How to support a relocated business: recommendations and successful practices

Publication date: August 10, 2022

In May 2022, the Legal Development Network conducted a survey of 15 representatives of small and medium-sized relocated businesses. The problems and requests of the respondents, as well as recommendations for their solutions, are outlined in the final report, which was presented at the end of July to representatives of the government, communities, businesses, and civil society.

The survey is part of the comprehensive support of small and medium-sized businesses, which the LDN started as early as February 24 within the framework of the humanitarian response program #StandWithUkraine, and later with the participation of members of the “Solidarity and Justice” coalition. 

«The coalition concentrates its efforts in the following directions: legal, humanitarian aid, and expert support of CSOs and communities. In the legal direction, over the past 5 months, we have provided assistance to more than 7,000 people who are not only in Ukraine, but also abroad. Separately, a hotline was launched for consulting small and medium-sized businesses. We understood that a full-scale war would not end in a few days. To win it, our country will need considerable resources. That is why we are continuing the implementation of the small and medium-sized business support component as one of the key ones. 

In the field of tax law, the issue of reporting and payment of taxes, and responsibility for violation of these terms became the main issue. To date, the MPR has already provided 115 consultations in the field of tax law, via online chat and by phone. In addition, we began to study the problematic issues of relocation in communities during the implementation of the “Vulyk Zmistiv” (Beehive of Meanings) initiatives. All this experience was used in the preparation of the survey and processing of its results», says Yevgen Poltenko, executive director of the LDN.

Key recommendations

Finance and taxation expert Anna Karpenko notes that from March 15, 2022, the State Tax Service temporarily suspended the provision of answers to business appeals. Accordingly, there was a large demand for prompt consulting and solving urgent problems.

This express study made it possible to cover the main problem areas, in particular, difficulties of relocation, integration of business in host communities, business needs, and problems in legislative regulation. And the developed recommendations have specific addressees. 

This is what the expert advises local self-government and representatives of local civil society:

• contribute to the settlement of workers, without whom no business will work;
• provide complete and comprehensive information about the community, local business, and local development priorities relevant to the field of business activity;
• assist in the search for premises necessary for entrepreneurial activity;
• support communication and coordination between representatives of local and relocated businesses;
• communicate with those businesses located in the combat zone regarding the possibility of full or partial relocation to the host community;
• strengthen cooperation with regional military administrations regarding the promotion of reservation of employees of relocated businesses;
• involve lawyers from civil society organizations (CSOs) who specialize in business consulting;
• involve active CSOs that have experience or experience with relocation and business. Such CSOs can strengthen local self-government bodies in terms of performing functions that the government cannot support, and it will also facilitate the involvement of a wider range of people in the process of business integration in the community.

Cabinet of Ministers of Ukraine

Consider reducing the value-added tax (VAT) rate for the import of production equipment. For example, the import of equipment for the production of clothes is taxed at the rate of 20% VAT, which restrains the development of own production, since it is more profitable to import finished products. Introduce an electronic service for issuing employment permits for foreigners and generally simplify the list of necessary documents.

Ministry of Economy of Ukraine and Ministry of Finance of Ukraine

Provide clarification on the issue of compensation for the costs of utility services incurred by enterprises/organizations as a result of the temporary stay of the Territorial Defense Forces. Provide information on which legislative acts regulate this issue, as well as an explanation of the algorithm for obtaining compensation.

One of the business representatives learned about the lack of possibility of receiving such compensation during the research. To clarify the information, a request was sent to the Ministry of Economic Development, which forwarded it to the Ministry of Community Development of Ukraine. This ministry noted that this issue has not been resolved and changes will be made to the relevant by-laws. Antonina Sytiuk, a state expert of the expert group on energy efficiency of public buildings of the Ministry of Community and Territorial Development of Ukraine, told about the stage of legislative innovations.

Antonina Sytiuk, representative of the Ministry of Community and Territorial Development of Ukraine:

«I am engaged in making changes to the resolution of the Cabinet of Ministers of Ukraine #261 dated 11.03.2022, which regulates these issues. It is assumed that private enterprises will also have the opportunity to apply for compensation for utility costs. The changes are in the development stage, but now such things are adopted quite quickly, given the understanding of the business needs».

Mariana Dzvinnyk, an expert at the Regional Policy Coordination and Evaluation Directorate of the Secretariat of the Cabinet of Ministers of Ukraine, advised to send the recommendations to all-Ukrainian community associations for consideration in their work, and also to send them to the Cabinet of Ministers of Ukraine:

«Thanks for the presentation and recommendations. There are developments that have not been resolved and not considered by the central bodies of local authorities, please summarize them and send them to the Secretariat of the Cabinet of Ministers. In order to settle, we will refer them to the responsible authorities, because the legislation is currently being updated. Perhaps there are already ready-made projects, and articles that can be taken into account during the preparation of the regulatory framework».

Successful practices

Zakarpattia Oblast is an example of the development and implementation of successful business relocation practices. As of August 2, 2022, 417 representatives of small and medium-sized businesses have moved to it, and 357 of them are already working. 

Halyna Rusnak, head of the Department for the Development of Industry, Trade, and Entrepreneurship, told about how strategies for supporting resettled businesses were developed in the oblast:

«It was a challenge for our region. Thanks to the coordinated actions of both local self-government bodies and businesses, we have collected a database of free sites, their capabilities (connected communications, etc.), telephone numbers, and links to which you can find out more detailed information. It was all posted online. And when businesses approached us, we gave them access to this data. 

Today, 75.8% of business entities have re-registered. This is because we immediately provided the telephone numbers of a tax consultant who advised businesses, in particular, small and medium-sized ones. He helped to register or re-register his business and also explained what it meant».

Other support programs are being implemented in Zakarpattia Oblast. This is how they create databases with a list of land plots that can be transferred on favorable terms (free of charge, preferential lease period, etc.) to relocated businesses and forcibly displaced persons for use in conducting business activities. They already have information on more than 170 hectares of such plots.

The regional administration concluded a memorandum with the Austrian federal land of Burgenland. Together, they plan to create favorable conditions for the development of winemaking and attract relocated businesses to work in this segment.

A memorandum of cooperation was signed with the Luhansk Regional Military Administration. Thanks to this document, part of the staff of the Luhansk RMA was relocated to the Zakarpattia oblast. They were given places to work and provided housing for the families of the displaced workers. In addition, for their support, part of the regional budget was “transferred” to the budget of Zakarpattia oblast.

Among the most acute problems that concern the relocated business is the required number of employees. In most cases, they do not have the opportunity to move their key workers from the frontline and temporarily occupied territories due to:

• • lack of housing for workers and their families in places of business relocation;
• • reluctance of employees to relocate due to probable mobilization (receiving a summons);

A large number of small and medium-sized businesses in the region creates competition for employers in the search for the necessary specialists. In addition, recruitment and social protection centers (former military commissariats) in the region practice “raids” on offices, enterprises, and businesses to serve summonses.

«At the last meeting with representatives of small and medium-sized businesses in Zakarpattia Oblast, at which we were present, we felt the negative attitude of local business representatives towards the relocated ones. I got the impression that in the region it is the relocated business that is now receiving the most attention, a favorable environment is being created for their work, and a large number of benefits are also provided by the state. Certain isolation is also observed: communication between them is insufficient. In addition, we saw a lack of interregional cooperation», Timur Kanataiev, project manager of the Legal Development Network, shares his conclusions after the meeting.

The material was created with the support of the International Renaissance Fund, the Ch. S. Mott Foundation, the DLA Piper Foundation, the international charitable platform GlobalGiving, and the Legal Empowerment Fund (program of the Fund for Global Human Rights (FGHR)). The content of the publication is solely the responsibility of the Legal Development Network and does not necessarily reflect the views of the previously mentioned organizations.

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