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Reform of agricultural land market in Ukraine
DLA Piper, Kyiv, Ukraine,
Apr 3, Fri, 2020
On March 30-31, 2020, the Ukrainian Parliament passed the Law of Ukraine On amendment of several legislative acts of Ukraine regarding the sale of agricultural land (New Law) that had long been discussed among the business community. The New Law is purported to abolish a ban on the sale of agricultural land that has been effective in Ukraine for about 19 years. The New Law has been provided for the President's signature and will then be officially published.
Current restrictions on the sale and purchase of agricultural land
There is currently a ban on:
- the sale and purchase of state and municipal agricultural land (except for buy-out for public purposes); and
- alienation, change of designated use, contribution into share capital of companies of private agricultural lands.
Once the New Law comes into force, the above restrictions will be abolished step by step subject to the timeline provided in the New Law.
The New Law provides the following legal framework for the Ukrainian agricultural land market.
1. Who can be an agricultural land owner?
- Only citizens of Ukraine, legal entities incorporated in Ukraine by Ukrainian citizens, state or Ukrainian municipalities, and Ukrainian state and municipalities can acquire agricultural land.
- Banks can acquire agricultural land plots in the course of foreclosure of mortgaged lands and shall sell foreclosed land plots within two years after foreclosure.
- For foreign individuals, legal entities and Ukrainian legal entities with foreigners among the shareholders, it is prohibited to acquire agricultural land plots unless allowed by results of a vote in an All-Ukrainian referendum.
- The following individuals and legal entities cannot acquire agricultural land:
- legal entities that have citizens of the state recognized as an aggressor or an occupant in Ukraine among shareholders or beneficiaries;
- members of terrorist organizations;
- legal entities whose beneficiaries are foreign states;
- legal entities whose beneficiaries cannot be identified;
- legal entities whose beneficiaries are registered in offshore zones subject to the list adopted by the Cabinet of Ministers of Ukraine;
- individuals and legal entities that are under ban to acquire land as sanctions measure and parties related to them; and
- Ukrainian legal entities controlled by individuals registered in countries from the FATF list of Non-Cooperative Countries or Territories.
2. Which agricultural land can be acquired?
- Foreign individuals, legal entities and Ukrainian legal entities with foreigners among the shareholders cannot acquire state and municipal agricultural land, agricultural land from holders of land shares and land within 50 km from the state border, notwithstanding results of an All-Ukrainian referendum;
- Sale of state and municipal agricultural lands is prohibited.
- Citizens of Ukraine are allowed to acquire agricultural land from July 1, 2021, (date of the law coming into force). Up to January 1, 2024, the total area of such land plots cannot be more than 100 hectares.
- Legal entities are allowed to acquire agricultural land from January 1, 2024, except for acquisition of agricultural land by banks as foreclosure of mortgaged land.
- Until January 1, 2030, transaction value of agricultural lands allotted in kind to the individual holders of land shares cannot be less than normative monetary value of land.
- The maximum area of agricultural land in ownership cannot exceed 10,000 hectares (100 hectares from July 1, 2021, to January 1, 2024).
4. Requirements for transactions with agricultural land
- Pre-emptive rights shall prevail when selling an agricultural land plot (e.g. a tenant of a land plot has a pre-emptive right to buy such land plot) and such pre-emptive rights can be transferred to third parties.
- Payments under transactions with agricultural land can be performed only in cashless form and a purchaser must prove the source of money or other assets transferred as a consideration for a land plot being acquired.