Ukraine Info
Joined: 20 Apr 2007
Posts: 17
Home Country: ukraine
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 Posted: Mon May 14, 2007 6:42 am Post subject: DOING BUSINESS IN UKRAINE / UKRAINE BUSINESS GUIDE |
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DOING BUSINESS IN UKRAINE
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Corporation
Minimum Capital Requirement: 35,000
City: Kiev
Registration Requirements:
Procedure 1. Notarise company charter and execute premises (if needed)
Time to complete: 1 day
Cost to complete: UAH 350
Comment: The notary fees are UAH75 at state notary, UAH200-400 at private notary. Notary fees depend on number of participants for approval, number of pages and copies of registration documents and additional notary fees, approved by Oblast (Regional) Department of Justice.
Company's Charter is the sole founding document necessary for registration. It should be accompanied with notarised copy of Minutes of the founders' meeting confirming founders' decision to establish the company, whereas founders' signatures on the original Minutes should also be notarised. Previously, the founders were required to enter into a Founders' Agreement, which had to be submitted for registration along with the Charter and no notarization of the Minutes were required.
Requirement to supplement the registration application with an instrument (e.g. lease or sale-and-purchase agreement) evidencing company's entitlement to occupy the premises where its management is to be located (registered address) was eliminated. However, the registering authority may still demand that such document be produced for verification.
Procedure 2. Open a temporary bank account for initial capital
Time to complete: 1 day
Cost to complete: no charge or up to UAH 100
Comment: The founder is obliged to contribute 50% of its Charter Fund contribution before registration of the company. Contributions of founders may be made in cash including foreign currency as well as in kind.
Procedure 3. Transfer registration fee to the Registry's account
Time to complete: 1 day
Cost to complete: UAH 1-7 (bank's charge)
Procedure 4. Register at the Registration Office
Time to complete: 11 days
Cost to complete: UAH 170
Comment: Documents for registration are:
(1) two copies of the Charter,
(2) Minutes of founders' meeting,
(3) application form (Registration Card),
(4) bank document evidencing payment of registration fee.
The registering authority (State Registrar) issues a Certificate of Registration, being company's incorporation document. According to the Law of Ukraine "On the State Registration of the Legal Persons and Private Persons - Entrepreneurs" No. 755-IV, dated May 15, 2003, State Registrar should perform all due registrations with the State Statistics Committee, State Social Funds and Tax Authorities on behalf of the newly registered company. However, according to existing practice, State Registrars do not perform the registration with the State Statistics Committee on behalf of the company. Such registration is usually performed by the company itself.
So far, with the implementation of the one-stop shop (one window) principle, registration with Pension Fund, Employment Fund, Social Insurance Fund, Industrial Accidents Fund and the Tax Authority (except for VAT registration) is done at the Registration Office. Directed by the President (Direction No. 1-1/444 of June 1st, 2005) and the Prime-Minister (Direction No. 28479/1/1-05 of June 2nd, 2005) of Ukraine, on August 8th, 2005, the Cabinet of Ministers issued Resolution 'On Top-Priority Measures on Expediting Revision of Regulations and Enhancing Registration and Authorisation Procedure' No. 321-р. This Resolution greatly facilitated implementation of 'one-window' registration.
Pursuant to Order of the State Tax Administration of Ukraine 'On Amending Instruction on the Procedure for Keeping Record of Taxpayers' dated August 8th, 2005, No. 317 stand-alone tax registration was abandoned and brought to the 'window'.
Since July 1st, 2005, companies do not need to independently register with local Employment Centers as payers of social insurance contributions (Letter of the State Employment Center of the Ministry of Labour and Social Policy of Ukraine 'On Issues of Introduction of 'One-Window' dated July 17th, 2005, No. DC-09-4408/0/6-05). Such registration was brought to the 'window'.
Procedure 5. Register at the State Statistics Committee
Time to complete: 1 day
Cost to complete: UAH 27
Comment: This is independently of the fact that the Registry has already filed some information with the Statistics office.
Procedure 6. Register for Profit Tax and VAT at the State Tax Authority, get a VAT number
Time to complete: 10 days (2 days for Profit Tax, 10 days for VAT)
Cost to complete: UAH 17
Comment: Companies which have annual turnover of up to UAH 1,000,000 are eligible for registration as a 6% or 10% Consolidated Tax Payer. 10% Consolidated Tax Payer shall not register as a VAT Payer.
Procedure 7. Approval of Ministry of Internal Affairs to prepare a company seal
Time to complete: 5 business days officially, 3 days for expedite service
Cost to complete: UAH 98 for regular procedure, UAH 148 for expedite procedure
Procedure 8. Prepare a seal
Time to complete: 2 days
Cost to complete: UAH 60-180, depending on the complexity of a seal
Procedure 9. Open a permanent bank account
Time to complete: 1 day
Cost to complete: bank's charge or no charge
Comment: The bank also notifies the tax inspection of the opening of a permanent bank account.
Procedure 10. Notify the District Tax Inspectorate of the opening of the permanent bank account
Time to complete: 2 days
Cost to complete: no charge
FORMS OF BUSINESS ORGANISATION
1. Joint-stock companies
2. Limited-liability companies
3. Joint ventures
Foreign investors may operate as joint-stock companies, limited-liability companies or joint ventures, or engage in joint activity without establishment of a legal entity. Joint-stock companies and limited-liability companies are the most popular form of business organisation.
The local banking market remains underdeveloped, but regulations have been tightened recently and access to credit for firms and individuals is improving.
TAXATION
Corporate tax
Main rate: 25%
Resident companies are taxed on worldwide income; non-resident companies are taxed on Ukrainian-source income only. Companies established under Ukrainian law are considered to be resident for tax purposes. Tax is charged at a rate of 25%. A dividend tax is payable when dividends are distributed, and this is creditable against corporate income tax. Dividends paid between resident companies are therefore effectively not taxed. Special rules apply to the computation of profits of banks and insurers. The Resolution of the Cabinet of Ministers #913, dated September 14th 2005, proposed to reduce the rate of corporate income tax to 23% in 2007, and then by 1% each year until it reaches 20%.
Individual tax
Flat rate of 13%
Resident individuals are taxed on their worldwide income; non-residents pay tax on Ukrainian-source income only. A person who has permanent residence in Ukraine is considered to be resident for tax purposes, and if the person has permanent residence in more than one country, the centre of vital interests is considered to be the place of residence. Where the person does not have permanent residence in any country, presence in Ukraine for 183 days in a tax year determines tax residence. Tax is charged at a flat rate of 13%, which is levied by withholding from dividends from resident companies and some other income. Tax on business income of individuals is collected by self-assessment.
Capital gains
Gains are taxed as income
Capital gains of companies are taxed as income. Capital gains of individuals from shares and securities are generally taxed by withholding at 13%. Gains from the sale of Ukrainian state securities are exempt. Capital gains of individuals in respect of immovable property are exempt from income tax until January 1st 2006.
Starting from January 1st 2006, gains of individuals on immovable property that was acquired after January 1st 2004 are reduced by 10% for each year that the property was held, apart from the first year, and will be taxed at a rate of 13%.
Gains by individuals on immovable property with an area of less than 100 sq metres, that was acquired before January 1st 2004, is taxed at a rate of 1%. However, if the area of immovable property is greater than 100 sq metres, the gain is taxed at a rate of 5%.
Indirect tax
VAT standard rate: 20%
Value-added tax (VAT) applies to most transactions at the standard rate of 20%. Registration is compulsory for businesses with annual turnover above UAH 300,000. Exports of goods are zero-rated. Exemptions include educational and insurance services, the sale of land, the sale of residential premises (apart from sales in the primary market), certain baby foods, healthcare and some medicines, supply (subscription) of magazines and books, transportation of passengers and goods via transit through the territory and ports of Ukraine and services rendered outside of Ukraine. Certain legal, consulting and marketing services and transfers of intellectual property, provided from Ukraine to non-residents, are also exempt. A reverse charge applies to certain services supplied by non-residents. There is a proposal to reduce the VAT standard rate to 19% in 2007 and 18% in 2008.
Tax administration and compliance
Tax year: Corporations: calendar year; Individuals: calendar year
Companies make quarterly advance payments of tax based on simplified provisional returns, and a final tax payment is due on February 1st following the year-end. A final self-assessment tax return is due within 40 days of the end of the tax year. Employment income of individuals is taxed by withholding. Individuals with business income are required to make quarterly prepayments of tax, each based on 25% of the liability for the previous year. Individuals earning business or other income not subject to deduction of tax at source should file a tax return by April 1st following the tax year-end, and the final tax payment is based on information in the return.
Additional tax information
Withholding taxes: Dividends, Interest and Royalties 15%.
Tax treaties: Ukraine has concluded more than 45 tax treaties.
Dividends: Dividends paid to residential legal entities are exempt of withholding.
Revenue protection: There is no transfer-pricing legislation.
Groups: There is no provision for group taxation.
Incentives: Agricultural enterprises; innovative products.
Other taxes: Community tax, Customs and excise duties, Land tax, Natural resources tax, Tax on vehicles. |
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