Leonid Kuchma Cracks Down On Foreign Investment Tax Cheats

by Carla Johnson, Investors Offshore.com

28 October 2002

Ukrainian President, Leonid Kuchma has asked the State Tax Administration to launch an investigation into bogus foreign investment joint ventures.

According to a report in the Kyiv Post on Thursday, in 1992 the authorities passed legislation affording special tax breaks to joint ventures between foreign investors and Ukrainian companies and entities, in a bid to attract more FDI to the country. Although the law was subsequently repealed in December 2001, the courts have restored benefits to some of the ventures which appealed the decision, albeit on a case-by-case basis.

Speaking last week, Presidential spokesperson, Olena Hromnytska explained that concerns have been expressed that rather than attracting legitimate foreign investment, Ukrainian funds are being moved into offshore accounts and then repatriated as foreign investment, thus enabling domestic ventures to take advantage of the tax benefits on offer.

However, speaking to the Kyiv Post, State Tax Administration spokesperson, Vitaly Lukyanenko reassured legitimate foreign investors and their partners that they will have nothing to fear from the investigation.

'This will not affect genuine investors,' he told the newspaper. 'This is about Ukranian firms that created fictitious joint ventures solely to benefit from the tax privileges.'

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