Tax and accounting insights for Ukraine
04.03.24 00:00
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How to book employees of companies working for the defense industry

The Federation of Employers of Ukraine explains how to book employees of enterprises that produce goods, perform work or provide services for the defense industry.

Sergiy Kapelyushnyi, Head of the Department of Mobilization and Civil Protection of the Ministry of Strategic Industry, informed the audience about the updated criteria of the Ministry of Strategic Industry for determining enterprises that are important for the national economy, which becomes the basis for further booking of employees subject to military service for the period of mobilization and wartime, which came into force on 31.01.2024.

Businesses have received a detailed algorithm for reserving employees of enterprises engaged in the production of goods, performance of works, provision of defense services to meet the needs of the Armed Forces and other military formations (the Ministry of Defense (State Enterprise Defense Procurement Agency), the National Guard, the State Border Guard Service).

Thus, a specialist of the Ministry of Strategic Industry explained two options for reserving persons liable for military service.

1. Employment of up to 100% of persons liable for military service, including those with deficient AFVs.

For this purpose, the enterprise must acquire the status of importance for the national economy in the defense industry and meet the following criteria in aggregate:

- The enterprise must be in the process of fulfilling a contract with a state customer in the defense sector or be a co-executor of such a contract.

- More than 50% of the total production volume is defense-related goods, works and services (for 2023).

The decision to grant such a status is processed by an internal commission of the Ministry of Strategic Industry. The final decision on granting the status is made by an interagency working group consisting of representatives of the Ministry of Defense, the Ministry of Internal Affairs, the Ministry of Economy, and the Ministry of Strategic Industries. The decision is valid for the duration of the state contract. The Ministry of Strategy and Industry will monitor the validity of contracts on a quarterly basis. Thus, companies should ensure that they are always within the scope of existing state contracts.

This mechanism is an important innovation for retaining 100% of valuable staff, for which the company only needs to meet the two above criteria, without the obligation to meet the criteria set out in Resolution No. 76.

2. Employment of up to 50% of persons liable for military service.

For this purpose, the company must acquire the status of being important for the national economy in the field of industry with three out of five of the following criteria.

- The company must be in the process of fulfilling a contract with a state defense customer or be a co-executor of such a contract.
- More than 50% of the total production volume is defense-related goods, works and services (for 2023).
- The company must be included in the electronic register of participants in the selection and execution of state contracts (agreements) in accordance with the Law of Ukraine "On Defense Procurement";
- The company must participate in the implementation of tasks envisaged by state target programs in the aircraft industry and in the field of space activities;
- The company must manufacture goods, perform works and provide services for defense companies (which, in turn, use them to manufacture defense goods).

The decision on the company's compliance with these criteria is made by a working group formed by the Ministry of Strategic Industry and representatives of other interested authorities.

In this case, the company must also meet at least two criteria set out in CM Resolution No. 76.

The list of documents (including samples) to be submitted to confirm compliance with the criteria and the procedure for submitting documents are available at https://mspu.gov.ua/.

As a reminder, the FEU submitted legislative amendments to the draft law on amendments to certain legislative acts of Ukraine on certain issues of military service, mobilization and military registration (draft law No. 10449), including the main provisions of the draft law:

- The term of the postponement of conscription is 12 months, for the duration of the decision on criticality, with extension for the same period from the date of the decision to confirm the criticality status;

- Moratorium on conscription and mobilization for the entire period of reservation from the time of reconciliation in the MCC and JV until the date of registration for special military service in connection with the reservation; - Exclusion of the norm from the development of a new reservation procedure;

- Notification by the enterprise to the TCC and JV of any actions with vehicles registered with them and intended for manning the AFU, instead of a ban on any actions with such vehicles;

- Exclusion of the powers of the ADPS officials to verify information in military registration documents when crossing the border;

- Exclusion of the obligation of the enterprise to ensure the timely arrival of employees involved in the performance of the mobilization obligation;

- Exclusion of the obligation of a person liable for military service to undergo a medical examination if he or she has medical documents up-to-date at the time of the examination;

- Exclusion of the obligation to update military registration data, except for their updating within the last two years;

- The law will enter into force in three months.

Federation of Employers of Ukraine
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