Accounting of foreign representative offices in Ukraine

This form of doing business as a representative office is very often chosen due to the fact that it gives some advantages in terms of taxes - primarily due to the non-taxable importation of goods and things for servicing the work of the representative office. But this office itself is not a legal entity, and has its own mode of doing business, depending on whether you choose a commercial or non-commercial type of representative office.

Today we will touch upon the issue of accounting in the representative office of a foreign company in Ukraine - how to set it up, what nuances should be taken into account.

Related article: Drastic reduction of the official fee for registration of a representative office in Ukraine

Differences in accounting for different types of representative offices in Ukraine

As we mentioned above, you can choose a commercial or non-commercial form of registering a representative office, depending on the goals of your business in Ukraine. The main difference is already shown in the name - through the representative office you may or may not conduct commercial activities and receive income. Of course, there will be a difference in accounting as well.

Accounting for the Permanent (commercial) representative offices

It is important to understand that representative offices are not legal entities. But the permanent missions are considered to be the place of activity of the company on the territory of Ukraine. At the same time, they are the payers of taxes on general terms. 

Such representative offices will have to pay the following taxes:

• VAT - 20%, with revenues exceeding 1 million per year; 

• taxes on employees' wages;

• income tax, when receiving profit in Ukraine, etc.

It is also important to take into account the nuances of each of the taxes, for example, when calculating taxes on wages, it is necessary to take into account the personal income tax of non-residents, employees of the representative office, calculated so as not to fall under double taxation.

Accounting for the Non-commercial representative offices

You won't find this concept in legislation, but it exists in business circles. In fact, this term refers to organizations that represent the interests of non-resident companies, but without the right to receive income in Ukraine. 

They are used, for example, to advertise, market or store non-resident products - that is, as auxiliary activities.  Such representative offices are not taxpayers in Ukraine.

A separate issue of accounting of representative offices will be registration of their relations with the parent companies. Whereas non-commercial companies can only receive money to cover their expenses, permanent ones receive income and can pass it on to the parent company. And here it is necessary to properly account for income, calculate profits and do not forget about the repatriation tax when transferring the parent company to a non-resident.

Our company can help you become registered with the tax authorities of Ukraine, get the necessary certificates of taxpayers, as well as open current accounts, establish accounting and calculate taxes, including for income repatriation to the parent company.