{"id":166,"date":"2017-02-02T13:37:00","date_gmt":"2017-02-02T13:37:00","guid":{"rendered":"https:\/\/baron.yakimaxim.site\/setting-up-operations-in-ukraine\/"},"modified":"2026-01-30T11:28:02","modified_gmt":"2026-01-30T11:28:02","slug":"setting-up-operations-in-ukraine","status":"publish","type":"post","link":"https:\/\/frishberg.com\/uk\/setting-up-operations-in-ukraine\/","title":{"rendered":"Setting Up Operations in Ukraine"},"content":{"rendered":"
January 31, 2017<\/em><\/p>\n With the ongoing conflict with Russia and a high level of corruption, doing business in Ukraine is unlike anywhere else in Europe, so GO SLOW! Here are some helpful guidelines:<\/span><\/p>\n Last, but not least, it is highly advisable to have a person or highly trustworthy contract in Ukraine at all times, monitoring the progress of your transaction. <\/span><\/p>\n Taking all of this into consideration, how do you set up operations in Ukraine on a shoe-string budget? Well, it all depends on your business. For example, setting up import-export operations can be done in the following three easy steps:<\/span><\/p>\n Step 1: Evaluating\/entering the Ukrainian market<\/strong><\/span><\/p>\n Most import-export deals are effectuated purely on a contractual basis, without any registrations in Ukraine. All you need is a properly drafted agreement that complies with Ukrainian legislation.<\/span><\/p>\n The advantages of working in Ukraine purely on a contractual basis include:<\/span><\/p>\n Step 2: Expanding<\/strong><\/span><\/p>\n Once your business is increasing, you may wish to capitalize on the momentum and expand by hiring a Ukrainian agent or distributor. In such case, you will need to enter into an agency or distribution agreement to develop the market\/clients for your Dutch company.<\/span><\/p>\n The advantages of this expansion include:<\/span><\/p>\n If you wish to expand your business activities in Ukraine, a number of business structures are available. However, the most common business forms used by foreigners are the representative office and\/or limited liability company.<\/span><\/p>\n Step 3: Setting up local operations: representative office (non-resident)<\/strong><\/span><\/p>\n Establishing a representative office makes sense once you need to supervise, coordinate and control contracts with local counterparties. In particular, a representative office engages in marketing, promotional and other auxiliary activities on behalf of its parent company. If your business demands day-to-day presence in Ukraine, you will need to:<\/span><\/p>\n Associated costs include:<\/span><\/p>\n Drawbacks:<\/span><\/p>\n A non-commercial representative office:<\/span><\/p>\n Advantages:<\/span><\/p>\n Step 4: Setting up local operations: limited liability company (resident)<\/strong><\/span><\/p>\n If you want to set up a retail store or have any kind of business on a day-to-day basis, then you will need to register a local presence. While numerous options exist, a limited liability company (LLC) is the most common choice. There is no current minimum capitalization, but the costs vary greatly, depending on the property rent, employees\/salaries and accompanying taxes. However, we recommend establishing a minimum capitalization that will enable you to cover all start-up costs for the activity of the company\u2019s first 3 to 6 months.<\/span><\/p>\n An LLC has the right to carry out a broad spectrum of activities, including:<\/span><\/p>\n Taxation:<\/span><\/p>\n An LLC can elect either the simplified tax or general taxation system:<\/span><\/p>\n The simplified or unified tax<\/strong><\/span><\/p>\n Group No.<\/strong><\/span><\/p>\n<\/td>\n Who can use?<\/strong><\/span><\/p>\n<\/td>\n Tax Rate<\/strong><\/span><\/p>\n<\/td>\n<\/tr>\n Group 1<\/strong><\/span><\/p>\n<\/td>\n Individual entrepreneurs<\/strong> who do not use hired labor and carry out the retail sale of goods from trade spots on markets and\/or carry out business activity involving the provision of consumer services. The amount of income<\/strong> of such entrepreneurs within the calendar year should not exceed 300,000 UAH<\/strong>.<\/span><\/p>\n<\/td>\n Fixed rate set by local authority up to 10% of the minimum standard of living level for healthy individuals*, depending on type of activity.<\/span><\/p>\n<\/td>\n<\/tr>\n Group 2<\/strong><\/span><\/p>\n<\/td>\n Individual entrepreneurs<\/strong> who provide services, including consumer services, to other payers of the unified tax or the general public or who manufacture and\/or sell goods or who are active in the restaurant business. Such entrepreneurs may only hire up to 10 persons as employees<\/strong>. The amount of income of such entrepreneurs within the calendar year should not exceed 1,500,000 UAH<\/strong>. Entrepreneurs, who provide intermediary services involving the purchase, sale, lease and appraisal of real estate, may not<\/strong> elect Group No. 2 (see Group No. 3).<\/span><\/p>\n<\/td>\n Fixed rate set by local authority up to 20% of the minimum monthly salary*, depending on type of activity.<\/span><\/p>\n<\/td>\n<\/tr>\n Group 3<\/strong><\/span><\/p>\n<\/td>\n Both individual entrepreneurs<\/strong>, who do not used hired labor or who may have an unlimited amount of employees, and legal entities<\/strong> of any organizational legal form. The amount of income of taxpayers in this group may not exceed 5,000,000 UAH<\/strong> during the calendar year.<\/span><\/p>\n<\/td>\n 3% of income in case of separate payment of VAT or 5% of income if VAT is included into the unified tax amount.<\/span><\/p>\n<\/td>\n<\/tr>\n Group 4<\/strong><\/span><\/p>\n<\/td>\n Agricultural producers with a percentage of agricultural products in their turnover which equals to or exceeds 75%.<\/span><\/p>\n<\/td>\n The rate is set at a certain percentage for each hectare of land and depends on type and location of land (from 0.19% to 6.33%).<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n *The minimum standard of living level and the monthly salary are set each year from January 1 to December 31. For example, for January 1, 2017 the minimum standard of living level was set at 1,600 UAH (and is expected to gradually rise up to 1,762 by the end of the year) and the minimum monthly salary was set at 3,200 UAH. Please note that the minimum monthly salary may be subject to change and should be verified prior to any calculations.<\/em><\/span><\/p>\n Please note that there may be restrictions on certain categories of entrepreneurs or businesses that may be included in the above-mentioned groups of unified taxpayers.<\/span><\/p>\n Any income that does not fall within the unified tax system for unified taxpayers (i.e., amounts in excess of permissible yearly income, amounts received for activity not permitted within the elected group, etc.) is taxed at the rate of 15% for individual entrepreneurs in groups 1-2 and at double the tax rate for legal entities in group 3.<\/span><\/p>\n General Tax System<\/strong><\/span><\/p>\n The general taxation system provides for taxation on profit. From April 1, 2011, the profit tax rate decreased from 25% to 23%; from January 1, 2012, it further decreased to 21%; and from January 1, 2015 until 2017, it has been set at 18%. Many legal entities are also subject to VAT if their activity is conducted on the territory of Ukraine and the total amount of their operations for the last 12 calendar months is over 1,000,000 UAH. The current VAT rate is 20%.<\/span><\/p>\n If an agent is an individual entrepreneur, but does not qualify for the simplified taxation system, then such individual will be taxed on their personal income at a rate of 18%. Such individual must also pay 22% as a unified social contribution (pension, disability, unemployment, professional illness). An individual agent under the general taxation system must pay at least 22% of the minimum monthly salary (currently 3,200 UAH) each month or 22% of actually received income per month, but on no more than 40,000 UAH per month (this ceiling will rise to 44,050 UAH by year\u2019s end).<\/span><\/p>\n In 2014, a war tax of 1.5% on the personal income of all individuals was introduced until December 31, 2014. However, the war tax has continued to be extended into 2017 until such time as the military actions in the eastern part of the country cease. Please note that this tax is applied to almost all types of income received by an individual and must be withheld by employers on behalf of their employees.<\/span><\/p>\n Immigration requirements<\/strong><\/span><\/p>\n For legal entities, including limited liability companies:<\/span><\/p>\n Foreign work permits<\/strong><\/span><\/p>\n 1. In order to hire the labor of a non-Ukrainian citizen, a local company must firstly apply for a work permit for such foreigner. The work permit procedure involves the gathering of several documents from both the employer and the foreign employee. For example, the local employer, among typical corporate documents, must provide to the local Employment Center vacancy notices and statements from the local authorities that the company is not in arrears in its payments to the tax and social insurance authorities. From the foreign employee\u2019s side, documents will include a duly certified copy of his\/her diploma and a statement from his\/her home country that he\/she is not subject to any criminal investigations or proceedings. The work permit application review procedure can take up to 7 business days once an application has been accepted.<\/span><\/p>\n Visa D<\/strong><\/span><\/p>\n 2. Upon receipt of a work permit from the local EmploymentCenter, the foreign employee must apply for a long-term visa \u201cD\u201d at a Ukrainian consulate outside of the territory of Ukraine. For this purpose, the visa application must include a copy of the recently obtained work permit. The visa application procedure may take up to 15 days; however, many Consulates provide an accelerated procedure. This should be confirmed prior to visiting the Consulate in question. Importantly, the long-term visa \u201cD\u201d is only a single-entry visa and will only be valid for 45 days upon entry into Ukraine. Therefore, the foreign employee should immediately apply for a temporary residency permit (see below).<\/span><\/p>\n Temporary residency permit (TRP)<\/strong><\/span><\/p>\n 3. Once the foreign employee has a work permit and a long-term visa \u201cD\u201d, he or she should enter the country and apply for temporary residency within 45 days upon entrance into Ukraine on the visa \u201cD\u201d. A temporary residency permit (TRP) is issued for the same duration of the foreign employee\u2019s work permit and will allow the foreign employee to travel to and from Ukraine an unlimited amount of times during the TRP\u2019s validity. In other words, the TRP will \u201ctransform\u201d the visa \u201cD\u201d into a multiple-entry visa and the foreign employee will not be subject to the minimum stay rules for citizens of their respective countries. For example, foreigners from the US, EU, Canada and Japan may only stay in Ukraine for 90 days out of each 180-day period without a visa.<\/span><\/p>\n Please note that the obtaining of a TRP is mandatory once a work permit and visa \u201cD\u201d are issued. Therefore, the foreigner should be prepared to remain in Ukraine until the TRP is issued for a period of 2-3 weeks. This is the moment when business trips should be planned accordingly.<\/span><\/p>\n Representative Office of a foreign company<\/strong><\/span><\/p>\n Invitation (from RO, certified by the Ministry of Economic Development and Trade, formerly the Ministry of Economy, formerly Ministry of Economy and European Integration)<\/strong><\/span><\/p>\n 1. The immigration requirements for representative offices of a foreign company slightly differ in the initial steps than the immigration requirements for legal entities. The first immigration step is the issuance of an invitation by the representative office to the foreign employee. This invitation must be set forth on the representative office\u2019s official letterhead and affixed with the representative office\u2019s stamp. Immediately thereafter the representative office must send the invitation to the Ministry of Economic Development and Trade for certification. This process can take up to 1 month. At the same time, the representative office should apply for an accreditation (service) card for the individual at the Ministry.<\/span><\/p>\n Visa D<\/strong><\/span><\/p>\n 2. Once the foreign employee receives the original, certified invitation, he\/she must submit it along with his\/her visa \u201cD\u201d application. The Consulate will keep the original invitation and, therefore, certified copies should be made for the TRP procedure. Once a visa \u201cD\u201d is obtained, the TRP process should be completed within 45 days upon entry into Ukraine for work at the representative office.<\/span><\/p>\n Temporary residency permit<\/strong><\/span><\/p>\n 3. See discussion above regarding legal entities. This document, along with the accreditation (service) card, will serve as legal documents for the foreign employee\u2019s presence in Ukraine and representative capacity.<\/span><\/p>\n Doing business in Ukraine in 2017 is not as complicated as it has in the past; alas, for every potential disaster there are a number of proven, legal solutions. Moreover, the Ukrainian government has been constantly attempting to simplify the business environment for foreigners by passing legislation on transparency in commercial activity, simplification of such procedures as antimonopoly permission, work permit applications, international trade rules, etc. More and more information on Ukrainian companies is becoming publically available in commercial databases, including registers of enforcement proceedings and debtors in 2017.<\/span><\/p>\n We hope the above information proves useful. If you have any additional questions, please do not hesitate to contact us.<\/span><\/p>\n<\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" January 31, 2017 With the ongoing conflict with Russia and a high level of corruption, doing business in Ukraine is unlike anywhere else in Europe, so GO SLOW! Here are some helpful guidelines: Check if the Ukrainian party is registered as a legal entity or entrepreneur (otherwise they cannot effectuate or receive payment). Meet with…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[65,115,76],"tags":[],"class_list":["post-166","post","type-post","status-publish","format-standard","hentry","category-legal-analysis","category-market-entry","category-volodymir-ivasiuk"],"yoast_head":"\n\n
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