Growing Your Business in Ukraine

Ukraine is strategically located in the heart of Europe. This enables expansion of communication channels. Additionally, Ukrainian Universities provide internationally approved educational systems, which are highly valued globally. In the age of remote working, transportation is not something as heavily considered, however, as travel resumes, having a powerful transport industry offers for traveling to Ukraine becomes crucial. There are 13 airports in Ukraine, providing flights to 129 destinations in 51 countries. For those planning a long-distance connection, high-speed electric trains or busses are also available for ease of travel.

Ukrainian Talent

With IT playing a pivotal role in businesses, Ukraine as a technological hub will surely be beneficial. Considering that the largest share of IT is concentrated in large regional cities, moving to any IT outsourcing destination will be convenient. It has the largest growing number of IT experts in Europe, around 86% of all IT resources of the country are accumulated in the following IT hubs: Kyiv, Kharkiv, Lviv, Dnipro, and Odesa. Companies like Microsoft, Deutsche Bank, Apple, Bosch, eBay, Dell, Microsoft, IBM and many others that outsource talent to Ukraine. Not forgetting to mention that the services provided are end to end, meaning that they will oversee development all the way through follow up sessions.

Due to the standard of education, many Ukrainians adopt global views, allowing them to adapt to the way other countries work. Additionally. the western-oriented cultural and communication barriers will not be that big of a challenge to overcome.

Types of Employed Workers

Salaried employee: Ukrainian law does not distinguish between different categories of worker. All individuals that are engaged under an employment agreement qualify as employees. Standard practice dictates that an employment agreement covers performance of work by an employee who observes internal work rules, in return for remuneration required for the level of labour conditions.

Independent Contractor/Self-Employed: Employees are governed by employment laws and independent contractors are governed by civil law. While there is no particular legal test used to differentiate employees from independent contractors, the distinguishing criteria typically include the following:

  • The subject matter of employment relations is the process of work, rather than its specific result.
  • Employees must observe internal employment rules and cannot freely plan their work schedule.
  • Evidence of employment consists of systematic and periodic payment for work (similar to salary payments), as opposed to a one-time payment, and benefits that are specific to employment relations (paid leave and overtime).

Basically, the nature of actual relations between the parties is a key factor in determining whether an individual is an employee or an independent contractor.

All employees are entitled to all available statutory employment rights. However, minor limitations may apply to temporary employees. As a standard approach, employment agreements are for an indefinite period. The parties can only sign fixed-term employment agreements if the law allows this or if the employer has a reasonable justification for offering temporary employment.

Taxes

The tax system in Ukraine is administered by STS, which interprets and executes effective tax legislation. STS operates directly through its regional offices. There are tax police units within  STS and its regional bodies. Taxes are a key area of costs to consider when starting a business. In Ukraine, taxes on labour tend to the following indicators:

  •   personal income tax is 5%.
  •   the unified social contribution is 22%.
  •   the military fee is 1.5%.

Company taxes:

  •   9% on tax on withdrawn capital or 18% on corporate profits, which is a global practice.
  •   0% on the tax treatment of dividends if they have not been distributed for two or more years.

Ukraine plans to attract angel investments by introducing tax benefits and 0% on an individual’s income from the sale of the shares in a start-up.

Why conduct business in Ukraine in 2021?

The simple answer to this would be how easy it is to expand business into Ukraine now. According to The World Bank Doing Business 2020 report, the country improved 6 out of 10 indicators of effective doing business and is ranked 64th out of 190.

Here are some areas Ukraine has improved in:

1) Dealing with construction permits

  •   Before: entrepreneurs had to struggle with more than 20 procedures and pay $1262 to the treasury.
  •   Now: Getting building permit has become much easier: firstly, hiring an external supervisor has been removed; secondly, it’ll be less costly by reducing the contribution fee to the Kyiv City Council.

2) Getting electricity procedure

  •   Before: it could take you up to 285 days to get electricity. Over the next 53 days, you have to wait for the completion and approval of the project.
  •   Now: to get technical specifications, it is not necessary to go through 9 circles of bureaucratic red tape. The state has also introduced a geographic information system and an outage compensation mechanism. The last one increases power supply reliability.

3) Registering property

  •   Before: this process took more time than the OECD norm
  •   Now: the registration procedure has been simplified, as land administration system transparency has increased

4) Crediting

  •   Before: Ukraine has a developed financial system
  •   Now: Improved access to credit information

5) Protecting minority investors

  •   Before: Provides a protective legal framework for investors
  •   Now: strengthening protection and disclosure of transactions with interested parties

6) Trading across borders

  •   Before: difficult test, requiring a month to approve six documents, in addition, inflated costs are associated with both import and export of containers
  •   Now: Time taken for imports have been reduced due to the certification requirements for auto parts.

 

Launching a business in Ukraine by foreign entities and onboarding a legal entity is still a process that needs to be perfected, while no longer as complex, it would still be easier if businesses had professional advisory to help work through all the HR, administrative, finance and legal work.


 

Global People is a leading local employment solutions provider for national and international corporations and can advise and escort you in your next destination.

About Us

Global People aims to assist its clients to fully focus on their development and success in their target destinations without having to worry about the regulation and compliance involved in the employment of their local and expat employees.

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