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Ukraine

Why Ukraine?

Ukraine, located in eastern Europe, is Europe’s second-largest nation after Russia. The second-largest European country, it covers 603,628 square kilometers. Poland, Slovakia, Hungary, Moldova, Romania, Russia, Belarus, and the Black Sea and Sea of Azov border it. Ukraine has 24 regions and Crimea. Ukraine declared independence on August 24, 1991. Despite Russia’s illegal annexation of Crimea and the eastern Ukraine conflict, the Ukrainian economy is showing signs of recovery. Petroleum, natural gas, coal, and renewable energy are abundant in the nation. Another lucrative market is the nuclear industry.

Advantages

Doing business in Ukraine can offer several advantages, making it an attractive destination for entrepreneurs and investors. Here are some key advantages with subheadings:

Strategic Location in Eastern Europe:

Ukraine’s geographic location positions it as a gateway to the vast Eastern European market, providing access to over 400 million consumers in neighboring countries.

Large Consumer Market:

Ukraine boasts a population of over 40 million people, offering a substantial domestic market for goods and services.

Cost-Effective Labor Force:

Ukraine is known for its well-educated and technically skilled labor force, particularly in fields such as IT, engineering, and science.

Competitive Labor Costs:

Labor costs in Ukraine are generally lower compared to Western European countries, making it an attractive option for businesses seeking cost-effective talent.

Abundant Natural Resources:

Ukraine is abundant in natural resources, including fertile agricultural land, minerals, and energy resources, providing opportunities for various industries.

Investment Incentives:

The Ukrainian government offers various tax incentives, such as reduced corporate tax rates and exemptions for specific sectors, to encourage foreign investment.

Emerging IT and Tech Sector:

Ukraine has gained recognition as a prominent IT outsourcing destination, with a thriving tech sector and a significant number of highly skilled software developers and IT professionals.

Startup Ecosystem:

The country’s startup ecosystem is growing, attracting investment, and fostering innovation in areas like fintech, AI, and e-commerce.

Simple Tax Regime

Taxation in Ukraine is governed by the Tax Code of Ukraine. The State Tax Service of Ukraine (STS) and the State Customs Service (SCS) are the main authorities responsible for tax collection and control. They report to the Ministry of Finance of Ukraine, which in turn reports to the Cabinet of Ministers of Ukraine.

Corporate Income Tax (“CIT”):

Standard rate is 18% for resident and non-resident companies. It applies to resident and non-resident Ukrainian companies’ taxable profit.

Personal Income Tax (“PIT”):

Expected to reach 18% by 2023 according to Trading Economics global macro models and analysts’ expectations.

Sales Tax Rate – VAT:

Currently 20%, with reduced rates of 7% and 0% for specific goods and services.

Withholding Tax:

Unless a double-taxation treaty applies, non-resident companies receive Ukraine-sourced income (dividends, interest, capital gains, and royalties) at 15% withholding tax. A Ukrainian resident must pay a 20% WI-FT from its own funds on non-resident marketing and advertising income from Ukraine. Ukrainian companies or their representative offices pay 0%, 4%, or 12% tax on (re)insurance contributions and premiums to non-resident (re)insurers.

Payroll Taxes:

Ukrainian legal entities and/or permanent establishments act as tax agents in Ukraine with respect to their employees. Employers withhold 18% for personal income tax and 1.5% of temporary military tax from employee salaries. Employers also pay 22% as the Uniform Social Tax.

Stamp Tax:

No stamp taxes exist, but nominal stamp duty exists for certain actions such as notarizing contracts and court filings. Commodity exchanges and real estate sales incur a 1% stamp duty.

 

Ukraine Companies

In case, if a foreign investor wants to set up his company in Ukraine, then an establishment suitable to his business or needs is to be chosen. As per Russian Company Law, there are several types of companies available in Ukraine, such as:

Limited Liability Company (“LLC”):

The LLC is the most popular and widely used form of business entity in Ukraine. It offers limited liability for shareholders and can be established with a minimum capital requirement.

Joint Stock Company (“JSC”):

A JSC is a type of business entity that can be publicly or privately held. It allows for the issuance of shares and raising capital through the stock market. Representative office: A representative office is a non-commercial entity that serves as a local representative of a foreign company. It is not allowed to engage in commercial activities but can perform marketing, research, and liaison functions on behalf of the parent company.

Sole Proprietorship:

A sole proprietorship is a business owned and operated by a single individual. The owner has unlimited personal liability for the business’s debts and obligations.

Partnership:

General partnerships have unlimited liability, while limited partnerships have limited liability for limited partners. Both types are called “partnerships.

Production Cooperative:

A production cooperative is a legal entity that is formed by individuals who pool their resources and efforts to engage in production or economic activities.

Limited Liability Partnership (“LLP”):

An LLP is a hybrid entity that combines elements of a partnership and an LLC. LLPs in Ukraine provide limited liability protection to owners (participants) and are governed by Ukrainian laws.

Professional Partnership:

A professional partnership is a specialized form of business entity that is typically utilized by professionals, such as lawyers, accountants, and architects.

 

Ukraine, located in eastern Europe, is Europe’s second-largest nation after Russia. The second-largest European country, it covers 603,628 square kilometers. Poland, Slovakia, Hungary, Moldova, Romania, Russia, Belarus

Author: Chandrawat & Partners

Topic: Doing Business in Ukraine

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Chandrawat & Partners stands as a dynamic and rapidly expanding full-service firm, specializing in the delivery of exceptional professional and corporate services to a diverse clientele, both foreign and local. We proudly represent companies and individuals across a wide spectrum of sectors through distinct entities established in various countries worldwide.