Why To Start Business In Ukraine
By Arthur Nitsevych, Wed Dec 7th
Ukraine General information Total area: 603,700 sq. km Population: ~48 million Principalcities: Kyiv (Kiev), Donetsk, Zaporizhzhya (Zaporozhye),Dnipropetrovsk (Dnepropetrovsk), Kharkiv (Kharkov), Lviv (Lvov),Odesa (Odessa) Official language: Ukrainian (although inbusiness Russian is mainly used) Neighbouring states: Russia,Moldova, Belarus, Poland, Romania, Slovakia, Hungary Currency:Hryvnia (UAH)
Ukraine has focused long ago on closer integration with the restof the world while preserving its traditional links with thecountries of the former Soviet Union. Reflecting its importanceand size, Ukraine is a member of the United Nations, the IMF,the World Bank, the EBRD, etc. Investment policy and investment possibilities •Foreign ownership of most types of business is permitted.•Foreign investments are welcome, especially, those onesinvolving technology transfer and capital. •Similar regime ofinvestment and business activity is applicable to local andforeign investors. •Protection of foreign investments isavailable under Ukrainian legislation and internationaltreaties. •As of January 1, 2002 foreign investors can ownnon-agricultural land in Ukraine. •Special economic zones grantsignificant tax concessions for investments. Possible business structures and corresponding regulations •The corporate and management structure is relatively flexible.•A joint stock company is a legal entity whose capital isdivided into a specified number of shares. There are two typesof joint stock companies: "open" joint stock company and"closed" joint stock company. Shares of joint stock companiesmust be registered with the State Commission for Securities andStock Exchange. •Limited liability companies require lesscomplex structure. A limited liability company does not haveshares. Participants in the company own a percentage of thecompany’s capital. •To establish a presence in Ukrainerepresentative offices are used although they can be engaged inbusiness activities. The representative office does notconstitute a legal entity. •A joint venture can take the form ofa company which has a distinct legal personality or anun-incorporated entity which does not. •Concessions are allowedin certain fields for the period up to 50 years. •Preliminaryapproval from the Antimonopoly Committee may be required forcertain acquisitions of shares or assets. •There is no ceilingregarding the amount of capital a foreign company invests into aUkrainian company. •Foreign investments must be registered withthe local authorities. Tax planning •Ukraine has developed a wide double tax treaty network.•Domestic tax treatment applies to foreign corporations andexpatriate personnel. •Dividends, interest and royalties may befreely repatriated. •Withholding
tax of 15% applies todividends, interest and royalties, but domestic tax law issubordinated to international tax treaties. •The principal taxesin Ukraine are corporate profits tax, personal income tax, VAT,payroll taxes, excise tax, land tax, tax on owners of motorvehicles and import duties. There are also other taxes anddifferent local taxes that may be levied by the localauthorities. Investment protection & incentives •Investment incentives are generally available on an equal basisfor both local companies and foreign investors. •In-kindcontributions may benefit from certain tax exemptions. Property(except for goods for re-sale) contributed by a foreign investorto the statutory fund of a Ukrainian entity can be imported freeof import duty. Exemption from import VAT is available for fixedassets imported into Ukraine as an in-kind contribution to thestatutory fund of a Ukrainian legal entity. •Exemption fromimport duties is available in respect of goods traded withex-USSR countries. Accounting and financial reporting andbanking system •The banking system consists of the National Bank of Ukraine andcommercial banks. The National Bank of Ukraine (NBU) is thecountry’s central bank that leads a uniform monetary policy andperforms bank supervisory functions. •The law On accounting andfinancial reporting provides for National Regulations(Standards) on Accounting in Ukraine (NR(S)AU) which areintended not to contradict IAS. Overall, standards combine theconcepts found in IAS, but with less interpretative guidance. Exchange control •Export proceeds in hard currency received by a Ukrainiancompany usually are subject to a mandatory 50% conversionrequirement. •Payments under foreign trade contracts between aresident and a non-resident entity should be in foreign currencyonly. •Certain transactions between residents and non-residentsrequire a license from the NBU. •Foreign loans must beregistered with the NBU. •Payments in foreign currencies betweenresidents of Ukraine are prohibited. •Ukrainian companiesusually must receive payment for exported goods, and obtainpre-paid imported goods within the period of 90 days. INTERNATIONAL LAW OFFICES & VERITAS LEGAL ADVISERS, KIEV-ODESSA,UKRAINE www.murs.com.ua Odesa 65014, Uspenska St., 15/6 Ph.: +38 (048) 715 58 55 Fax:+38 (0482) 49 69 25 veritas@murs.com.ua Kyiv 01025, Velyka Zhytomyrska St. 15/8 Ph.:+38 (044) 235 73 97 Fax: +38 (044) 212 32 50 info@murs.com.ua
About the author:Arthur Nitsevych Certified attorney-at-law Master of science inaccounting Director INTERNATIONAL LAW OFFICES & VERITAS LEGALADVISERS, KIEV-ODESSA, UKRAINE www.murs.com.ua Odesa 65014, Uspenska St., 15/6 Ph.: +38 (048) 715 58 55 Fax:+38 (0482) 49 69 25 veritas@murs.com.ua Kyiv 01025, Velyka Zhytomyrska St. 15/8 Ph.:+38 (044) 235 73 97 Fax: +38 (044) 212 32 50 info@murs.com.ua |
