Company registration in Ukraine

Tax Implications

Registering a company is not difficult. It is difficult to do it the first time, so you do not have to make numerous corrections later because you planned it incorrectly. Taxes and how they will work for your business are among the most important issues that must be resolved BEFORE registration.  

For this, our company employs tax lawyers and accountants together. Here is what you need to know about taxes for business in Ukraine.

General Taxation System

It is suitable for large and medium-sized enterprises with large revenues, significant expenses and complex operations. It can be relevant for your business, if you plan to operate in several industries, export-import, or need to optimize costs or cooperate with international partners. Currently, taxes on this system have the following rates:

• Corporate income tax: 18% of net profit (income minus expenses).

• VAT (value added tax): standard rate of 20%. A reduced rate of 7% applies to certain categories of goods (e.g. medicines).

• SSC (single social contribution): 22% of the payroll, paid by the employer.

• PIT (personal income tax): 18% for salaries and other income of individuals.

• Military: 10% of the income of individuals.

Rates may change, especially regarding the military levy, which is planned to be up to 5%.

Simplified Taxation System

It is designed for small businesses, individual entrepreneurs, farms, and startups that have limited revenues and a limited number of employees. It is beneficial for freelancers, small shops, catering establishments and workshops. For now, the tax rates can vary on this system, depending on the type of activity:

• First group: 10% of the subsistence minimum.

• Second group: 20% of the minimum wage.

• Third group: 5% of income (excluding VAT) or 3% (including VAT). 

1 and 2 groups are available ONLY for sole proprietorships.

International Tax Considerations

If we are talking about a business that will cooperate with your existing business abroad, or you simply plan to have suppliers or clients outside of Ukraine, you need to take care of international tax rules. First of all, you can think about such nuances:

• Tax treaties;

• Double taxation;

• Taxation of foreign income and its declaration;

• International VAT on exports and imports of goods and services;

• Currency control for financial transactions with foreign partners, etc.

Employment and Labor Law

The second important point when planning a business is the hiring system. This is especially important for such types of businesses as IT companies because they have at least three schemes for hiring employees:

• Employment contract;

• Work through a sole proprietorship;

• Gig contract.

Only one of these options, for example, allows you to go through the booking procedure. But which one is right for your business scheme? Here's what you need to consider BEFORE registering.

Hiring Employees

• Hiring personnel must be accompanied by documented relations. You must choose the type of contract that you will sign with the employee.

• If you plan to transfer foreigners to some positions in Ukraine, they will need to obtain a work permit.

• Each officially employed employee is a tax burden for the company, which you must take into account.

• In addition to hiring, you will need to document vacations, business trips, sick leaves, dismissals and other aspects.

Employment Contracts

The main provisions of employment contracts in Ukraine include:

• obligations and rights of the employee and the employer;

• working hours;

• remuneration conditions;

• vacations;

• duration of the probationary period, etc.

Wages and Taxes

The employer is obliged to withhold and pay taxes from the employee's salary: 

• personal income tax (18%);

• military duty (1.5%);