Martial Law

Martial law is a specific legal regime introduced in Ukraine or in some of its regions in the event of armed aggression or threat of attack, threat to the state independence of Ukraine, its territorial integrity and provides for the provision of the relevant state authorities, military command, military administrations and local self-government bodies with the powers necessary to avert the threat, repel armed aggression and ensure national security, eliminate the threat to state independence.

Due to russia’s military aggression since February 24, 2022, President Volodymyr Zelenskyy signed Decree No. 64/2022 “On the Introduction of Martial Law in Ukraine”, which is regularly updated at the legislative level (every 90 days).

Impact of martial law on doing business in Ukraine:

The National Bank of Ukraine may impose restrictions on foreign exchange transactions making international transactions more difficult. As the war is ongoing, the NBU is adapting its regulations and taking steps to restore Ukraine’s economy. For more information on the current conditions for regulating foreign exchange transactions, please follow the updates of the National Bank of Ukraine.
During martial law, the authorities may compulsorily seize the resources and property of enterprises for defense or public security purposes. In this case, a preliminary full compensation of the property value is possible.
New labor obligations are introduced that may affect normal working conditions, including possible mobilization of employees. On Amendments to Certain Legislative Acts of Ukraine on Optimization of Labor Relations.
Businesses may be subject to additional inspections and control measures by military and government authorities.
During hostilities, there is a risk of damage or destruction of company property, which can cause significant financial losses. Remember, the company must be equipped with a bomb shelter to ensure the safety of its employees.
The martial law potentially complicates logistics and the supply of goods due to checks at the checkpoints and customs controls. Despite these difficulties, businesses continue to transport their goods across Ukraine.
A declaration will be enough to start your own business. During the martial law, Ukraine has simplified the issuance of permits and licenses on a declarative basis, which allows entrepreneurs to launch their businesses more quickly.

Impact of martial law on corporate taxation:

The requirements for the transportation of fuel were simplified, certain goods for military units were exempted from excise duty, and the accounting of excise duty on electricity and fuel storage was changed.
Imports of defense goods are exempt from customs duties, and customs regulations for certain goods have been simplified.
Businesses are exempt from fines for late payment of taxes due to hostilities until 6 months after the end of martial law.
Taxpayers, who have lost documents due to hostilities, can submit a notification to retain expenses and tax credit without audits. Declaration data is not increased.

Key aspects of martial law for civilians:

Under martial law, special measures are provided for the evacuation of civilians from areas of danger, the arrangement of shelters, healthcare and the provision of vital services.
During martial law, there may be restrictions and limitations for citizens, foreigners and stateless persons to move freely, as well as to drive vehicles. A curfew is introduced.
According to the law, during martial law, the authorities and military command have the right to check documents, inspect belongings, luggage, cargo, vehicles, and private property.
For the duration of martial law, persons liable for military service are prohibited from traveling abroad, with certain exceptions.

Mobilization in Ukraine

Mobilization includes a set of measures to ensure that the national economy, state bodies, local governments, enterprises, institutions and organizations are ready to operate in wartime conditions. It covers the transition of their activities to the war regime, as well as the training of the Armed Forces of Ukraine, other military units and civil defense forces for wartime operations.

Mobilization in Ukraine is carried out in accordance with the Constitution of Ukraine, the Law “On Mobilization Training and Mobilization” and other legal acts. On May 18, 2024, the new Law No. 3633-IX “On Amendments to Certain Legislative Acts of Ukraine on Certain Issues of Military Service, Mobilization and Military Registration” came into force, which introduced significant changes to the mobilization process, including:

Reduction of the conscription age from 27 to 25 years.
Creation of a unified electronic register of persons liable for military service.
Permission to demobilize conscripts.
Cancellation of the status of “restrictedly fit for military service”.
Increasing fines for persons evading service.
Women can be registered for military service voluntarily, except for those with medical or pharmaceutical education. They can be mobilized only upon their consent.

Certain categories of citizens are granted a deferment from conquistion for military service during mobilization in Ukraine in accordance with the law. In particular, deferment is granted to:

Persons with three or more children under the age of 18.
Persons raising a minor child on their own.
Persons caring for family members, who need constant assistance.
Booked employees of critical industries or organizations.
Students, who are studying full-time or dual enrollment and meet the conditions for consistent improvement of their education.
Persons with disabilities of all groups, if there is a confirmation from the military medical commission (with an obligation to undergo a second medical examination in 6-12 months).

The deferment shall be granted on the basis of relevant documents confirming the existence of these circumstances. The decision to grant the deferment is made by the TRC. For more information on the procedure for deferment, see Law of Ukraine “On Mobilization Activities and Mobilization”.

Deferment period

In the context of mobilization, persons subject to call-up may be granted a deferment of mobilization for the duration of the circumstances that constitute grounds for granting the deferment or for the duration of the booking. The deferment is granted by territorial recruitment centers (TRC) and commissions on the basis of submitted applications and justifications. Resolution of the Cabinet of Ministers of Ukraine of May 16, 2024 No. 560 “On Approval of the Procedure for Conscription of Citizens for Military Service during Mobilization, for a Special Period”.

The grounds for extending the deferment are checked, in particular, with the help of the Unified State Register of Conscripts, Persons Liable for Military Service and Reservists.

Booking of employees

In the context of mobilization, businesses can book key employees to ensure the continuity of important production and functional processes. This applies to employees whose activities are critical to the functioning of enterprises, organizations or institutions. The procedure for booking employees, who are critical to the economy and defense, is determined by the Law of Ukraine “On Mobilization Activities and Mobilization”.

Booking procedure:

Companies submit to the relevant authorities applications for booking of their key employees with a justification for the need for reservation, as well as a list of employees to be booked.

Applications are reviewed by the Ministry of Economy of Ukraine and the General Staff of the Armed Forces of Ukraine. Upon approval, a decision is made to grant a deferment.

Since July 2024, Ukraine has introduced electronic booking through the Diia portal. This significantly speeds up the process and reduces the workload of ministry employees. The booking procedure takes about an hour, and decisions are made automatically based on checks in the registers.