Business registration in Ukraine
Setting up a company in Ukraine
Lots of foreign citizens, as well as companies, consider starting a business in Ukraine. Ukraine is a developing country with a mild tax regime, opened data resources, easy business registration procedures and strengthening its position in the “Doing business” rating.
Naturally, there are difficulties and negative aspects of running a business in Ukraine: high salary tax rates (41,5% total), bureaucratic procedures in obtaining licenses, permits to run certain types of business activities.
Therefore, as the process of registration can run quite smoothly, we usually advise thinking beforehand of all the important issues related to setting up a company in Ukraine.
Choosing the form for your business
Before starting a business in Ukraine investors should consider possible options of legal entity in Ukraine.
Ukrainian legislation sets several organizational legal forms for companies:
1) limited liability company;
2) company with additional liability (it resembles a general partnership, but a separate legal entity is created);
3) limited partnership;
4) joint-stock company.
A foreign company has also an opportunity for the foundation of a representative office (it is not considered as a separate legal entity in Ukraine).
The new law dated 06.02.2018 (has not come into effect yet) regulates issues with limited liability companies and companies with additional liability. Shareholder’s agreements will soon become the enforceable instrument for governing relations between shareholders. It is not mandatory, but if you want it to become an efficient instrument, we advise our clients considering the conclusion/non-conclusion of the SHA before registration of the company. However, there are no time restrictions on it.
Usually, limited liability companies, partnerships have no authorized capital amount limitations; the minimal authorized capital amount for joint-stock companies is approximately 170 000 USD.
In some areas of business, there are specific requirements for the amount of authorized capital. For example, for financial companies, the amount of the authorized capital shall not be less than 3 500 000 UAH.
The authorized capital amount is indicated in the Company’s Articles of Association and shall be evaluated in UAH. It is essential for the Investors who plan to make their contribution as a bank transaction from abroad in foreign currency and want to indicate it in USD, EUR, etc.
Money, securities, proprietary rights, and property can be a form of a contribution to the authorized capital. The evaluation of proprietary rights, assets that are transferred to the company as the contribution to the authorized capital is made by the shareholders (except for the cases where expert evaluation is necessary).
Registration itself is an easy process. Authorized Registrars shall enter the data to the State Registry of business entities of Ukraine within 24 hours. At the same time, a notable set of documents must be prepared. Please note, that some documents submitted to the Registrars must be verified by a notary. Legislation of Ukraine currently allows notaries to be Authorized Registrars that also makes the whole process easier and more convenient.
If any information that is included in the State Registry of business entities changes, the company has to update the respective data. The procedure itself is quite similar to the initial registration but the state fee will be charged.
It is worth noting that Ukraine ranks No. 43 in Doing business rating in taxation issues. As per the legislation of Ukraine, there are two tax systems for business entities in Ukraine:
1) general tax system;
2) simplified tax system.
The general tax system is used by the default: the business entity has to pay 18% of the net profit. If the amount of services rendered (goods produced) exceeds 1 000 000 UAH within one calendar year, the taxpayer has to register as VAT-payer.
The simplified tax system can be used by small businesses. Not any business entity may choose it: first of all, the yearly turn over shall not exceed 5 000 000 UAH, and second of all, not all types of business activity are allowed to use this system. The tax rate is 5% of income without paying VAT or 3% of income plus VAT.
No matter what system you choose, the company has also expenses for its employees: there is 22% of the single social security tax that the company pays itself, 18% income tax and 1,5% military fee that company deducts from the salary of its employer and transfers to the tax body.
Read about controlled foreign companies tax regulations in our article.
Starting a business is not an easy thing. The duly organized company at the very beginning is easier to run, structure and develop it for the future. Thus, it will be useful to be clear on the aforesaid issues. These will prevent extra expenses in case of wrong decisions, difficulties occurring while negotiations and any surprises arising out of the unfamiliar jurisdiction.
We hope your business in Ukraine will become successful and prosperous!