Lots of foreign citizens as well as companies are considering the opportunity of starting business in Ukraine. Ukraine is a developing country with mild tax regime, opened data resources, easy business registration procedures and strengthening its position in “Doing business” rating.
Of course, there are difficulties and negative aspects of doing business in Ukraine: high salary taxes rates (41,5% total), bureaucratic procedures in obtaining licenses, permits to run certain types of business activities.
So, as the process of registration can run quite smoothly, we usually advise to think of all the important issues related to the setting up a company in Ukraine beforehand.
Choosing the form for your business
Before starting a business in Ukraine investors should consider possible options for organization of legal entity in Ukraine.According to Ukrainian legislation, there are the following organizational legal forms for companies:1) limited liability company;2) company with additional liability (it resembles general partnership, but a separate legal entity is created);3) limited partnership;4) joint stock company.A foreign company has also an opportunity for creation of representative office (it is not considered as a separate legal entity in Ukraine).
As the new law was adopted on 06.02.2018 which regulates issues with limited liability companies and companies with additional liability (has not come into effect yet), shareholder`s agreements will soon become the enforceable instrument for governing relations between shareholders. Its concluding is not mandatory, but if you want it to become an efficient instrument, we advise our clients to consider the possibility of concluding/non-concluding the SHA before registration of the company. However, there are no time restrictions on it.
Generally, there is no limitation to the authorized capital amount for limited liability companies, partnerships; for joint stock companies the minimum amount for the authorized capital is approximately 170 000 USD.Specific requirements for the amount of authorized capital are specified for separate fields of business. For example, for financial companies the amount of the authorized capital shall not be less than 3 500 000 UAH.The amount of the authorized capital is indicated in the Articles of association of the company and shall be evaluated in UAH. If investors want to indicate it in USD, EUR etc. (it is essential for those who plan to make their contribution as a bank transaction from abroad in currency)Money, securities, proprietary rights, property can be a form of contribution to the authorized capital. The evaluation of proprietary rights, assist that are transferred to the company as the contribution to the authorized capital is made the shareholders (except for the cases where it is necessary to get the evaluation made by an expert).
Registration itself is an easy process. Authorized Registrars has 24 hours to make respective entry to the State Registry of business entities of Ukraine. At the same time a notable set of the documents must be prepared. Please note, that there are requirements to the documents that are submitted to the Registrars: some of them must be verified by 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 to the State Registry of business entities changes, 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 holds the 43-rd position in Doing business rating in taxation issues.According to the legislation of Ukraine, there are two systems that can be used by business entities in Ukraine:
1) general tax system;2) simplified tax system.
General tax system is used by the default: business entity has to pay 18% of the net profit. If the amount of services rendered (good produced) within one calendar year exceeds 1 000 000 UAH, the taxpayer must register as VAT- payer.
Simplified tax system can be used by small businesses. Not any business entity may choose it: firstly, the yearly turn over shall not exceed 5 000 000 UAH, secondly, not all types of business activity are allowed to use this system.The tax rate is 5% of income (you will not pay VAT) or 3% of income plus VAT.
Irrespective of what system you choose, company has also expenses for its employees: there is 22% of the official salary social insurance tax that company pays itself, 18% income tax and 1,5% military fee company keeps from salary of its employer and transfers to the tax body.
Starting business is not an easy thing. Duly organized at the very beginning company is easier to run, structure and develop in future. So, it will be useful to make clear position on the aforesaid issues. These will prevent extra expenses in case of wrong decisions, difficulties that occur while the negotiation process and any surprise from the unfamiliar jurisdiction.
Hope your business in Ukraine will become successful and prosperous!