COVID-19: exemption from VAT, simplified procurement and registration, impact on regulatory

Not so long ago, the world community was shaken by the news about cases of pneumonia caused by an unknown pathogen, and today the issue of spread and prevention of coronavirus infection (COVID-19) is one of the most discussed and acute, both at the level of global organizations and states, and at the level of each company and citizen.

Human safety is the highest priority, so we believe that there is no “too much” in preventive actions and measures. We are also convinced that maintaining business processes is one of the key issues for our partners. Therefore, this letter concerns not only regulatory updates, but also critical points that should be taken into account when planning business processes related to Ukraine. 

The Parliament of Ukraine and the Cabinet of Ministers of Ukraine adopted a number of legislative acts in order to establish a legal framework for the prevention and treatment of coronavirus disease (COVID-19): 

• exemption from import VAT and duties for certain medicines, medical devices and personal protective equipment,
• special mechanism for the public procurement of certain goods and services,
• prolongation of the period of validity of registration certificates for medicinal products purchased by specialized organizations, introduction of simplified state registration procedures and establishment of the possibility to purchase unregistered medicinal products,
• major simplification of market authorization of certain medical devices and personal protective equipment, etc.

Briefly on the main issues: 

Law of Ukraine 530-IX “On Amendments to Certain Legislative Acts of Ukraine aimed at preventing the emergence and spread of coronavirus disease (COVID-19)”:

• The Cabinet of Ministers of Ukraine (hereinafter – CMU) determines the list of goods, works or services and the procedure for their purchase, which are necessary to prevent the spread, localization and elimination of outbreaks, epidemics and pandemics of coronavirus disease (COVID – 19);
• operations related to import of medical devices and medicines included to the List of the CMU to the customs territory of Ukraine are temporarily exempt from VAT and import duty; customs clearance of such goods is performed in priority regime;      
• simplification of the public procurement procedure for products determined and approved by the CMU;
• control over prices for medicines, medical products and socially important goods is assigned to the CMU;      
• from the day of announcement of the quarantine until the end of the quarantine the timelines of administrative and other services, as well as the terms of provision of such services shall be suspended;      
• It is stipulated that force majeure includes a quarantine regime established by the Cabinet of Ministers of Ukraine.      

Law of Ukraine 531-IX “On Amendments to Certain Laws of Ukraine aimed at increasing the availability of medicinal products, medical devices and accessories, which are purchased by a person authorized to conduct procurement in the area of health care” (the following provisions will enter into force as of 01.04.2020):

• the term “person authorized to conduct procurement in the healthcare sector” is introduced: a legal entity established by the Ministry of Healthcare and authorized to conduct procurement of medicines, medical devices and accessories and services for the state budget funds (hereinafter – the Authorized Person);
• simplified procedures for state registration of medicines for the purposes of procurement by the Authorized Person at the expense of the state budget are introduced:
  • 7-days authentication procedure for medicinal products registered by the competent authority of the United States of America, the Swiss Confederation, Japan, Australia, Canada and used in the territory of these countries or by the competent authority of the European Union through a centralized procedure;
  • 30-days registration procedure for other medicines.
• the period of validity of registration certificates for medicines purchased by specialized organizations issued before 31 March 2020 has been extended to 31.03.2022 (may be in circulation only for the purpose of procurement at the expense of the state budget for the implementation of programmes and centralized health protection activities);
• established the possibility to purchase unregistered medicinal products for state and local budget funds in accordance with the list determined by the CMU;
• the Ministry of Health has the right to enter into managed access agreements for original medicinal products, that should include terms and conditions of delivery of the original medicines to the territory of Ukraine for state and/or local budgets. The procedure for conducting negotiations on access agreements and entering into access agreements shall be approved by the CMU;
• the term of validity of the Law on Public Procurement with the involvement of specialized purchasing organisations has been extended till April 30, 2020. 

Law of Ukraine 532-IX “On Amendments to the Tax Code of Ukraine on Improving the Accessibility of Medicines, Medical Devices and Accessories that are Purchased for State Budget Funds and Creating Conditions for Healthcare Procurement for State Budget Funds” (the following provisions will come into force on 01.04.2020):

• shall be temporarily exempt from value added tax (until December 31, 2022) on operations related to import into the customs territory of Ukraine, supply and free supply (transfer) of medicines, medical devices and accessories, imported and/or transferred under agreements (contracts) concluded by the Authorized person; 
• the list of such medicinal products, medical devices and accessories shall be approved by the Cabinet of Ministers of Ukraine.      

Resolution of the Cabinet of Ministers of Ukraine No.224 “On Approval of the List of Medicinal Products, Medical Devices and/or Medical Equipment Required for Implementation of Measures aimed at Prevention and Distribution, Localization and Elimination of Outbreaks, Epidemics and Pandemics of Coronavirus Disease (COVID-19), which are Exempt from Import Duty and the Operation on Import of which into the Customs Territory of Ukraine are Exempt from Value Added Tax“.

Resolution of the Cabinet of Ministers of Ukraine No.225 “Certain Issues of Purchase of Goods, Works and Services necessary for implementation of measures aimed at prevention of outbreak and spread, localization and elimination of outbreaks, epidemics and pandemics of coronavirus disease (COVID-19) on the territory of Ukraine”:

• establishment of the temporary simplified procedure for public procurement without the use of an electronic system, according to which the Authorized Purchaser organizes and conducts procurement not earlier than 48 hours after the announcement, and the results will be made public;
• the list of relevant goods, works and services is approved.

Resolution of the Cabinet of Ministers of Ukraine No.226 “On Amendments to Certain Resolutions of the Cabinet of Ministers of Ukraine”: placing on the market (market authorization) of personal protective equipment, medical devices, medical devices for in-vitro diagnostics and active implantable medical devices according to the list approved by the Cabinet of Ministers of Ukraine has been substantially simplified.

For placing such products on the market it is required to submit an Application to the competent authority specifying the purpose of import, information about the manufacturer, name of the device(s), lot(s) or serial number(s), volume, as well as data on the purpose of the device and intended use. The competent authority shall process the submitted documents and issue a notification on the placing on the market of products for which the requirements of technical regulations are not met, but the use of which is required in the interests of public health. 

The competent authority for personal protective equipment is the State Labour Service. The competent authority for medical devices, medical devices for in-vitro diagnostics and active implantable medical devices is the Ministry of Health.

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A few additional comments on the simplified market authorization procedure of personal protective equipment, medical devices and IVD’s:

1. Yes, it’s a major simplification and the requirements of the Technical Regulations do not apply: it is not required to designate an Authorized Representative in Ukraine, there is no conformity assessment procedure, there is no need to draw up a Declaration of conformity, there is no registration of the person responsible for placing of products on the market, it is not required to affix the national symbol of conformity with the technical regulations. Issue concerning the language of the instruction for use (user’s manual) in the text of the resolution is not regulated. 
2. Such simplification is applied only for those products that are specified in the Decree of the Cabinet of Ministers of Ukraine No.224 and are exempted from import VAT and import duty.
3. Mechanism of further taxation of the sales operations on the territory of Ukraine (after placing it on the market) is not regulated. We assume that the VAT rate at sale should be 20%, unless the medical device complies with Technical regulations. 
4. The Application must contain lot numbers or serial numbers, volume (amount) of products.
5. The form of Application is not defined in the text of the Resolution.

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We also want to inform our partners about the local situation in Ukraine which may affect the work processes and planning. From March 17 to April 3 all checkpoints for international passenger traffic are closed in Ukraine, and from March 12 quarantine is introduced. These measures affect the work of the competent authorities in the country and the procedures related to the transportation of inspectors and auditors. 

Manufacturers of medical devices should pay attention to the main critical points and consider them while planning operations in Ukraine:

1. Registration of persons responsible for placing medical devices on the market. The State Service of Ukraine on Medicinal Products and Drug Control of Ukraine (SMDC) responsible for processing of Applicationsinforms about changes in it’s operating schedule for the period of quarantine and, as a result, about an increase in the period of assessment of paper versions of documents. It shall be reminded that registration of the notification is performed within 10 working days. It is expected that the standard operating hours of SMDC will be restored 03.04.2020.

Within the last week medical devices intended for prevention of the spread, containment and elimination of a coronavirus pandemic, such as COVID-19 detection kits, masks and respirators, gloves etc. have been included to the registry in urgent mode. 

2. Audits are impossibleuntil international passenger air traffic will be restored in Ukraine, that is expected not earlier than 03.04.2020. Any restrictions from the accepting country must be also taken into the account. A number of Ukrainian designated conformity assessment bodies postpone audits to countries with outbreaks of infection until May-June 2020. 
3. Therecognition of the EC certificatesis carried out in a standard mode, and in the current situation shows the greatest stability. We do not expect that the situation will have a significant impact on the recognition route of conformity assessment. 

Manufacturers of medicines should consider possible delays in the process of examination of registration materials during registration, renewals or variations (changes), as well as issuance of conclusions on GMP compliance.

The State Expert Center plans to switch to electronic document circulation. The good news is that the SEC decided to postpone the planned increase in the cost of expert works until the end of the quarantine period.

The State Service of Ukraine on Medicinal Products and Drug Control recommends to switch to electronic communication and not to send paper copies of documents without an emergency.

Manufacturers of cosmetic products and special food products (including baby food) should consider that the State Service of Ukraine on Food Safety and Consumer Protection, as well as expert institutions do not stop their activities, but at the moment work in partially remote mode, which may affect the timelines of obtaining conclusions of the State Sanitary and Epidemiological Expertise and reports on research works.

According to preliminary information, it is planned to restore the normal mode of operation from 03.04.2020. Please consider possible delays in receiving the conclusions and reports:

• projects submitted from 17.03.2020 and during the quarantine period (17.03.2020-03.04.2020); 
• The projects not approved by 19.03.2020 will be transferred to the laboratory after the quarantine (preliminary from 03.04.2020).

Most of our employees have been transferred to remote work and continue absolutely all current tasks in the standard working schedule. Negotiations with partners are conducted by phone or other means of telecommunication, mail and parcels are received uninterruptedly. 

In general, all ongoing processes are performed on time, at the expected quality and expertise level. Our entire team is available by email, for quick communication we recommend using the mobile phones indicated in the signature of each expert.

Take care!