Financial and tax planning for foreign business in Ukraine

What is the most important question an entrepreneur asks himself when planning to start a business in a foreign country? 

The answer is simple: what taxes will I pay and will such a business be profitable for me?

An experienced entrepreneur knows which tools to use to get the answer to his question. And he should also realise that only those specialists who have been working in this field in a given country for a long time can give an accurate answer. After all, it is they who know the internal rules of the market, the nuances of the law and the rules of the game which are not visible to the outside eye.

If you are planning to do business in Ukraine, you will need the assistance of a lawyer in Ukraine. And the most effective tool at the start will be Business planning and financial model.

The financial model is goals and ways to achieve them expressed in numbers and calculations. It is useful not only and not always at the start of business. Many people turn to it when a business enters the systemic stage. When there is a need for tighter control, not only of employees and processes, but also of cashflow.

Related article: How to avoid double taxation in Ukraine?

What does the financial business model provide?

A financial model will be needed if you plan to:

• set up a new business or project;

• attract investors or lenders;

• restructure the company;

• develop a growth strategy for an existing business.

The financial model makes it possible to:

• identify the factors affecting business performance;

• define or adjust the company's development strategy;

• determine credit and investment requirements.

The development of a financial model typically involves the following steps:

1) Filling in the brief.

At the start of the work, a brief takes place so that both parties understand what to expect from the process and what the objectives are. The brief is completed jointly by the client and our lawyers. As much up-to-date information as possible about the business and the client's plans are included. 

2) Version 1 of the financial model.

A first version of the financial model is created, which will include information for the customer, including:

• the duration of the project;

• the project timetable;

• project cost plan;

• investment plan;

• cash flow plan; cash flow plan;

• risk analysis;

• and much more.

3) The final financial model.

Of course, the model needs to be agreed upon and adjusted. This is what happens in stage 4 of the work.

4) Integrating the financial model into the business plan.

The financial model is integrated into the company structure. Often the company regulations and instructions need to be aligned.

As a result, the owner receives a working tool that will develop together with his company and allow to operate the business in Ukraine with maximum efficiency.

Of course, our lawyers are ready to provide any necessary legal support to the business, including providing subscription services on legal and accounting issues in Ukraine.

Related article: Outsourced Accounting Services in Ukraine

Tax planning for business in Ukraine

Tax planning is a separate tool that you should use if you do not want to work at a loss. For example, we were approached by a client, the owner of a logistics company, whose problem was that his taxes for the current year had increased by 1.7%, but it was not clear on what basis and from what calculations.

We first of all offered the client an audit of the company's operations. Such an audit should reveal the main problems in the recording of business transactions and rule out technical or accounting errors.

We also carried out a comparative analysis of the financial indicators for the 6 months of 2021 and 2022. We then identified the reasons behind the sharp increase in the VAT and income tax burden.

Once the problem had been identified, the accountant, in conjunction with a lawyer, devised tax optimisation methods for the current reporting period.

It is difficult to overestimate the opportunities provided by tax audit and planning in Ukraine. It will help both before tax audits and for optimization of business operations in Ukraine, especially in the period of constant changes in tax legislation.

We offer our foreign clients the best service and the best product they can get in Ukraine - a reliable legal partner and the opportunity to solve any problems faced by the business in Ukraine.

For service and support costs, see here, or ask our specialists.