Ukrainian cinemas are facing the threat of closure over government plans to charge them royalties for the use of music in films.

The Ukrainian State Service of Intellectual Property (USSIP) plans to force cinemas to sign agreements with the Ukrainian Agency of Copyright and Related Rights (UAASP), which owns music rights.

Under the terms of the potential agreement, cinemas will be obliged to pay 1% of revenue to the UAASP.

If they refuse, cinemas will face litigation and could be fined up to 50,000 minimum wages, which is equivalent to $700,000 (UAH 5.5m).

According to Ukrainian lawyers, UAASP is likely to win such cases, despite there being no precedent in Ukrainian legislation.

Cinemas in the Eastern European country have opposed the plans, arguing that payment of music royalties should be handled by film distributors.

Several local cinemas have already received word of the new demands from USSIP.

According to Lyudmila Gordeladze, director of the Kiev Zhovten cinema, such claims may have drastic consequences - especially for small chains - resulting in their inability to screen many movies and even closure.

According to Ukrainian analysts, even a 1% loss of revenue could threaten cinemas, which are currently investing large amounts in upgrading to digital.