What taxes are paid by a representative office of a foreign company in Ukraine? How to pay them?

When registering a representative office in Ukraine, if we are talking about a commercial representative office, i.e. the purpose of which is to make a profit for you in Ukraine, you should not only understand what taxes await you, but also make sure that it is profitable for you. That is, draw a financial map of your project in Ukraine, specifying the possible taxes, expenses, investments, and expected profits.

The standard tax rates for a commercial establishment in Ukraine are:

• VAT 20% on revenues over 1 million a year; 

• taxes on employees' wages.

Starting your activities in Ukraine through a representative office, it is a foreign company which becomes a tax resident - it becomes registered with the Ukrainian Tax Authorities. And depending on the type of the company's activity and possible turnover of the company, you choose the taxation system. For example, whether you need VAT, etc.

In addition to these taxes, you may also face other state fees. For example, if you plan to buy a plot of land, you will face a land tax (if the plot is purchased) or a rental fee for state or municipally owned land (the plot is leased). If you buy a property, a one-off fee is payable. 

If the representation office employs foreign employees, when calculating and taxing their wages, PIT must be taken into account and calculated so as to avoid double taxation.

The tax scheme (how much tax you will pay) and its optimisation, is developed for each client separately. As standard, if the type of activity allows, we talk to clients about a simplified tax system (5%) + taxes if there are employees.

Related article: To withdraw money from a Ukrainian company abroad: tips from a lawyer

Open an account in a Ukrainian bank for a foreign representative office

In order to pay taxes, as well as to carry out any settlement operations, a bank account must be opened for the foreign representative office. Financing from the parent company, payments to suppliers, payment of staff salaries and much more can go through the representative office account.

The head of the representative office must be present in person for this procedure - he/she must have his/her passport and a power of attorney which confirms his/her authority as head. 

The following documents are required:

• Registration certificate of the representative office from the Ministry of Economy; 

• certificate from the statistical authorities;

• certificate of registration from the tax office.

It takes only an hour or two to open an account, provided the documents are prepared in advance and the time is agreed upon with the banks' representatives.

Our company offers a choice of trusted Ukrainian banks that can easily open accounts for foreign representations in Ukraine.

Related article: Rules for registering a representative office in Ukraine in 2022 and the formation of accounting

The correct maintenance of the accounts of the representation will need to be monitored. This is usually done by an accountant, as accountancy and payroll are closely linked. If you do not already have a proven accountant at the start of your business, we can offer you a lawyer+accountant combination for outsourced bookkeeping, personnel and other accounts of the office.

Our company provides tax advice for registering a representative office in Ukraine.

You can find out the cost of registration of a representative office in Ukraine here.