Guidance on business registration in Ukraine: problems, investments, rules
Before deciding whether to open a business in Ukraine, it is necessary to weigh all the risks and advantages of such a location. Among the clear advantages that most often influence the decision of foreign investors are:
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comfortable tax level for most types of business - much lower than in Europe or America;
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cheaper but highly skilled labour;
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a more economical environment to locate an office or manufacturing facility
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high speed internet, with all the necessary communications.
Whether it is profitable for your business specifically, taking into account relocation, transportation of equipment and so on, can be calculated through business planning with our lawyers.
But let us take a closer look at possible problems for business in Ukraine.
Related article: What taxes will I pay in Ukraine when starting a business?
What are the most frequent difficulties encountered by foreign businesses in Ukraine?
The need to understand tax legislation.
Yes, Ukraine does offer good tax rates for businesses, for example, only 5% tax for IT activities. But you will have to take into account a huge number of regulations in your work. The hardest part is that most of the tax authorities have their own personal interpretation of some regulations, which makes communication with them even more difficult.
Of course, most problems are solved with the help of an experienced accountant. The best option is for the accountant to work under the supervision of a lawyer, which is what we offer our clients.
Planned and unplanned business inspections.
A problem arising in part from the previous point is the need to be prepared for business inspections. These may be inspections by the tax authority or, for example, by the body responsible for ensuring that your company's personnel records are kept correctly and that workers' rights are respected. If your business needs a licence, say you have opened a pawnshop or a pharmacy, the licensing authority will carry out their inspections.
Failure to pass an inspection can result in sanctions. Fines or even an order to stop your business.
Personnel records and document management rules.
If you are planning to move part of your staff to Ukraine, consider that all paperwork, preparation and filing of reports, addressing a government body for any reason - should always be done in Ukrainian.
In order to run your business you will definitely need a staff with knowledge of Ukrainian or a permanent contact person.
On the subject of hiring personnel in general - any employee must be formally employed. The process is not complicated, but you will need to keep careful records of all payments to employees.
These are only some of the problems, but they are the ones worth solving at the start, if you have decided to enter the Ukrainian market.
Related article: How to create a business in Ukraine if there are several owners?
In which types of business in Ukraine do foreign investors most often invest?
The IT sector in Ukraine.
Here are simple factors that influence the choice of this particular industry:
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Ukrainian IT specialists are in good standing with most companies around the world due to their high qualifications, willingness to work remotely and comparatively cheaper labour costs. At the same time such specialists in 95% of cases have good knowledge of English;
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In Ukraine there are tax "discounts" for IT sphere - there is a special tax rate for such kind of activity - 5%;
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Fast and stable Internet;
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Cheaper rental costs for office or co-working space.
In this field, it is important to define from the outset the terms and conditions under which IT specialists work with you. It is not the level of salary, but the scheme of cooperation itself. Most of the companies in Ukraine work with IT specialists not through employment contracts, but as contractors. But today in Ukraine there is already a new type of IT activity - Diya City. It makes it possible to enter into gig-contracts with employees, and to work in a special taxation field.
Provision of medical services in Ukraine.
One of the most profitable businesses in Ukraine is the medical sector. Yes, starting such a business requires more capital investment - you need staff and equipment as well as specific premises. But the payback of such business is very high, and this is a signal to many foreign investors.
To start a medical business will require a medical license and a number of other permits. Our company helps with all this.
Related article: How to keep personnel records and hire employees in Ukraine? Instruction for foreign investor
Important nuances of doing business in Ukraine
The most frequent question we hear from foreign entrepreneurs is about arranging a mechanism for withdrawal of funds from Ukraine.
To open a bank account for a company in Ukraine, the founder or his authorised officer (if the founder is a foreign company) must be present in person. If the rest of the procedure can be performed by a representative in Ukraine with a power of attorney, then to open an account you will need to come in person, at least for 1 day.
It is also important to remember that there is a financial control procedure in Ukraine that covers all funds above the amount indicated by the law. If your business involves large tranches of funds, this process can be streamlined on the advice and under the supervision of an experienced lawyer.
Our company has been assisting with the registration of foreign businesses in Ukraine for over 15 years. If you do not just want to get a company ready to start, but also to get a business plan and advice on tax, accounting and legal matters in advance - contact us.
