov.ua.
But they failed to improve the last year’s results by the “local taxes” component. In spite of the last year’s recommendations from the BRDO Office on reducing tax rates for the first group to 8% and for the second group to 10%, there has been no changes. Now rates are still 10% and 20%. There is also disappointing progress in the components related to construction permits and getting electricity, as elsewhere within the country.
“Regions and territories of Ukraine should learn how to compete with each other for investments! Such problematic issues as obtaining construction permits and connecting to electricity networks in the Rivne region should be resolved in the near future. The BRDO Office will gladly provide recommendations to set an agenda for changes to make it easier to do business in the region,” the BRDO representative Vitaliy Bezhin said.
“The involvement of offices and institutions at the national level is something we lack to create an effective and active environment that will advocate the business and economic development interests. We have already gained a significant progress in how to start a business quickly, and now we are actively working on a business strategy for the development of Rivne,” the head of the Rivne Business Support Centre Serhiy Vaschuk said.
The BRDO Office together with the Union of Ukrainian Entrepreneurs (SUP) presented the Regional Doing Business 2018 rating on an annual basis. Five types of interaction between entrepreneurs and local authorities were selected for the study: paying local taxes; setting up an enterprise; obtaining construction permits; registering a land plot for real estate purposes; connecting to electricity networks. In addition, this year we added a new indicator – the quality and availability of electronic services.
The Cabinet of Ministers simplified access to state-owned geological information. Soon, it will be easy to find the necessary geological information, as it will be available online.
What would be the point?
Firstly, information about the private geodata will be included into the Geological Information Catalogue.
Secondly, anyone, and first and foremost, a potential investor will be able to see the information on a land plot in a few clicks. This is another step towards holding transparent subsoil auctions, as online access will simplify preparations for auctions for investors significantly.
Third, it will reduce the monopoly of officials on access to information and facilitate the interaction between subsoil users.
In addition, from now on, private companies do not need to receive an approval from the state to sell their own geoinformation. All it will take is to inform it.
In such a way, business owners will spend less time and money, while making more investments and creating more jobs.
We hope the State Service of Geology and Mineral Resources of Ukraine and the State Scientific and Production Enterprise “Geoinform Ukraine” will quickly implement these changes in life.
Source: biz.nv.ua
On November 7, the Law On Electronic Trust Services, which can be easily called a revolutionary law, came into effect.
It is expected that the law will bring such long-awaited things as European electronic identification standards, namely electronic seals, electronic signatures, registered electronic delivery and even electronic timestamps for electronic data, into our lives.
In essence, this law creates conditions to “automate” a number of relations, primarily between the state and business, while opening up new opportunities for the latter. In particular, these are financial opportunities, because online services will replace tons of paper and time previously spent on bureaucratic procedures. For citizens, this creates more opportunities to obtain administrative services online. In addition, the law will have a positive impact on international relations, in particular, the economic ones, since, from now on, it will harmonize the requirements for electronic trust services and e-identification means with European and international standards. In such a way, this will allow our entrepreneurs to be fully engaged in international e-commerce.
However, there is still a lot of work to be done to make it work. First of all, this relates to the drafting of subordinate acts to introduce all the novelties.
But first of all, let’s talk about what specific benefits this law will bring and what exactly the trust services are:
So, the key innovations are the introduction of:
European electronic identification schemes involve high, medium and low levels of confidence in electronic identification means. Using qualified electronic signatures and seals will provide the high level of confidence, while using the advanced ones – the medium level. Electronic identification schemes should be developed by the Ministry of Justice and approved by the government.
One of the key advantages of introducing electronic identification according to international standards is the mutual recognition of Ukrainian and foreign certificates of public keys and electronic signatures. That is, electronic identification means issued in Ukraine can be used abroad, and Ukraine will recognize the means issued in other countries. This will allow, for example, companies to conclude contracts without a lot of paperwork, send documents to get higher education online, receive services from state or local authorities abroad, etc.
The implementation of this requirement of the law implies the conclusion of relevant international agreements on the recognition of electronic identification schemes and, again, the adoption of a series of subordinate acts.
Another important innovation is the introduction of interoperability, that is, ensuring the compatible functionality of technical solutions used when providing electronic services and their ability to interact with each other. This is one of the conditions for automated data exchange between information and telecommunication systems of government authorities. This will increase the availability of administrative services and remove the “human factor” in government agencies.
In addition, it provides for the technological neutrality of national technical solutions in the process of developing electronic signature or seal means, which allows the free choice of necessary identification technologies. And it will also contribute to the development of competition in this market.
The law also provides for a detailed regulation of the provision of legally valid qualified e-trust services and minimization of the regulatory impact on the provision of services without using a qualified electronic signature. In particular, it is important for confirming the legal fact of sending and receiving electronic data to regulate the provision of electronic delivery services.
In general, reforming the system of legal e-identification regulation aims at increasing trust in online services and expanding the scope of electronic identification, in particular through the MobileID and BankID introduction.
Electronic digital signatures issued earlier will be used until their expiration date, but no later than November 2020, and existing accredited key certification centers will automatically be included into a new list of trust services.
Currently, the BRDO Office is carrying out an analysis of the regulatory environment in this area, which aims at working out joint steps with stakeholders to improve the regulatory framework in this sector.
So, if briefly summed up, the law will have a positive impact on the development of e-governance and expand business opportunities. However, it is necessary to develop the relevant regulatory legal framework no later than November 2019 for the full implementation of the law.
I hope we will make it in time, because some regulations have been already developed by the Ministry of Justice and the State Agency for Electronic Governance.
This article is co-authored with Nadiya Kostryba, key IT and Telecom sector expert at BRDO.
The views expressed in this article reflect solely the author’s point of view and do not necessarily coincide with the position of the Delegation of the European Union to Ukraine.
Source: tech.liga.net
How easily it is to register your business online and whether you can avoid contacts with officials in this way.
Last March, it became possible to register a business online in Ukraine. You open your bar or vyshyvanka tailor shop. You really need to register. But you don’t want to contact officials. The good news is that now it is not necessary.
Today, online business registration services are becoming increasingly popular. For example, according to the National Agency for e-governance, more than 10 thousand businessmen have registered through the electronic procedure since March 2017. That sounds like a large number. But it is just a drop in the ocean of small businesses.
LIGA.net tried to find out how to register online, how difficult is it and what aspects you need to know.
At what point do you need to register a business?
The BRDO COO Oleksiy Dorohan says that if you plan to launch your business at a fixed location for consumers or start some business in the B2B segment, you need to register it before its opening.
If we are talking about freelancing, remote or field work, you need to register your business when this activity is performed in a systematic manner. Actually, it is considered systematic if it occurs more than 4 times a year.
“In this context, the general recommendation is to try products and services on friends and acquaintances before registering and opening your business,” Dorohan says.
Where to begin?
Now online registration is available for both individual entrepreneurs and legal entities. But there is one important point. You need to have an electronic digital signature (EDS) to do this.
You can obtain it from the State Fiscal Service and a wide range of public and private AKCC (accredited key certification center) free of charge. Also, you can make your EDS through banks, for example, PrivatBank24. Later, mobile operators will provide the Mobile ID service as well. They are currently testing and launching it.
When you receive your EDS, you can register as an IE or legal entity in two services – the Online House of Justice and the iGov public services portal. When using these two services, you will be immediately asked to enter your EDS, and then you will enter your data in electronic form in your personal profile.
Pitfalls, timing and cost
According to Oleksiy Dorohan, after registering as an IE or a LLC, as a rule, it is necessary to go through additional stages, but not all of them are available online. In addition, there is a taxation aspect.
“A single tax is popular among entrepreneurs. Therefore, when registering as an IE, it is important to apply for selecting a simplified taxation system and ensure that a tax agency received it your application. In addition, you will need to contact the tax agency regarding a registration book and extract from the register,” he says.
There are cases when application on selecting a simplified taxation system may not reach the tax agency, and you need to control this aspect.
“It would be helpful as well to think about accounting services, as there can be lot of problems with this. Now many services and companies provide such services,” Dorohan says.
According to the expert, if you have a clear plan and make no mistakes, the process of registering a business can take on average from 2 weeks to 1 month. The cost of registration without consultants is from 100 hryvnias to several thousand hryvnias, depending on the type of business.
Inconvenient convenience
Unfortunately, many people still do not know what an EDS is and how to use it. Therefore, most entrepreneurs register a business in the old manner. Many people want to personally see those to whom they give their documents.
“Today, online registration of business is not available (fully available – Ed.), because everything looks so good only on paper. To do this, you need to have electronic keys. And, as a rule, no one has them,” the Director of the Yurkomfort law firm Dmitry Kobylinsky says.
According to him, in most cases, entrepreneurs use the services of law firms that follow new developments in legislation and know all the aspects. They offer entrepreneurs to register for a relatively small fee (about 1,200 UAH).
Life after registration
After registering, any IE will need a bank account to send and receive payments. Fortunately, you do not need to go to the bank to open it, since available online services are already fully operational. One of the most recent developments is the OK, Alfa online banking for entrepreneurs from Alfa-Bank Ukraine.
This service has significantly simplified the procedure of remote account opening. Any IE can become a bank customer without ever visiting its office.
You just need to register in the “OK, Alpha!” system, indicating only your taxpayer identification number and mobile phone number, and after confirming with a one-time password, you will get allocated bank account details, which can be used for billing and signing contracts, sent to your mobile. A mobile banker will bring clients the documents that should be signed when opening an account under the law.
According to the Alfa-Bank Ukraine press service, “OK, Alpha!” online banking is an opportunity for IEs to take advantage of bank services without visiting its office. All operations necessary for an entrepreneur, from opening an account to ordering statements and from sending reports to the tax agency to legal services, can be conducted online, in a full-fledged virtual bank.
Moreover, you do not need to fill out long forms, as in other services, when opening an account. All things considered to save the time of entrepreneurs as much as possible.
Source: lb.ua
The World Bank has announced the results of Doing Business 2019. The Ukraine’s index has grown by 5 positions (from 76 to 71). What prevented Ukraine from gaining more positions? What gave positive changes in +5 points? And most importantly, how to improve our position over the next six months, taking into account that starting from the beginning of May, the World Bank will review the Doing Business 2020?
The concept of the half-full and half-empty glass is true this time too. On the one hand, this year Ukraine (+5 positions) worked better than all our neighbors: Poland (-6), the Russian Federation (+4), Belarus (+1), Moldova (-3), Romania (-7), Hungary (-5) and Slovenia (-3). Moreover, only Belgium achieved more progress than we did (+7) among the EU countries.
On the other hand, all our neighbors still take higher positions in the rating, and in order to achieve the Georgia’s position (6th in the world), we need to look to the progress of Asian leaders, such as China (+32 positions) and India (+23 positions), instead of European countries.
The glass seems to be even more empty, if we look in detail at components of our success.
International trade:
We improved our position by 41 points (from 119 to 78). This was a surprise, because just one small reform (excluding spare vehicle parts from the list of military goods), which could not have had such an effect, was implemented in this area. The answer turned out to be simple: the rating developers came to the conclusion that our last year’s figures were wrong, and in reality, exporters and importers spent less time and money on crossing the border. Therefore, the growth in terms of this component is not so much the reform as recognizing the fact that everything was not so bad even before the reform.
Protecting minority investors:
There is a similar situation. There was only a small reform (the mandatory disclosure of information on related party transactions in annual reports of joint stock companies), but we received two points instead of one point, and so we got 9 positions (from 81 to 72). The reason for our second point is that the rating developers recognized the possibility of establishing an audit committee in joint stock companies, that is, they took into account the reform implemented several years ago.
Resolving insolvency:
We obtained 4 positions (from 149 to 145). And again, the reason is not some this year’s reform, but adjustments made to the last year’s data. The rating developers admitted that the sale of debtor’s essential assets requires the consent of creditors. And do not ask what such “essential assets” are and who these creditors, whose consent is required, are – I do not know, these are evaluation questions.
Dealing with construction permits:
This is the most conflicting and interesting component. We’ve got rigorous adjustments that worsened all key indicators of past periods. If the government (MEDT and the Ministry of Regional Development) have done nothing this year, we would lose our positions (from 35 to 129) by this component. Fortunately, several reforms (canceling the need to obtain initial data for project designing from the State Emergency Service and introducing the requirement for higher education for designers and building inspectors) allowed not only to keep our last year’s position, but even to grow by 5 positions (from 35 to 30).
Starting a business:
Nothing has been done, so we lose 4 positions in the rating (from 52 to 56).
Paying taxes
Nothing has been done, so we lose 9 positions (from 43 to 54).
Registering property:
We lose 1 position (from 64 to 63). Honestly speaking, the Ministry of Justice carried out a reform that canceled the need for an expert monetary assessment of land plots in case of notarization of sale and purchase transactions between legal entities. But its implementation required additional several weeks they missed. We hope it will be taken into account the next year.
Getting electricity:
Nothing has been done, so we lose 7 positions (from 128 to 135).
Obtaining loans:
Nothing has been done, so we lose 3 positions (from 29 to 32).
Enforcing contracts:
It is our only “clear” victory. The commercial litigation reform (the amended Commercial Procedural Code) led to our growth by 25 positions (from 82 to 57). There were no data adjustments.
And finally, our coolest result is that Ukraine remained the second country in the world by growth rates in the rating. If you do not believe, just visit doingbusiness.org, find distance to frontier metrics and calculate the change of indicators for each of 190 countries. Unfortunately, the data are available only starting from 2009 (these rates were not calculated before), and therefore we can only evaluate the rates of the last 9 years.
However, this year’s +5 positions are too few for the Ukraine’s potential and ambitions. We can become a global leader by growth rates and be among the TOP-50 countries in the rating in the next couple of years. To do this, we just need to stop closing gaps at the last second and adopt the draft law No.8124.
We very much hope that the Ukrainian deputies will find time to consider this draft law, because the calculation of points for the next Doing Business rating will start in 6 months. The clock is ticking.
The views expressed in this article reflect the author’s point of view and do not necessarily coincide with the position of organizations that support the BRDO Office.
Over the past few years, the word “deregulation” became a cliché and a tired idea. All speeches of politicians, government officials or international experts concerning the business climate and investments include this word. And that makes sense, because quality regulation implies establishing clear rules of the game.
The simpler the rules, the more interested players there are, and hence – the larger market and the more rapid inflow of investments.
Over the six waves of deregulation, the Cabinet of Ministers has abolished 760 outdated legal acts, most of which were the Soviet legacy.
Just one “deregulation” day resulted in dumping of 318 Soviet-era regulations, instructions, rules and orders. Most of them were archaisms that have not actually been used.
However, remaining in the legal field, such archaisms have always kept the door open to corruption.
Or they created unnecessary barriers, because Soviet standards were focused on state-planned economy and state-owned property.
Under market conditions, they look like rust on a huge car – you can deal with them, but they won’t be able to operate for so long.
As part of a special EP (Economichna Pravda) project on quality regulation, we have found out what the current progress of the Ukrainian legislation desovietization is and when Ukraine will finally ensure the end of wholly outdated rules of doing business.
According to Oleksandr Honcharuk, the Head of the Better Regulation Delivery Office, almost every second abolished act is of the Soviet era.
The oldest of them is dated 1922 and contains a list of categories of workers, whom an employer should provide with a laundry soap (400 grams per month) to take it home.
“Such little things do not kill business, but they create an extra trouble, in particular, in communication with trade unions, public organizations and, in general, with inspectors who are trying to find “at least something”.
We’ve spent so much time trying to convince the Government to abolish this rule, because trade unions insisted on the opposite,” Honcharuk said.
“Most of the abolished Soviet-era acts relate to social issues. First, just because there is a large number of such acts, and secondly, it is difficult to abolish these acts because of populism.
We have to agree this step with trade unions,” Maksym Nefyodov, the First Deputy Minister of Economic Development and Trade of Ukraine, explained.
“By the way, there is still no notification about the abolition of the resolution on the soap supply in the database of the Verkhovna Rada,” he adds.
“We have deregulation meetings of the Cabinet of Ministers every 2-3 months. In most cases, laws regulating one or another area are no longer in effect, but there are orders and instructions at the level of by-laws.
So, someone may demand to comply with their requirements. Large businesses have lawyers to deal with it.
And those who have no opportunity to address this problem pay bribes or meet outdated standards,” the Deputy Minister commented.
Most of the abolished Soviet resolutions relate to the agrarian sector.
In particular, these are documents that regulate the mineral fertilization, although today agricultural companies identify the need to use drones for mineral fertilization, not to mention the latest formulas of fertilizers.
Other rules contain tips on farm disinfection by using outdated agents, which not only are less effective than the modern ones, but also are not safe to use.
Another example is the decree of the Council of Ministers of the Ukrainian SSR of February 11, 1949, that provided for giving names to wines in respect of grape varieties: “Perlyna Stepu” – from “Aligote”, “Naddnipryanske” – from “Risling”, “Oksamyt of Ukraine” – for wines from “Cabernet Sauvignon” and so on.
This resolution was in force until November 2016.
A significant part of the legislation “desovietization” takes place in construction. For example, such laws include the decree of the Council of Ministers of the Ukrainian SSR of October 30, 1958 on approval of the regulation for cooperative building groups and individual developers in cities and town settlements.
In particular, the document provided for the size of land plots for the construction of multi-apartment buildings.
Oleksiy Honcharuk said that they also included strictly Soviet-era standards contained in state building codes.
“Starting from October 1, new changes to the DBN have come into effect. They were not Soviet ones, but some of their provisions were copied from the Soviet legislative legacy.
They reproduced the Soviet principles while the Government provided businesses with guidance on how to be effective.
For example, there was a requirement to place a kindergarten only in a separate building.
This is not economically profitable – sometimes a small kindergarten is needed, sometimes there should be a lot of different kindergartens for the competition to be fair.”
The Soviet legacy in the cash discipline legislation is another story.
Only on October 11, the Ministry of Finance issued an order that deprived Ukrainian businessmen of the Soviet-era practice and cancelled the compulsory use of accounting books of settlement operations, which are a thick notebook with daily reports and pasted sales checks, for entrepreneurs.
There was little point to write these data in such a book and paste “zero checks”, since cash registers send data to the SFS in electronic format.
“In the end, tax inspectors with printed records of these sums came, opened these books and tried to find where a person made a mistake by hand,” Serhiy Badritdinov, the Chairman of the Retail Trade Committee at the Union of Ukrainian Entrepreneurs and Intertop CEO, explained.
Actually, the list of abolished Soviet-era documents looks like a set of small instructions, rules and procedures, which are so stupid that it’s hard to imagine who could use it nowadays.
They include the market trade rules, hay harvesting rules or rules for equipping and operating infectious disease control centres of 1959, which, in particular, required to cover window frames and doors with oil paint and allowed only rubber or wooden toys in children’s units.
According to experts, there are still many Soviet atavisms in the Ukrainian legal field. Recently, the Ministry of Economic Development and Trade mentioned a new initiative – to cancel books of complaints and suggestions.
The representatives of the Union of Ukrainian Entrepreneurs that appealed to the MEDT with such an initiative explained that the function of complaints books was not to punish, but improve services or goods provided.
“It makes no sense to look at the date of the act, if it reproduces purely Soviet-era approaches. A book of complaints and a consumer’s corner were copied from the Soviet practice when there was no Internet and it was virtually the only possible way for consumers to express their comments regarding services. Now the Internet has been long servicing as such a book, and you can leave feedback on a manufacturer’s or store website. There are special websites that collect feedbacks on different companies or businesses. But complaints and suggestions books have a quite different meaning for inspectors,” Tetyana Palamarchuk, the Co-chairman of the Union of Ukrainian Entrepreneurs Committee on Enterprise Development, commented.
Under the competitive climate, entrepreneurs are always ready to improve their services, listen to the wishes of consumers both on the Internet and beyond it. They will try to improve the quality.
If a company is careless, then you should not expect its managers to respond to complaints in such a book. If you have some complaints, you should appeal directly to the State Service on Food Safety and Consumer Protection.
“At the same time, there are cases when entrepreneurs were fined for not having made changes to the information provided in their “consumer’s corner” after the relevant office of this Service has changed its telephone number,” Palamarchuk added.
But, according to the Ministry of Economic Development and Trade, two massive documents (the Labor and Housing Codes) contain the most amount of Soviet-era rules.
“Today, we are supposed to keep to the Housing Code that begins with the words: “As a result of the victory of the Great October Socialist Revolution in our country, we created all the prerequisites necessary to solve one of the most important social problems – meeting the housing needs of working persons”, Oleksiy Honcharuk said. “Imagine what is written there.
This is about post-war residence halls, the resettlement of families, the order, in which people have to settle in apartments. These things no longer exist, but we still have these rules. And some “persons” are trying to use these rules for their own interests.”
Same with the Labor Code that aims to establish rules for large groups and state-owned enterprises, which was natural when the relations were regulated administratively.
At its “deregulation” meetings, the Cabinet of Ministers abolishes documents, which it is entitled to abolish. Some outdated acts are regulated by presidential decrees of the Soviet era, which were equated with laws by the Soviet Constitution. So, only the Parliament can abolish them.
According to Nefyodov, at the current pace, it is possible to clear the legislation of Soviet-era and simple outdated debris in two years.
Instead, the Verkhovna Rada registered the draft law 4650 on the abolition of Soviet legislation.
“This is a radical decision, a kind of “Soviet guillotine”: everything adopted in the Soviet times will be abolished within a transitional period.
If it turns out that some instruction is really needed in this period, there will be time to adopt it. The draft law is included in the priority list, but it’s not time yet,” Maksym Nefyodov summed up.
By Anna Rodichkina, for the EP
Source: Ekonomichna Pravda
From now on, starting a business in Ukraine is not a challenge anymore! Bringing it into reality and creating a more favorable business climate in the country is the goal of the BRDO and one of the Government’s priorities. A year ago, BRDO presented a PRO Platform for more effective online interaction between the state and the business. Today, the state information service Start Business Challenge contains already 100 business cases with step-by-step instructions to start your own business, and entrepreneurs can obtain all the necessary reliable information for business registration in one place quickly and free of charge.
BRDO is actively involving local authorities in regions, employment centers, and financial institutions in creating a more favorable business environment. On October 25, the Start Business Challenge 2018, which was held under the support of the EU4Business|FORBIZ initiative as part of the European Entrepreneurship Week, brought together the business and partners in Kyiv.
“Small and medium entrepreneurship is a driver of the European economy, and its impact cannot be overstated. Business develops when there is a favorable environment created for it: clear rules in the market and available financial instruments. I hope the Start Business Challenge platform will be a powerful stimulus for business development in Ukraine, as the EU pays particular attention to supporting efforts to improve the business climate in the country,” the FORBIZ Project Manager in Ukraine Matthias Halder said.
The information service helps entrepreneurs to deal with the documents and procedures necessary to start own business legally. According to the portal’s statistics, family doctor’s offices, electric charging stations, mini bakeries, restaurants, foreign language courses, and kindergartens were the most popular business cases in the past year. It is worthy of note that the number of business entities in the relevant economic activity types classification (KVED) also increased during January-October 2018. In addition, the platform accumulates information on the most demanded procedures for businesses: from state registration of self-employed individuals, creating a legal entity and registration by a single tax payer to connecting to electricity networks and registration of cash registers.
“Step by step we work to ensure that starting a business in Ukraine is no longer a challenge. Today, already 100 business cases are available on our platform, and since the procedures have their own specifics at the local level, we have also created functions for their localization. Bring your ideas to life, go for it! We are here for you and do our best to make it easier for you to start your business working more comfortable,” the BRDO Head Oleksiy Honcharuk stressed.
For example, connection to electricity grids, land registration, obtaining construction permits, and some aspects of taxation are regulated by regulatory acts on the local level. Therefore, BRDO experts created an opportunity for local authorities to access their personal profiles on the platform and provide residents of their cities with full information to open a business: how many procedures are to be completed and what documents to get, where to apply, how much it costs and how long it takes and so on.
Today, regulatory bodies of 12 Ukrainian cities are working on the platform: Zhytomyr, Mykolayv, Chernivtsi, Odesa, Drohobych, Poltava, Popasna, Uzhhorod, and Lysychansk in particular. The leaders are Vinnytsya, Sumy, and Ternopil, which have already localized all 100 cases. Kyiv, Obukhiv, Irpin, Khmelnytsky, and Chernihiv began to work with their first cases, and Lutsk and Mariupol will get involved within the few days. Restaurants, kindergartens, and taxi services are the most popular cases in the regions.
During the event, representatives of the State Employment Center, the Ministry of Economic Development and Trade of Ukraine, and the Kyiv City State Administration spoke about entrepreneurship programs and their services for business. Ukrainian entrepreneurs including Maksym Bakhmatov, UNIT.city Managing Partner, Anna Petrova, founder of StartUp Ukraine and Leonid Ostaltsev, founder of Veterano Group, also shared their success stories and specifics of setting up your own business.
As part of the Start Business Challenge, a workshop with legal advices and financial consultations from the BRDO, Oshchadbank, Pryvatbank, and German-Ukrainian Fund regarding a range of business cases was also held.
The event was attended by the First Deputy Minister of Economic Development and Trade Maksym Nefyodov, the Deputy Head of the State Employment Service Yuliya Zhovtyak, the Deputy Director of the Kyiv City State Administration’s Department of Industry and Entrepreneurship Development Nataliya Kondrashova, the Acting Head of the German-Ukrainian Fund Valeriy Mayboroda, the Deputy Chairman of the Board of Oschadbank Andriy Stetsevych, the Advisor to the Privatbank Chairman Yuriy Husev and numerous business community representatives.
More details at www.sbc.regulation.gov.ua.
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The inspection system in Ukraine is transforming towards a risk-oriented approach. Inspection authorities from now on will focus on a transparent assessment of business entities and risk prevention. At the same time, business owners will be better informed on the timing and purpose of the inspection.
An integrated portal www.inspections.gov.ua with a range of instruments for transparent and predictable online state-business interaction has already been launched. 26 of 33 inspection agencies have already joined the portal and published information about their inspections. As of October 2018, almost 250 thousand plans and about 48 thousand results of inspections have been published in this single system. New risk criteria are in the process of approval, and this will allow to plan control measures in a more effective way.
On October 17, the Better Regulation Delivery Office (BRDO) with the support of the EU4Business|FORBIZ project presented the first results of the Inspection Reform, as well as, further steps of its implementation at the Inspection Forum #PEREVIROK.NET, which took place in Kyiv as part of the “European Entrepreneurship Week”.
“The Government took number of necessary steps, required to launch a new risk management system. It should be noted that the majority of regulatory authorities have already joined this effort. Our goal is to fully implement the risk-oriented system of inspections starting from the beginning of 2019. Therefore, I insist that all inspection authorities should approve the risk criteria in their areas and join the single portal of inspections by the end of this year,” noted Volodymyr Groysman, the Prime Minister of Ukraine.
Hugues Mingarelli, the EU Ambassador to Ukraine, Head of the EU Delegation to Ukraine stressed the importance of developing a transparent inspection system for further implementation of reforms in Ukraine. “The institutional capacity, including a transparent, effective control system, is a necessary component of a favorable business climate. Business is developing when there are clear and predictable rules in the market. As a result of Inspection Reform, entrepreneurs can better plan their activities, achieve better results, enter international markets and contribute to the development of the country’s economy as a whole,” he said.
In the spring, the Government approved a new risk management methodology, and the task of inspections is to identify a list of hazards for each area of control and develop a combination of criteria for identifying risks and planning inspections efficiently. At the moment, the most progress in adopting the new, transparent system has been made by regulatory authorities in charge of fire, technological safety, security and tourism.
“The new system is aimed at risk management, rather than an ineffective documentation of violations that are identified today in 99% of inspections. We create the integrated Big Data portal with a whole array of data and the possibility of their qualitative analysis. From now on the businesses will have a clear and comprehensive information about inspection requirements and opportunity to reduce the risks of their activities. This will significantly reduce instances of abuse and make the system more effective and predictable,” the BRDO Head Oleksiy Honcharuk said.
This new system will allow to rate business entities and facilities in terms of risk points in each area in order to focus on the prevention of hazards that are of the highest risk.
The event was also attended by Kseniya Lyapina, Head of the State Regulatory Service, Maksym Nefyodov, First Deputy Minister of Economic Development and Trade of Ukraine, Oleksiy Kudryavtsev, Head of the State Architectural and Construction Inspectorate, Volodymyr Lapa, Head of the State Food Safety and Consumer Protection Service, Roman Chernega, Head of the State Labor Service, Oleksandr Vlasov, Acting Head of the State Fiscal Service, Kateryna Hlazkova, Executive Director of the Union of Ukrainian Entrepreneurs, Anna Derevyanko, Executive Director of the European Business Association, Tetyana Prokopchuk, Vice President at American Chamber of Commerce as well as numerous business representatives and members of the public.
The Inspection Portal instruments are already available in their test mode at www.inspections.gov.ua. They will be fully operational from 1 January 2019. For this purpose, inspection agencies were tasked to approve new forms of inspection acts and publish the information on inspections by the end of this year. In November, the Ministry of Economic Development and Trade of Ukraine supported by USAID / UK aid project “Transparency and Accountability in Public Administration and Services / TAPAS” will begin working on upgrades to the Inspection Portal.