The state budget should receive UAH 6 billion from privatization in 2023. Taking into account that during the first "war" year of 2022, the State Property Fund of Ukraine (SPFU) sold assets totalling UAH 2.2 billion (of which the state budget actually received UAH 1.7 billion), the plan for 2023 does not seem fantastic.
The fact is that this year, for the first time, the SPFU will sell state and municipal property that is in a tax lien. Also, in addition to privatization revenues, the state budget will be able to receive funds from the sale of assets recovered from the citizens of the russian federation who have been sanctioned by Ukraine.
Mind looked into what kind of tax liens and sanctioned assets we could talk about and at what price they could be put up for sale.
What can the state do with tax liens? On November 3, 2022, the Verkhovna Rada adopted Draft Law No. 8045 (now Law No. 2719-IX). Its provisions allow the state and municipal property held in tax lien to be privatized without the consent of the supervisory authority.
The buyer of such property has to meet the main requirement: to repay tax debt in full within six months from the date of transfer of the privatization object ownership. If he fulfils this requirement within the specified period, fines and penalties accrued on the repaid tax debt will be cancelled.
At the same time, the property will remain in a tax lien until the debt is repaid. In this case, the new owner of the pledged assets will be obliged to direct any income received from their use (for example, from rent) to cover the debt.
What can the state do with sanctioned assets? The property that Ukraine collects from russian citizens is usually transferred to the National Agency of Ukraine for Finding, Tracing, and Management of Assets Derived From Corruption and Other Crimes (abbr. – Asset Recovery and Management Agency, or ARMA)
The assets of russians are seized and then transferred to ARMA. Seizure within criminal proceedings can be carried out by the Security Service of Ukraine (SBU), the Economic Security Bureau of Ukraine (BEBU), and the State Bureau of Investigation (DBR).
However, legally, ARMA is not the owner of these assets. It only manages them. Moreover, the court decisions on the basis of which the agency receives the property of russian citizens often stipulate that ARMA must find managers who will be engaged in the activities of the expropriated asset (a plant, a factory, etc.). The income received by the National Agency will be channelled to the state budget.
The State Property Fund has somewhat different powers in relation to such assets. They are spelled out in the law №4107-VI. The SPFU disposes of (manages) state or municipal property, including corporate rights of the state. The main instruments by which the SPFU fills the state budget are the privatization of property or its lease.
Accordingly, the Fund receives those sanctioned assets that, after passing the procedures prescribed by law and courts of all levels, have become the property of the state. After that, the Cabinet of Ministers transfers the nationalized property of russians to the State Property Fund, which will choose the most effective option for their monetization – sell or find a tenant.
What tax liens may fall under privatization? At the end of 2022, the SPFU has announced that it already has 41 objects that are in a tax lien. This is both state and municipal property. Its total starting value is estimated at UAH 1 billion. The amount of tax debts that will have to be repaid by the new owners of these assets (in case they are sold) is UAH 300 million.
Mind appealed to the SPFU with a request to name at least the key objects that could be sold under the provisions of Law No. 2719-IX. However, at the time of publication, representatives of the Fund did not answer the editorial questions.
However, based on information from open sources, YouControl, Opendatabot databases, as well as the Unified State Register of Court Decisions, we can get an idea of which assets and enterprises with tax encumbrances can potentially be put up for sale.
Commenting on the plans of the SPFU to sell tax liens, Rustem Umerov, the Head of the Fund, said that the new owners will be able to build new businesses on the basis of 41 objects. Accordingly, most likely, the enterprises that are not fully operational or just property complexes will be put up for sale.
What sanctioned assets can the SPFU sell? The sale of russian citizens' property that was seized in favour of Ukraine, will become a precedent in case it does happen. At least since February 24, 2022, such assets have not yet been put up for sale.
Probably, first lots will be the enterprises of russian businessman Vladimir Yevtushenkov, which the Cabinet of Ministers placed under the SPFU management on December 9, 2022. This decision was agreed by the government based on the decision of the Supreme Anti-Corruption Court, which on September 1, 2022, seized to the income of the Ukrainian state 17 real estate objects and corporate rights in the authorized capitals of five companies, Yevtushenkov being one of their owners.
After the transfer of Yevtushenkov's assets to the SPFU, Rustem Umerov stated that the funds from their sale would be used to "...strengthen the defence capability and restoration of Ukraine."
What other assets can be sold? Potentially, the property managed by ARMA is also in the queue for privatization. The only nuance is that all legal proceedings to recover assets in favour of the state must be completed, after which they can be sold to new owners.
In September 2022, for example, the SBU seized and transferred to the ARMA assets of one of the enterprises in the Vinnytsia Oblast worth UAH 2 billion, which belonged to a russian businessman. However, law enforcement officers did not disclose the names of the companies and the businessman's name.
In December 2022, the DBR announced the transfer of assets of the russian Tatneft Group to ARMA. In particular, these were the equity rights of Tatneft-AZS-Ukraine, and the equity rights and property of Kharkiv-Capital and Poltava-Capital, which own more than 100 petrol stations in Kharkiv and Poltava oblasts. And in January 2023, the BEBU transferred to ARMA the assets of a russian citizen for UAH 350 million, who owned one of the largest enterprises for the production of frozen semi-finished products in Ukraine in Ukraine. The Interfax-Ukraine later reported that it was the Yermolino company.
Generally, the value of the property seized from russian companies in Ukraine is already estimated at tens of billions of hryvnias. Back in the summer of 2022, Vadym Melnyk, the Head of the BEBU, reported the amount of UAH 31 billion. Obviously, by the beginning of 2023, it has increased significantly. Therefore, along with the privatization of Ukrainian state-owned companies, the sale of nationalized assets of russian citizens soon may become one of the sources of replenishment of the state budget of Ukraine.