Important Draft Laws. Issue 43: Agreement on Subsoil Use with the U.S., Military Ombudsman’s Office, Taxation of Marketplace Income

Agreement between Ukraine and the U.S. on establishing a joint reconstruction investment fund

On April 30, the governments of Ukraine and the United States signed an agreement to establish a joint Reconstruction Investment Fund. On May 8, Parliament adopted Bill No. 0309 related to the Agreement, which was signed by the President of Ukraine just four days later.

Under the Agreement, the Fund will be a joint enterprise organized as a limited liability partnership. Its founders will be the U.S. International Development Finance Corporation (a U.S. government agency) and the Ukrainian Agency for the Support of Public-Private Partnership (a Ukrainian state institution). The United States may count military assistance provided to Ukraine, after the Agreement enters into force (i.e., following ratification by the United States), as contributions to the Fund. Ukraine, in turn, will contribute a share of revenues from subsoil use, specifically 50% of royalties, license payments, and proceeds from production sharing agreements related to future projects.

The specific rules governing contributions to the Fund are not detailed in the Agreement itself. These will be defined in a separate Limited Partnership Agreement—a commercial contract between the Fund’s founding entities: the U.S. International Development Finance Corporation (DFC) and the Ukrainian Agency for the Support of Public-Private Partnership. This document will establish key aspects of the Fund’s operation, including its governance structure, profit distribution, the liabilities of the parties, and the timing and format of contributions. This two-tier structure is a common approach in international financial projects: first, an intergovernmental agreement; then, a commercial agreement between the implementing partners. The latter is non-public and not subject to parliamentary ratification.

The ratified Agreement stipulates that any changes to domestic legislation must not worsen the conditions for the Fund. In the event of a conflict between Ukrainian law and the Agreement, the provisions of the Agreement will take precedence. All income, contributions, and payments related to the Fund’s activities will be exempt from taxes and duties in both countries.

The Agreement and the Fund’s activities will apply to nearly all mineral resources, except construction materials. Resources covered under the agreement will be referred to as “Natural Resource-Related Assets.” These include areas, deposits, and reserves of aluminum, antimony, arsenic, barium, beryllium, bismuth, cerium, cesium, chromium, cobalt, copper, dysprosium, erbium, europium, fluorine, fluorspar, gadolinium, gallium, germanium, gold, graphite, hafnium, holmium, indium, iridium, lanthanum, lithium, lutetium, magnesium, manganese, neodymium, nickel, niobium, palladium, platinum, potassium, praseodymium, rhodium, rubidium, ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium, tin, titanium, tungsten, uranium, vanadium, ytterbium, yttrium, zinc, zirconium, oil, natural gas (including liquefied natural gas), and other minerals or hydrocarbons.

The Agreement creates favorable conditions for the Fund: each license for subsoil extraction, concession, or public-private partnership agreement will be required to include a clause obligating companies to provide information to the Fund if they seek investment. If the Fund expresses interest in participating in a project, the company must engage in good-faith negotiations and not offer substantially more favorable terms to other investors.

The Agreement is concluded indefinitely and will remain in force until both parties mutually agree to terminate it—unilateral withdrawal is not permitted. Amendments to the agreement will be possible only with the written consent of both governments.

Amendments to the Budget Code related to the Agreement with the U.S.

The Agreement on the joint Reconstruction Investment Fund with the United States provides that half of the revenues from new resource deposits will be directed to the Fund. Bill No. 13256, adopted in its first reading on May 13, proposes that these funds—50% of the proceeds from the sale of new licenses and revenues from new projects—first be transferred to a newly established special fund within the state budget, and then allocated to the Investment Fund. The remaining 50% will be distributed between the general state budget fund and local budgets. This model will apply to “Natural Resource-Related Assets.”

Redistribution of revenues from various sources will differ slightly:

New framework for regulating investment funds

Bill No. 13246 seeks to significantly update the regulation of investment funds, which the Law currently governs On Collective Investment Institutions and the Presidential Decree On Investment Funds and Investment Companies.

For example, the decree defines an investment fund as a legal entity. In contrast, the current law provides for two types of collective investment institutions: a corporate fund (a legal entity structured as a joint-stock company) and a mutual fund (which is not a legal entity; rather, it is a pool of assets jointly owned by its participants and managed by an asset management company). A transition period has been established for existing mutual funds, lasting until January 1, 2042, during which they must either be converted into legal-entity-based funds or cease operations.

The primary regulatory body for investment funds would remain the National Securities and Stock Market Commission (hereafter, the Commission). As is currently the case, the Commission would continue to carry out licensing, supervision, registration of funds and investment certificates, and approval of prospectuses—documents that contain key information about the Fund, including its investment strategy, associated risks, fees, and investor rights. Prospectuses must be published before any certificate offering to ensure investors are fully informed of the investment terms. The Commission would also have the authority to confirm whether a fund has been adequately established and to impose sanctions, including fines, suspension of licenses, and removal from the state register. Under current law, if the Commission adopts a resolution stating that a fund has not been adequately established, all funds raised through the placement of investment certificates must be returned to investors by the asset management company. The Commission’s authority to approve the establishment of “master-donor” structures and to set rules governing the preliminary marketing of funds is new in the draft law.

The bill classifies investment funds into two categories: public and alternative. Public funds would be permitted to invest only in publicly traded securities or place funds in bank deposits. The draft law introduces diversification requirements for such investments, including limits on the maximum share allocated to a single financial instrument or issuer to mitigate risks for investors.

Alternative funds such as venture, social enterprise, or long-term investment funds may be specialized. Each of these categories would be subject to additional requirements. For instance, social enterprise funds would be required to direct their investments toward socially significant projects, while venture funds would target companies with high-risk profiles and strong innovation potential.

A public fund may not be converted into an alternative fund. This restriction protects non-qualified investors, as public funds are subject to stricter asset composition and disclosure requirements. In contrast, alternative funds are generally riskier and operate under fewer regulatory constraints. Converting a public fund into an alternative one could increase investors’ exposure to risk. However, an alternative fund may be converted into a public fund, provided it complies with all applicable requirements, such as those on asset diversification, disclosure, the publication of a prospectus, registration, and obtaining approval from the Commission.

Investment funds may operate in pairs: one as a master fund, the other as a donor fund. A donor fund must invest at least 85% of its assets in the certificates of the master fund, thereby effectively transferring those assets under the master fund’s management. A master fund may not serve as a donor fund, meaning it is prohibited to create a chain of funds in which one donor fund invests in another donor fund. This restriction is intended to prevent excessive structural complexity and mitigate the risk of cascading financial losses if one such Fund underperforms. Forming such fund pairings would be permitted only with the Commission’s approval and by the regulations it is required to establish.

The bill also introduces a procedure for pre-marketing, allowing a fund to privately inform potential qualified investors about its strategy before its establishment. In addition, each investment fund would be required to regularly disclose information on its operations, asset structure, performance, and financial reporting, both on its website and on the official website of the Commission. Asset management companies, in turn, would be obligated to notify the Commission and fund participants of any material changes—including changes in the composition of governing bodies, investment strategy, or the structure or size of assets—and must ensure proper storage and maintenance of all fund documentation.

If adopted, this law would enter into force on January 1, 2027, while the current Law on Collective Investment Institutions would be repealed as of January 1, 2042. Existing funds would, therefore, have a 15-year transition period to bring their operations into full compliance with the new legislation.

Legislative framework for the work of the Military Ombudsman

In April 2024, the Ministry of Defense and the Verkhovna Rada Commissioner for Human Rights established the Central Department for the Protection of Service Members’ Rights—a unit within the Ministry of Defense tasked with systematically monitoring compliance with the rights of military personnel. This step was part of broader preparations for establishing the Military Ombudsman institution. In December 2024, the President of Ukraine issued a decree appointing Olha Reshetylova (Kobylynska) to the position. However, the role currently lacks a clearly defined legal status, mandate, or enforcement mechanisms, thus creating the need for dedicated legislation.

Bill No. 13266 proposes defining the legal status, powers, and operational procedures of the Military Ombudsman. The Ombudsman would be responsible for safeguarding the rights of all individuals involved in national defense, including service members, police officers engaged in combat operations, reservists, and veterans. The Ombudsman would be appointed by the President for a five-year term, with a limit of two consecutive terms. Candidates must be Ukrainian citizens over 30, possess higher education, have no criminal record, hold no dual citizenship, and demonstrate no political affiliation. Before an appointment, candidates must undergo an anti-corruption screening and submit an asset declaration for persons authorized to perform state or local self-government functions. This is the same declaration required of civil servants, judges, prosecutors, MPs, and mayors, which is publicly disclosed on the National Agency on Corruption Prevention (NACP) website. Unlike a basic income and property declaration, this expanded form includes information on family members’ assets, corporate rights, financial holdings, and liabilities, and is intended primarily for anti-corruption oversight.

Service members or their legal or authorized representatives may submit complaints to the Ombudsman in writing, orally, in person, or through electronic channels. During the review process, the Ombudsman can visit military units without restriction, obtain documents, conduct interviews, and engage directly with officials.

Anonymous complaints would generally not be considered, except in cases containing specific, verifiable information indicating rights violations.

The Ombudsman must submit an annual report to the President, which must also be published online. To support the Ombudsman’s activities, a separate Office of the Military Ombudsman would be established and funded from the state budget. In 2025, UAH 37.4 million was allocated for this purpose, with the amount expected to rise to UAH 172.7 million by 2027. The draft law does not specify the number of staff for the Office.

Bill No. 13267 complements the primary legislation by introducing administrative liability for obstructing the work of the Military Ombudsman. Officials who fail to comply with the Ombudsman’s lawful instructions could face fines ranging from UAH 8,500 to UAH 17,000. In the case of repeat violations, the fine could increase between UAH 17,000 and UAH 34,000. It may also include disqualification from holding certain positions for up to one year or indefinitely.

Ban on public events involving members of the military

Bill No. 13270 proposes banning the formation or assembly of military personnel during martial law. Additional restrictions would apply in public spaces, where gatherings of personnel for non-combat purposes (such as awarding a Battle Flag or announcing commendations) would be prohibited. The ban would not apply to activities directly related to combat training, mobilization readiness, or national defense.

New taxation rules for income earned through digital platforms

Bill No. 13232 seeks to implement the international DPI (Digital Platform Information) agreement—a global standard for automatically exchanging tax information on income earned by individuals and businesses through digital platforms. This means that Ukraine could receive data and tax the income of its residents from platforms such as OLX, Airbnb, or Amazon—even if the platforms are not based in Ukraine.

For example, suppose a Ukrainian citizen rents out an apartment through Airbnb, which is registered in Ireland. In that case, Airbnb transmits the data to the Irish tax authority, which shares it with the State Tax Service of Ukraine under the DPI agreement.

The bill requires platform operators (i.e., companies managing websites or applications) to report annually to the tax authority on sellers registered on the platform and the income they have received.

If a platform operator facilitates payment processing between sellers and buyers, it would become a tax agent, meaning it must transfer the corresponding taxes to the budget. If the platform only connects buyers and sellers, and payments happen off-platform, then the seller would be responsible for paying the taxes.

The tax authority would have the right to request information from banks regarding sellers’ accounts, audit platform operators, and their reporting, and issue notifications to foreign companies in case of legal violations. Ukrainian platform operators would be treated as standard business entities: they must register with the tax service, submit reports, retain documentation, and be subject to inspections and tax audits. Foreign platform operators registered in Ukraine would also fall under these requirements.

If a foreign platform operator is not registered in Ukraine but conducts business with Ukrainian sellers, the tax authority may send notifications via the operator’s electronic account. If such an account does not exist, communication may be routed through the tax authority of the operator’s country of registration. In addition, under the DPI agreement, Ukraine could receive information automatically from foreign tax authorities, provided the platform qualifies as a reporting entity and submits reports in its home jurisdiction. Thus, Ukraine’s influence over foreign companies would not be exercised through on-site audits but through international data exchange and tax cooperation mechanisms.

Any individual earning income through digital platforms would be required to notify their bank, either when opening an account or using it, that the account would be used to receive compensation from platform-related activity. Failure to provide such notification would result in a fine of UAH 680 for each instance of non-disclosure—that is, for each account not properly declared. This penalty would apply regardless of the number or value of transactions and would be triggered solely by the failure to notify the bank at the time of account registration.

If the individual notifies the bank of their status as a reportable seller, the bank must forward this information to the tax authority. Until the account is officially registered with the tax authority, the individual would be prohibited from using it to spend funds, except for transfers to the state budget or public funds. If the bank fails to report the account despite receiving the relevant information from the seller, it would be subject to a fine equal to 10% of all transactions conducted on that account before registration, but not less than UAH 1,700. In this framework, the individual would be responsible for timely notification to the bank, while the bank is responsible for transmitting that information to the tax authority.

Legal regulation of the timber market

Bill No. 13227 introduces a special legal regime for the timber market, covering harvesting, purchase, sale, and processing activities. The law would apply to fuelwood (including logs, wood chips, sawdust, and pellets), wood products (such as railway ties, boards, plywood, parquet, windows, doors, and timber construction elements), as well as metal structures incorporating wooden components, furniture, and other related items. While the bill aims to prevent uncontrolled deforestation, it is expected to increase the administrative burden on businesses.

The bill does not directly regulate forest felling. Still, it would require market operators to submit harvesting plans and reports on their implementation to the State Forest Resources Agency of Ukraine (the State Forestry Agency). It would also require that all data related to timber harvesting, transporting, and selling timber be entered into an electronic accounting system.

The draft law proposes that raw and fuelwood be sold exclusively through electronic exchange auctions, which would take place in multiple stages. In the first stage, only companies listed in a newly established List of Wood Processing Companies (maintained by the State Forestry Agency) would be allowed to participate.

In the first stage of the auction, only upward bidding on the starting price would be permitted. If the product remains unsold, additional companies may be admitted to a subsequent stage, where upward and downward price adjustments would be allowed. Off-exchange sales would be permitted only in exceptional cases: for defense purposes, retail sales to individuals, or public procurement. The price, maximum volume, and standard contract form for the sale of raw timber and firewood for household use would be approved by the State Forestry Agency.

Regulation of the timber market would be shared among several authorities. The Cabinet of Ministers would be responsible for approving procedures for inspections, monitoring, and removal from the Registry of economic entities engaged in wood processing, as well as for establishing the Complaints Review Commission—a newly created body tasked with reviewing complaints from market participants regarding the actions of auction organizers or other participants. The Ministry of Environmental Protection and Natural Resources would be responsible for developing sectoral policy, including setting retail sales rules, and drafting legislation and other regulatory acts to align Ukrainian law with EU standards. The State Forestry Agency would conduct monitoring and inspections of enterprises, schedule exchange auctions, define technical requirements for auction organizers, approve pricing procedures, and maintain key registries, including the list of economic entities engaged in wood processing and the list of authorized information agents (i.e., auction organizers). It would also publish all essential information on its official portal. The newly created Complaints Review Commission would be empowered to resolve disputes related to the conduct of market participants and auction organizers. The Cabinet of Ministers would define its composition and mandate.

In addition, the bill proposes extending the moratorium on timber exports—originally scheduled to expire in 2025 (and in the case of pine, in 2027)—until the end of martial law, plus an additional five years. A separate bill, No. 13223, proposes extending the current export ban even further, until 2035–2037.