Business in Ukraine
Before undertaking business activity in Ukraine, it is necessary to choose which type of legal entity to form. The type of company form will influence all the activity of the company, which includes financial and tax reporting as well as customs procedures. An investor should pay special attention to determining the appropriate corporate form according to their goals. The most common company forms used are the Limited Liability Company or LLC, and the Representative Office.
As in most countries, the LLC company form allows the owner to undertake most business activities without restrictions as their own legal entity. Conversely, the representative office allows only for activity that supports the owning company's business - usually this is marketing activity done locally in order to create sales for the parent company.
Some business areas require licenses in Ukraine. These include banking and financial activities, power supply, alcohol and tobacco sales and production, telecommunication, construction activity.
Foreign nationals can act as sole proprietors of an LLC in Ukraine. The sole ownership in Ukraine doesn’t require a minimum share capital and it is the basic form of business. The founder is taking all the decisions necessary to the good function of the entity and can use the profits after submitting the personal tax income declaration to the tax authorities.
Companies established in Ukraine pay 18 % corporate income tax on their profits. The personal income tax in Ukraine is 18 %, plus a 1,5 % military tax. The employer pays a 22 % social tax rate from the employee's gross salary.
Standard VAT rate is 20 %. Export of goods VAT is 0 %, for services it can be 0 or 20 % depending on the place of receiving services, place of registration of the recipient etc. Import of goods and services to Ukraine is subject to 20 %VAT and customs duties.
The regulation of employment in Ukraine is governed by the Labor Code of Ukraine, which applies equally and must be complied with by both the executives and the employees. Ukrainian labor laws apply to foreign nationals and foreign businesses in Ukraine in the same manner as to domestic entities. All regulations related to minimum guarantees, employment benefits and compensation supersedes any agreement between the employer and employee. In general, the Ukraine labor law is protective of the employee.
Expats are liable to pay resident Ukrainian taxes and social charges only if they stay in the country at least 183 days during a calendar year. Your employer will typically arrange for your registration with the Ukrainian tax office and secure your tax number. Self-employed workers will need to arrange their tax registration and Ukrainian tax number themselves. Ukrainian social security payments are deducted from your gross salary by the employer.
In the condition of an employer-terminated agreement as a result of redundancy or liquidation, two months’ notice is given along with a two months’ salary severance payment to the employee.
Termination of the employment agreement by the employee may be carried out by providing two weeks’ written notice to the employer, which is a basic right under the Labor Code that cannot be overridden by contractual terms.
BEING AN EXPAT
An investor looking to start a company in Ukraine may want to consider moving here to manage their company. In this case they must first start their company so that they have the company's registration certificate, and after that apply for a work permit. The work permit entitles them to receive an entry visa into Ukraine, and afterwards apply for a three year work visa and residence permit. This process is somewhat cumbersome but easily done with the right help. For most countries' citizens, it is also possible to visit Ukraine visa-free for a maximum of 90 days per each 180.
Ukraine is a very nice place to live, living costs vary greatly from city to city and also within cities. We recommend to use an agent when looking for an apartment, as most of the advertisements online are outdated.
The foreign national who is living or working in Ukraine for more than 183 days in a calendar year is obliged to pay taxes and contributions towards the Ukrainian social security system. Usually double taxation can be avoided but this should always be checked on a case-to-case basis.