Company registration in Ukraine
When starting business in Ukraine, investors often choose to open a commercial/non-commercial representative office or to create a new legal entity (limited liability company). The final decision depends on the long – term goals of the new business, nevertheless the risk that it is not possible to convert a representative office into a company at a later date should be considered.
Representative office (RO) vs. Limited Liability Company
The two most popular ways of doing business in Ukraine due to its simplicity and flexibility are the Representative Office (RO) and the Limited Liability Company (LLC). According to Ukrainian laws, a RO has neither status of a legal entity nor residential status but is deemed as a division of a foreign company that is registered in Ukraine. The head office of a foreign company assumes all rights and obligations of its RO and bears full liability for its actions. A RO which carries out commercial activities (so called a commercial RO) creates a permanent establishment of the foreign company with tax consequences. A RO which undertakes preparatory or auxiliary activities (a non-commercial RO) does not create a permanent establishment and is not subject to corporate profit tax. LLC (comparable to GmbH, SARL etc.) as a Ukrainian subsidiary established by a foreign company generally has both, legal entity and residential statuses which means it may be engaged in any type of commercial activity. An LLC is entitled to conclude agreements in its own name, assume any legal obligations, acquire property, sue and can be sued on its own behalf. Furthermore, an LLC provides its foreign owner full control, repatriation of income and limitation of responsibility. SCHNEIDER GROUP can help you register your company in Ukraine and assist you to choose the most suitable form of the legal entity (LLC, OJCS etc.). We are also ready to consult you on various legal matters associated with the set-up of your subsidiary. Also, we can provide you with the support concerning the accreditation of your representative office or branch office in Ukraine.
Work and Residence permit in Ukraine
Foreign nationals who want to work in Ukraine must have a work permit from the state authorities. This document should be obtained by a Ukrainian legal entity and the employer shouldn’t have any tax or state duty debts. A search should be performed for suitable Ukrainian candidates on the labour market prior to applying for the work permit. Foreign employees should not be under criminal prosecution in their country or residence and may only work for one Ukrainian employer.
Work permit lasts for usually one calendar year and it is issued only for one position. The Ukrainian employer should provide to the State Employment Service an application with a prescribed list of documents. The list of documents required from the foreign national is standard:
- 2 colour photos measuring 3.5 x 4.5 cm;
- Copy of diploma or other document confirming the employee’s qualifications;
- Copy travel passport;
- Certificate confirming no criminal records which is issued by the respective authority in the foreigner’s country of residence.
Other documents should be prepared by the company-employer depending on the category of foreigners who should be employed in Ukraine. A state fee of four minimum salaries (which is UAH 3,200 as of 01.01.2017, i.e. UAH 12,800) should be paid by the company-employer in case a work permit is approved and issued. The approximate term for receiving a work permit is two months. Upon obtaining a work permit and concluding a labour agreement with a foreign worker, the company-employer is obliged to provide the State Employment Service with a copy of such agreement within three working days; otherwise the work permit might be cancelled. The work permit may be prolonged for one year by submitting a shortened list of documents 30 days prior to the expiry date.
Temporary residence permit
A temporary residence permit is issued based on a work permit and allows the foreign employee to stay in Ukraine for the period of the work permit and freely cross the border. The foreigner may stay in Ukraine longer than 90 days within 180 days and can enjoy simplified border crossing procedures. Additionally, family members of the foreigner are able to receive temporary residence permits. However, a disadvantage of this document is that the foreigner might be recognized as a tax resident of Ukraine and have to pay personal income tax (PIT) on his/her global income to the Ukrainian budget and/or lose certain benefits connected with his/her residence in another country (such as pension or social insurance). The temporary residence permit is issued by the Ukraine State Migration Service based on a passport with a long-term visa (Type-D which allows a stay in Ukraine for up to 45 days) and applications from the foreigner and its host party (usually the employer). The application for temporary residence should be accompanied by the list of documents confirming one’s stay in Ukraine (e.g. work permit), insurance and copies of some internal documents of the employer. The usual document processing time is 14 days. After receiving a temporary residence permit, it is necessary to obtain a registration stamp at the local department of the State Migration Service within 10 calendar days; otherwise a foreigner will be subject to administrative penalty.