Ukrainian amendment gives fresh impetus to industrial parks

On 7 October 2021, Law of Ukraine No. 1710-IX “On Amendments to the Law of Ukraine "On Industrial Parks" and Other Legislative Acts of Ukraine for Attracting Investments to Industrial Sector of Economy by Stimulating the Development of Industrial Parks” (the “Law”) came into force. These long-awaited changes are expected to provide efficient support in developing manufacturing clusters and increase the competitiveness of Ukrainian industrial parks.

What can be developed in an industrial park?

The following facilities may be placed within the area of an industrial park:

• offices of an industrial park management company and the park’s participants, financial institutions, and marketing and advertising concerns;
• educational institutions, such as preschool, general secondary and higher education, professional pre-higher, and professional or vocational education;
• scientific institutions, business accelerators, and laboratories for the development of innovative technologies;
• multipurpose halls designated for holding scientific conferences and other public events;
• industrial and warehouse buildings and structures, logistics infrastructure facilities;
• waste management facilities (except for waste landfilling);
• engineering buildings and structures;
• areas of greenery;
• fire stations; and
• other companies and institutions whose activities are allowed by legislation.

What are the additional requirements for land plots within an industrial park?

The Law stipulates that the area of a land plot or the aggregate area of adjacent land plots designated for the establishment and operation of an industrial park must be at least ten hectares and no more than 1,000 hectares.

In addition, land plots on which engineering and transport infrastructure facilities are located (or are intended to be located in accordance with city planning documentation) may be located between industrial park land plots.

What types of economic activity are restricted in industrial parks?

Under the Law, the following businesses are forbidden in an industrial park:

• excisable goods manufacturing, except for manufacture of light vehicles and their bodies, trailers and semi-trailers, motorcycles, vehicles for ten or more people, and goods vehicles;
• the issuance of and holding of lotteries;
• gambling activity;
• mediation in employment abroad;
• a capture fishery outside the jurisdiction of Ukraine;
• operations with plants listed as narcotic substances and other mind-altering drugs; and
• waste landfilling.

Who is a “participant” of an industrial park?

The participant of an industrial park is a legal entity or individual entrepreneur that:

• entered into an agreement on carrying out the economic activity within the territory of an industrial park in accordance with the industrial park concept with the management company;
• carries out activity solely on the territory of an industrial park and exclusively in the fields as follows:
  • processing industry;
  • processing of industrial and/or household waste (except for waste landfilling);
  • scientific and technical activities; and
  • information and telecommunications activities.
• is registered in an industrial park;
• acquired a right to a land plot and/or other real estate located within the territory of an industrial park.

Businesses operating in other than the listed fields, though not engaged in activities prohibited by the Law, may also be registered, located and operating in industrial parks. These businesses, however, will not be entitled to state support set forth by the Law.

What financial incentives does the Law provide, and who can receive them?

The Law stipulates that only initiators, participants and management companies of industrial parks, which are registered with the state register of industrial parks, are entitled to the following state incentives:

• full or partial compensation for interest rates on loans taken for equipping or carrying out business in industrial parks;
• financing of the construction, refurbishment, repair of engineering infrastructure for the development, equipping, and operation of industrial parks;
• compensation of the costs incurred for connection to the engineering networks; and
• tax and customs benefits.

These incentives can be provided from state and local budgets and other sources not prohibited by Ukrainian legislation.

What institutional incentives does the Law establish?

As of now, the Ministry of Economy of Ukraine is authorised to establish permanent or temporary advisory bodies and engage companies and institutions to support initiators of industrial parks, park’s management companies and participants with the following service:

• preparing of short- and long-term programmes for the development of industrial parks;
• ensuring cooperation with international financial institutions, foreign governmental and non-governmental organisations;
• assistance in (i) development of an industrial park concept and business plans; (ii) engagement of financing; and (iii) attracting potential participants to industrial parks; and
• assistance in organising scientific and educational conferences and public events (e.g. exhibitions, seminars) in industrial parks.

For more information on the development of the industrial parks regulation, contact your regular CMS advisor or local CMS experts: Natalia Kushniruk, Anna Pogrebna.

Legislation: The Law of Ukraine No. 1710-IX “On Amendments to the Law of Ukraine "On Industrial Parks" and Other Legislative Acts of Ukraine for Attracting Investments to Industrial Sector of Economy by Stimulating the Development of Industrial Parks”