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Who is Subcontractor for International Technical Assistance Projects? Q&A

16/ 12/ 2020
  Svitlana Svyrydenko. Sales & Business Development Director, Attorney-at-Law, Accountor Ukraine On October 9, 2020, the Cabinet of Ministers changed the system of engaging, using and monitoring international technical assistance (ITA) and implemented the concept of “subcontractor”. A “subcontractor” means any party (residents/non-residents) who has a written agreement with the executor or with the recipient, who ensures the implementation of the project or part of the project and who conducts procurement process for the project at the expense of the ITA funds. 1) Who can be a subcontractor? Any party, resident or non-resident, can be a subcontractor (as well as the executor). 2) Does the subcontractor need to be accredited by the Secretariat of the Cabinet of Ministers? Unlike for executors, accreditation is not required for subcontractors. 3) How shall selection be made and who decides on the subcontractor(s) for the project? There are no legal requirements/criteria for the subcontractor selection procedure. Meanwhile, the decision to engage a subcontractor may be made by the executor or recipient, and a relevant written agreement must be signed. 4) How can project implementation be divided between the executor and the subcontractor(s)? The subcontractor(s) may be involved in the implementation of the project in whole or in part, so the executor and subcontractor(s) may agree upon how they shall share the implementation of the project. 5) Is it possible to engage a subcontractor after the project is registered? Even after the project has been registered, it is possible to make changes to the procurement plan due to selection of subcontractors. The updated plan must be submitted by the development partner (executor) or by the recipient to the Secretariat of Cabinet of Ministers along with a copy of the subcontractor agreement. 6) Are subcontractors entitled to tax benefits provided by the laws and international treaties of Ukraine? Like executors, subcontractors are entitled to tax benefits provided by the laws and international treaties of Ukraine. 7) Does a subcontractor have any extra responsibilities compared to the executor? No. Just as any executor exercising the right to obtain tax benefits according to the laws and international treaties of Ukraine (except for contracts related to: preparing the Chornobyl NPP for decommissioning, decommissioning the Chornobyl NPP units and transforming the “Shelter” facilities into an environment friendly system), a subcontractor must submit information confirmation in prescribed form on paper and electronically to the body of the State Tax Service where this subcontractor was registered as taxpayer. The involvement of a new entity (subcontractor) in ITA projects implementation is expected to increase the number of Ukrainian companies participating in the implementation of ITA projects. After all, it is natural that Ukrainian companies with relevant experience and reputation who understand the needs of beneficiaries and of Ukrainian society will potentially join the ranks of subcontractors. The Legal Advisors and Accountants of Accountor Ukraine provide comprehensive services pertaining to subcontractors’ involvement in ITA projects, as well as accounting and report preparation/filing services (including special reports for exercising the right to obtain tax benefits).

Svitlana Svyrydenko

Sales & Business Development Director, Attorney-at-Law, Accountor Ukraine

On October 9, 2020, the Cabinet of Ministers changed the system of engaging, using and monitoring international technical assistance (ITA) and implemented the concept of “subcontractor”.

A “subcontractor” means any party (residents/non-residents) who has a written agreement with the executor or with the recipient, who ensures the implementation of the project or part of the project and who conducts procurement process for the project at the expense of the ITA funds.

1) Who can be a subcontractor?

Any party, resident or non-resident, can be a subcontractor (as well as the executor).

2) Does the subcontractor need to be accredited by the Secretariat of the Cabinet of Ministers?

Unlike for executors, accreditation is not required for subcontractors.

3) How shall selection be made and who decides on the subcontractor(s) for the project?

There are no legal requirements/criteria for the subcontractor selection procedure. Meanwhile, the decision to engage a subcontractor may be made by the executor or recipient, and a relevant written agreement must be signed.

4) How can project implementation be divided between the executor and the subcontractor(s)?

The subcontractor(s) may be involved in the implementation of the project in whole or in part, so the executor and subcontractor(s) may agree upon how they shall share the implementation of the project.

5) Is it possible to engage a subcontractor after the project is registered?

Even after the project has been registered, it is possible to make changes to the procurement plan due to selection of subcontractors. The updated plan must be submitted by the development partner (executor) or by the recipient to the Secretariat of Cabinet of Ministers along with a copy of the subcontractor agreement.

6) Are subcontractors entitled to tax benefits provided by the laws and international treaties of Ukraine?

Like executors, subcontractors are entitled to tax benefits provided by the laws and international treaties of Ukraine.

7) Does a subcontractor have any extra responsibilities compared to the executor?

No. Just as any executor exercising the right to obtain tax benefits according to the laws and international treaties of Ukraine (except for contracts related to: preparing the Chornobyl NPP for decommissioning, decommissioning the Chornobyl NPP units and transforming the “Shelter” facilities into an environment friendly system), a subcontractor must submit information confirmation in prescribed form on paper and electronically to the body of the State Tax Service where this subcontractor was registered as taxpayer.

The involvement of a new entity (subcontractor) in ITA projects implementation is expected to increase the number of Ukrainian companies participating in the implementation of ITA projects. After all, it is natural that Ukrainian companies with relevant experience and reputation who understand the needs of beneficiaries and of Ukrainian society will potentially join the ranks of subcontractors.

The Legal Advisors and Accountants of Accountor Ukraine provide comprehensive services pertaining to subcontractors’ involvement in ITA projects, as well as accounting and report preparation/filing services (including special reports for exercising the right to obtain tax benefits).

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