1. Type of the company
The recommended type of the legal entity in Ukraine is LLC – Limited Liability Company.
LLC can be established both by private person and by legal person and there are no limits for the number of members. The only restriction is that the sole shareholder of the company may not be another entity founded by one person. In this case, a nominee shareholder is involved with a share of 1%.
Overall the procedure of the incorporation of a company will take around 1 month.
2. The process of incorporation:
Following documents are required for incorporation of the LLC:
– a power of attorney (PoA)
PoA can be issued in your home country and should be certified by the notary and legalized in the embassy of Ukraine (or alternatively you need to put apostille). A hard copy should be sent to Ukraine;
– a tax number in Ukraine (if a company is incorporated by a private person)
A foreigner can incorporate a company in Ukraine and be a shareholder in case he/she is registered as Ukrainian taxpayer and has a tax number issued in Ukraine. The procedure will take up to 10 days;
– if the shareholder will be an entity (legal person) we will need an information from the national commercial registry (certified by notary and legalized) and information about shareholders (articles of association or other documents). These documents should be sent in hard copies to Ukraine where they will be translated and certified by Ukrainian notary;
– incorporation documents – articles of association (charter) and a decision on incorporation
The articles of association shall include following information: the name of the company, personal data of shareholders, address of the company, share capital (equity), spheres of business activity and other provisions. A decision on incorporation shall also define a director (CEO) of the company.
The abovementioned documents are submitted to the notary who carries out the registration.
3. Questions to be considered before the incorporation:
– the name of the company;
– the address. You can either rent a real office or rent a legal address to incorporate a company;
– the temporary director – resident of Ukraine. A foreigner cannot be a director of the company without having a work permit in Ukraine;
– the director authorities. Please be aware that the director will open a bank account and only the director will have an excess to the bank account. The director will be able to sign all contracts, official documents etc. He/she should be officially employed by the LLC and get the salary. In the articles of association, you may define the amount of payment document or contract that the director will be obliged to agree with the shareholders;
– the sum that will be funded to the equity by the shareholders.
4. Taxes and accounting
4.1. Taxes.
4.1.1. Company taxes
As a company that is established by a non-resident, you will be on the general taxation system:
- Income tax – 19%
If the income is less than $ 75 000 per year you will file the reports to tax bodies 1 time per year; if more than $ 75 000 per year – 1 time per quarter.
- VAT – 20 %.
Generally, a company is not a VAT payer, but can be registered as a VAT payer. A company with overall revenue more than $ 40 000 is obliged to register as a VAT payer.
4.1.2. Salary taxes
19,5% (18 % personal income tax + 1,5 % military tax) – are deducted from the salary;
22% (social contribution) – are paid over the salary.
At least 1 person should be hired officially and get a minimal salary (3800 UAH – around 150 USD).
4.2. Funding
When incorporating a company, it is recommended to have an understanding of how the funding will be transferred to this new company.
Usually, foreign companies are funding their branch LLCs via service providing contracts. These contracts should correspond with the tax code of Ukraine and comply with 0% VAT. You can also fund money as equity payment.
4.3. Accounting
From the day one you will be obliged to submit monthly reports about the salary of the director, so it is strongly recommended to hire an accountant from the very beginning.
Accounting rates starts from 150 USD per month.
5. Bank account
An account can be open by a temporary director. Most banks have very flexible rules on online banking. You can manage your bank account via online banking with temporary director’s access.
Please be aware that if a shareholder of the company will be an entity (legal person) you will have to reveal a real end beneficiary of the company to the bank.
