Rada intends to change legal status of state-owned enterprises-users of land in state ownership, declare them land tenants

KYIV. Sept 20 (Interfax-Ukraine) – The Verkhovna Rada of Ukraine adopted at the first reading bill No. 7588, which provides for the transformation of state-owned commercial enterprises, in the permanent use of which are from 100 hectares of farmland, into limited liability companies (LLC) for the subsequent transfer of the relevant land plots to them on lease for 50 years.

Bill No. 7588 on amendments to certain legislative acts of Ukraine on increasing the efficiency of land use by individuals and entities of the public sector of the economy was adopted at a parliamentary session on Tuesday by the votes of 251 MPs (with the necessary 226), Yaroslav Zhelezniak, a member of the Holos parliamentary faction, said in his Telegram channel.

According to an explanatory note to the document, the efficiency of the use of agricultural land in state ownership today is unsatisfactory in Ukraine. According to the results of 2020, the revenue of state-owned enterprises in the agriculture, forestry and fisheries sector amounted to only 3.3% of the total revenue of public sector enterprises, while about 3.2 million hectares of farmland, or about 7.5% of total area of agricultural land plots in Ukraine.

To eliminate such inefficiency in land use by state-owned enterprises, bill No. 7588 proposes the transformation of state-owned commercial enterprises, in the permanent use of which there are agricultural land plots with a total area of at least 100 hectares, into an LLC with the subsequent transfer of the corresponding land plots to them for rent.

According to the explanatory note to the document, this measure will help to avoid the illegal lease of state-owned land by other legal entities that do not pay taxes on such contracts.

"A very common phenomenon in Ukraine is the conclusion of "quasi land lease agreements" under the guise of agreements on joint activities, joint processing, investment agreements, actually hidden lease agreements… These agreements are concluded and executed "in the shadows," the funds from the "rent" are often paid in cash to management of state-owned enterprises, the budgets do not receive funds for the taxation of these operations," the explanatory note states.

To combat such sublease of state-owned land, the bill proposes to establish a ban on the transfer of land plots of public and communal property for permanent use for commercial agricultural production.

In addition, bill No. 7588 proposes:

– grant the Cabinet of Ministers the right to determine and decide on the transfer of integral property complexes of state-owned enterprises, institutions, organizations that own the right to permanent use of farmland.

– determine the procedure for re-registration of the right to permanent use of land plots of a state-owned enterprise, which turns into a legal entity of a different organizational and legal form, into the right to lease a land plot for a period of 50 years.

– allow the introduction of other legal entities into the sublease of state-owned land only after land auctions.

– determine the procedure for re-registration of the right of lifetime inheritable possession of land, the right to permanent use of a land plot for the right to lease land or buy out such land plots.