Starting a Business in Ukraine: Everything You Need to Know
Recently, Forbes ranked Ukraine among the top 80 viable international business destinations. However, while many foreign startups are thriving in the country, it’s important to note that things aren’t always rosy when you start a company in Ukraine for the first time.
Registering a business or expanding operations into the country can be an arduous procedure, with tons of bureaucracy, and lengthy processes. Fortunately for you, we have compiled this insightful article with all the insights to help you dodge the common pitfalls and get it right the first time.
- Why Open a Company in Ukraine
- Company Structure and the Best Business to Start in Ukraine
- Tax Requirements
- How to Register a Company in Ukraine
- Other Important Details for Doing Business in Ukraine
Why Open a Company in Ukraine
Over the past few years, Ukraine has been significantly strengthening its reputation as a favourable business environment. According to the 2021 Global Startup Index, Ukraine is a beacon hope, proving it’s potential and creating “technology that is both scalable and global” despite the economic challenges. Did you know that leading tech companies like Grammarly, Gitlab, and Ciklum among many others originate from Ukraine?
Below are three other reasons why you might want to open your company in Ukraine:
Low cost of skilled labor
For starters, Ukraine has readily available skilled labor at just the right prices for western start-ups. In the tech industry alone, Ukraine has over 200,000 IT specialists and these figures are expected to increase by 10% each year. And most importantly, developer salaries in the country are significantly lower than in other European countries.
The driving force behind the vast pool of professionals is Ukraine’s investment of 6% of its GDP to education funding – one of the highest rates in the world. As a prospective entrepreneur, you’ll have access to qualified talents not just in the IT industry but in other sectors too.
Favorable government policies
Ukraine ranks 64th out of 190 countries in ease of doing business. It also ranks high in terms of time, cost, and procedure of starting a business in Ukraine. Most of the processes including registration, getting permits, taxation, and setting up your teams are business-friendly. And more so, you can seek help from experts to make each process as effortless as possible. pwrteams provides a detailed and proven approach to staff augmentation whether you’re a startup, SMB, or a large enterprise.
Good time zone difference
Ukraine is two hours ahead of the United Kingdom and an hour ahead of Denmark, Poland, and other countries within the continent. This is particularly helpful if you’re serving the European market in sectors that require real-time response.
Company Structures and the Best Business to Start in Ukraine
The common forms of business in Ukraine comprise the Limited Liability Company (LLC); also known as TOV in the Ukrainian language, Representative Office (RO), and Individual Entrepreneur.
For LLCs, the business partners are liable within the limits of the capital they invested rather than their personal assets. Unlike in other countries, the capital is divided into parts, rather than the number of shares; giving every member ownership of parts of the business. TOV is easy to register and is suitable for various business scopes including but not limited to one-man businesses, small and mid-sized companies, as well as multinationals. The number of partners in a limited liability company is usually from 1-100, except when specified otherwise by the law.
The Representative Office is specifically for foreign companies who wish to study the Ukrainian market. These companies cannot conduct transactional activities. Instead, they can only undertake market research or other non-commercial ventures. ROs are mainly extension offices of a foreign company that exists in Ukraine.
Setting up and maintaining a business as a private entrepreneur is far easier. However, the downside is that the liability of the business extends to the personal assets of the owner. This type of business venture is suitable for freelancers, self-employed individuals, or small companies that run simple, low-risk businesses. Other forms of organizations include Joint ventures and Joint Stock Companies; both of which are mostly for large enterprises.
So what is the best business in Ukraine? Although these business structures have their advantages and disadvantages, they can be ideal for specific companies. What is suitable for you depends on the scope, size, capital, risk level, type of business, and more.
According to the tax code of Ukraine, businesses fall either under the general tax system or the simplified regime. Although the former is the default, businesses can also opt for the simplified tax system if they meet certain requirements. These requirements are based on annual turnover, type of business, size of employees, and more. Aimed at supporting small businesses, companies under this system only pay a unified tax.
The general taxation system comprises multiple taxes including VAT, which applies to certain businesses, goods, and services at varying rates. Taxes are usually filed quarterly but can also be annual. Also, non-residents’ income and insurance, gambling, banking, and other specific companies have special taxation rules.
How to Register a Company in Ukraine
Since 2016, the business registration process has gotten easier due to reforms. You can register a business in less than 3 days as long as the required documents are ready. There are various documents and procedures involved in each form of company registration in Ukraine. However, some common documents include:
- Completed application for registration;
- Ukrainian tax ID (for each founder);
- Charter and the decision of founders regarding incorporation (for required businesses);
- Application on registration as a unified taxpayer or VAT payer;
- Extract from the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Organizations;
- Employment agreements (if needed);
- Power of Attorney (if you’re using a representative).
The documents required for business registration for foreigners include those listed above, a tax certificate issued in Ukraine, and a passport. These documents must be legalized or apostatized where applicable. File for registration with the Unified Register once these documents are ready. To track your application, you can check the portal of the Ministry of Justice of Ukraine. To make the Ukranian market more appealing to foreign investors, the government stated that the cost of opening a company in Ukraine is no longer applicable.
It’s important to note that most of the registration documents are filled in Ukraine. Therefore, partnering with a local business registration expert can make the process smoother.
Before Doing Business in Ukraine, keep in mind that:
There is no doubt you are looking for a team that is an extension of your local organization. Using this approach, all Businesses in Ukraine do not require a corporate seal but, if you wish, you can have one.
Foreigners need a permit to work unless they are permanent residents.
There’s no need to notify tax authorities or register as a social security taxpayer. These are automatically set up after the initial steps of opening your business. You are only required to make changes when switching to a different tax regime or hiring new staff. Also, you’d need to apply for licenses.
Companies operating in Ukraine require a local bank account. The cost or duration of opening one depends on the bank you choose. Some necessary documents are:
- Power of Attorney for your representative;
- Signature card;
- Tax ID and other relevant documents for individuals referred to in the card;
- Application forms of bank.
These are the few steps for doing easy business in Ukraine. However, setting up your team, registering, and launching your business can be a time-consuming and overwhelming process. Luckily, we can guide you through a cost-effective way of building your cross-border tech team whether you’re an individual entrepreneur or a Limited Liability Company. Contact us today to learn how we can help your business.