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Regulatory advancements for stay of foreign management in Ukraine

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As of today more and more foreign nationals are deciding to set up business in Ukraine. Such tendency can be explained by a variety of factors:

  • Ukrainian economy shows slow but steady recovery;
  • living standards in Ukraine are quite high while prices are relatively low;
  • regulatory framework concerning a variety of matters important for foreign investors is constantly improved.

It is perfectly understandable that before starting a business venture in Ukraine, a foreign head office or a private citizen wants to understand how procedures and regulations on business opening, work and residence permit obtainment work in Ukraine.

So in this article we will give an overview on the latest regulatory advancements which concern legal grounds based on which foreign management of Ukrainian company can work and live in Ukraine.

To begin with let’s outline the major stages of residence permit obtainment in Ukraine:

  • ITIN (Individual Tax Identification Number) certificate or simply Individual tax ID obtainment for a foreign person;
  • Registration of a legal entity (usually LLC) in which the foreign person is a founder and a citizen of Ukraine acts as nominal director;
  • Obtainment of work permit (employment permit, work authorization document) for the foreign person (applied for by the LLC as employer);
  • Replacement of nominal director with the foreign one;
  • Receiving of temporary residence permit;
  • Registration of the foreign person’s registration address in Ukraine.

During the first stage a foreign person gets a local individual tax ID. Without such document the foreign person will not only be unable to get employed but also to become founder of Ukrainian company. In order to get the tax ID it is necessary to submit application, translation of foreign passport and provide power of attorney (if application is filed by a representative). Regarding the latter there are two procedures of its issuance: from Ukraine or from abroad. In the first case everything is relatively simple. Foreign person goes to a local notary with a translator and issues the document in the name of his or her representative. However in our practice a more common thing is when a foreign person issues power of attorney in his/her home country. In this case the power of attorney needs to be legalized/apostilled, then physically mailed to Ukraine and translated into Ukrainian. In practice tax ID is obtained within 3-5 business days however sometimes can be obtained even faster.

The second stage is the actual company registration in Ukraine. Mostly foreign founders chose LLC (limited liability company) due to its relative simplicity of establishment and functioning. In cases when foreign businessmen subsequently want to apply for Ukrainian residence permit such persons have to set up the LLC as individuals or be shareholders as individuals at least partially.

In order to create a company it is necessary to summon a general meeting of founders during which its charter documents are approved. Also the general meeting chooses head of the company, its registration address, size of authorized capital, types of activities. In practice in most cases the meeting takes place in distance over internet or other means of communication and the final decision is made in the form of minutes which is signed in Ukraine by official local representatives e.g. lawyers. The said minutes have to be drafted in accordance with Ukrainian law so its preparation (as well as preparation of other charter documents) should be performed by lawyers. This will allow to register the company within 2 days based on notarial power of attorney.

During company registration a foreign person needs to use services of nominal director. This is the result of prohibition for foreign citizens to occupy any position in Ukrainian companies (including the position of director) without work permit. Thus, before such foreign person receives the said permit a citizen of Ukraine must be appointed to the position. If the foreign person does not have a candidate, such role can be played by a lawyer as a service. Subsequently, once work authorization is received the Ukrainian director is replaced by the foreign citizen.

As of the moment of registration the business registration address has to be known and stated in registration documents. Just as in the situation with director, the address can be nominal.

The next step is obtainment of work permit for the foreign director. The application for the permit is filed by the newly created LLC. One of the key documents in this procedure is a properly prepared application with all the necessary elements such as:

  • validity term of work permit;
  • name of the managing position (director, general director etc.);
  • company registration address;
  • major activity of the company;
  • confirmation that the position does not involve access to the classified information.

The document has to be signed and stamped.

Other documents required for the procedure are notarized translation of foreigner’s passport into Ukrainian and preliminary draft of future employment contract.

If all the paperwork is prepared properly the work authorization can be obtained in 7 business days.

If as of the moment of work permit obtainment the foreign person is staying outside Ukraine the nominal director can personally pick up the permit and mail it abroad (via DHL for example).

Once the work permit is received the foreign person has to leave Ukraine (if such person was in Ukraine as of the moment of its obtainment) and get special immigration D type visa and enter Ukraine with it. This needs to be done even for those foreign nationals who do not need visa to enter Ukraine.

After obtainment of work authorization document for a foreign director, the employer is supposed to file copy of employment contract with such foreign national with the Employment center within 90 days from the date of work permit issuance. The contract is entered into between a nominal director (Ukrainian citizen) and a new foreign director.

Temporary permit, which is the next document on our list, can be obtained only after the border is crossed with the abovementioned visa and it is stamped at the airport of other entry point.

Once the foreign person enters Ukraine with the visa, the Ukrainian nominal director is replaced with such foreigner. The main task of this stage is to draft appropriate minutes of the general meeting of the company in which a decision to replace the director is made. Once the minutes are notarized they are filed with the registration authorities. On the next day the foreign person is listed in the official state register of companies as director.

The next stage is obtainment of temporary residence permit. Among the documents that need to be filed for the permit are obligation of the employer to notify immigration office about termination of employment contract, notarized translation of the foreigner’s passport, work permit etc.

The permit is received for the term up to 3 year and allows a foreign citizen to stay in Ukraine legally for a long time with unlimited number of entries and exits.

Upon getting the residence permit the foreign citizen has to register his or her registration address as an individual in Ukraine. The address has to be as stated in application for the permit however it can be changed in the future.

In certain cases the address can be nominal if a foreign person does not have one. The application for the registration can be filed either by the foreign person him or herself or though representative.

The registration of address has to be performed within 30 days after a foreign citizen receives residence permit in order to avoid administrative liability.

These are the stages that are necessary to be completed in order to get temporary residence permit for a foreign manager. If you want to start doing business in Ukraine, personally manage the company as well as be sure that your stay in Ukraine is absolutely legal, lawyers of our firm will assist you in this endeavor with your minimal involvement.

In our next publications we will discuss options for payment of minimum salary to a foreign director while keeping activities of LLC in strict conformity with Ukrainian laws.

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