Company Formation in Ukraine

Ukraine is a country in Eastern Europe. It is the second-largest country in Europe after Russia, which borders to the east and north-east.

Ukraine is a developing country ranking 74th in the Human Development Index. It is the poorest country in Europe alongside Moldova, suffering from a very high poverty rate as well as severe corruption. However, because of its extensive fertile farmlands, Ukraine is one of the largest grain exporters in the world. It also maintains the third-largest military in Europe after Russia and France. Ukraine is a unitary republic under a semi-presidential system with separate powers: legislative, executive, and judicial branches. The country is a member of the United Nations, the Council of Europe, the OSCE, the GUAM organization, the Lublin Triangle, and is one of the founding states of the CIS, even though it never became a member of the organization.

The company registration procedure is carried out by the Department of State Registration of Ukraine. All companies and sole proprietors during the legal procedure for business set-up are signed into the State register of legal entities and companies of Ukraine. Details about every change and amendment to company information are also stored and saved in the register. Your company registration number is also assigned during the registration process. Information and all data from the Business Register of Ukraine are available on the Ministry of Justice of Ukraine’s website. Bank account opening is the final stage of the Ukraine company incorporation process.

Types of business entities in Ukraine

 Establishing a Ukrainian TOV - Limited Liability Company. In Ukraine, the limited liability company is a form of business established by small businesses as the maximum number of shareholders cannot exceed 10 and the provided minimum share capital consists of a minimum of 100 minimum salaries at the moment of registration. There is no restriction on the amount of authorized share capital.

 At least half of this capital must be paid at registration and the other half in a maximum of one year after the registration. The capital of the TOV is divided into shares that are transferable only with the full consent of the company members. The management of the Ukrainian TOV is assured by the general meeting of participants, the Board of Directors, and a General Director appointed by the members of the Board of Directors.

Another form of Ukrainian company is the Additional Limited Liability Company. The founders of a Ukrainian Additional Limited Liability Company must deliver a contribution of at least 100 minimum salaries and their personal assets can be used if necessary to cover the outstanding liabilities. 

 A Ukrainian PrAT- private joint-stock company or PuAT-public joint-stock companies are forms of business especially designed for medium and large businesses. Both of these entities must have a share capital of at least 1250 salaries at the moment of registration and the main difference is that the private joint-stock company cannot freely trade its shares to the public while the PuAT-public joint-stock company has its shares freely transferable and can be listed on a stock exchange. The main bodies which govern the joint-stock companies are the general assembly, the executive body, and a supervision body. The company can be incorporated for an indefinite period, and it is allowed to operate all types of business activities, as long as this is lawful.  Shareholder meetings are expected to take place at least once a year. When a joint-stock company has more than ten shareholders, it is mandatory to establish a Supervisory Board.

In General, in Partnerships created in Ukraine, all the members are united under the same economic purposes and share the same responsibilities and liabilities for the company’s debts.

 A Limited Partnership incorporated in Ukraine is formed by at least one general partner with unlimited liabilities for the company’s debts and one silent partner with responsibilities limited by their contribution to the capital.

 The choice between the available business forms depends on the available capital, the number of investors, and the level of protection against liability that they wish to have during the course of running the business. Other considerations might include the complexities of the accounting and reporting requirements, which are different for large taxpayers compared to small ones.

How much time is needed to set up a company in Ukraine?

Ukraine company registration process takes from 2 days up to 12 days (if VAT registration is needed). After our initial consultation, we will tell you the exact time it will take to finalize all the procedures necessary for your specific business. In most cases, it takes more time to receive required documents than actually, the company registration procedure takes.

The time needed to complete this process depends on many factors such as corporate and tax structure, required licenses, shareholders, beneficiaries, etc. Usually, it takes up to 2 days to open a bank account in Ukraine. But if one of the beneficiaries of the company is a foreign legal entity, it can take up to 5 days for the bank to check and to prove beneficiary owners.

In case the company is established by a natural person (not a corporation) that does have a Ukrainian tax ID, we can process the registration of the company in Kyiv and open a bank account within 2 business days. Anyway, we always inform our clients about the time required to complete all the stages.

How to set up a company in Ukraine?

If you have decided to open a business in Ukraine, this chapter will be very useful for you. To begin the company formation process, the following documents shall be prepared and submitted to the state registrar:

• application for company registration;
• articles of association (must be signed by each shareholder and certified by Ukrainian notary);
• minutes declaring the decision to establish a company (protocol)
• power of attorney (this is required from every shareholder);
• information about ultimate beneficiary owners (UBO);

The company registration procedure is carried out by the Department of State Registration of Ukraine. All companies and sole proprietors during the legal procedure for business set-up are signed into the State register of legal entities and companies of Ukraine. Details about every change and amendment to company information are also stored and saved in the register. Your company’s registration number is also assigned during the registration process. Information and all data from the Business Register of Ukraine are available on the Ministry of Justice of Ukraine’s website. Bank account opening is the final stage of the Ukraine company incorporation process.

All individuals (regardless of citizenship) to be registered as a company director, shareholder, or founder must obtain an identification number. But a Tax ID is not required to name a beneficiary of a corporation.

What is the minimum tax per year to keep the Ukrainian company active?

If your Ukrainian company doesn’t conduct any official business in a given year, there is no need to file or pay taxes. Unlike in many other countries, there are no minimum taxes or fees that a company must pay to avoid dissolution by the Ministry of Justice. However, if your business has not submitted any financial statements within 3 years, this can be grounds to initiate company dissolution (though even then this almost never happens).

According to the World Bank Doing business report, in 2020 Ukraine is ranked №61 on ease of starting a business.

We hope that this information was useful for you, and we hope that your business in this country will be successful, prosperous, and pleasant.

Company taxation in Ukraine

 Once the company is incorporated and starts its business activities it will be subject to its worldwide income, as a locally registered (resident) company. A number of new rules, which are likely to enter into force in 2022, will make it possible for foreign companies with their effective place of management in the country to choose to become tax residents.

The taxes for companies that were in force at the time this article was written are the following:

• - 18%: the corporate income tax in Ukraine, a relatively low rate compared to the ones applicable in other European countries;
• - 15%: the withholding tax on dividend payments made by nonresidents; dividends that are received by a domestic company from another Ukrainian company are not subject to tax;
• - 20%; the standard value-added tax in Ukraine, with other lower rates of 14% and 7% and a 0% rate for certain types of goods or services;
• - 22%: the unified social security contribution that is paid on the salary of an employee.

Economy overview in Ukraine

Situated in a very advantageous area in Eastern Europe, bordered by the Black Sea, Ukraine is offering great opportunities for investors who want to start a new company. If you are interested in company formation in Ukraine, you should know that the workforce is well trained (for example, Ukraine is included in the top ten locations in the world regarding IT specialists).