Is it legal to register a legal entity at the address of a residential premise?

Taking into consideration our own experience and having analyzed the normative base, our experts prepared a comment, which is intended to help foreigners, who aim to earn money in Ukraine, to feel confident and avoid any mistakes, which could lead to negative consequences.

How does the law define term registered office?

The legislation of Ukraine determines a registered office as a factual place of business or location of an office, from which its heads conduct day-to-day management and record-keeping.

Furthermore, the law defines the concept of "tax address of a legal entity", that is, an address, the records about which are included into the Unified State Register and to which the tax authorities send letters and can carry out inspections.

Features of registration of a registered office at the address of your own residential premise:

Residential premises are intended for a residence of citizens, that is, an owner, members of his or her family and other persons.

Use and provision of such premises for industrial needs are prohibited.

However, the Civil Code of Ukraine determines that an owner, at his own discretion, possesses, uses and disposes of his property and can take any actions regarding it, which do not contravene the law, in particular, to use his or her property for business activity.

Also worth noting is that in compliance with the State construction standards on the ground, first and second floors of residential buildings one may place premises for conducting business.

Regarding prohibition of registration of a registered office in a rented residential premise:

If a person is going to rent a residential premise for conducting business activity, it will directly violate the law, in particular, the norm of Civil Code of Ukraine, which states that a tenant can use a residential premise only with the intention of living in it. The same norm is for legal entities: in the case of renting a residential premise by them, it can be used only for living of individuals in it.

Options for solving a situation

The law stipulates that a head, a person having a power of attorney, or a person specified in constitutional document, who can represent a legal entity or must carry out business activity, must be present at the address of a registered office.

Pursuant to abovementioned, if you have a partner (for instance, a legal company), you can register a business entity at its office address in case of agreement.

Moreover, practice shows that tax authorities can differently interpret norm of the law regarding residential premises, which are intended for the residence of citizens, that is, an owner, members of his or her family and other persons, stating that a registration of a legal entity at this address is a violation of legislation.

One of the consequence of this may be deprivation of VAT payer status. Such actions of tax authorities can be litigated, however, the process may last for many months, which will negatively affect your financial statements.

Based on this, there are the following options for solving the situation:

1) Rent an office and register a company at this address;
2) registration in own residential premise (it should be kept in mind that although the law does not prohibit it, practice shows that there may be some misunderstandings with the public authorities, as we wrote above);
3) search for partners, who can provide legal services to the business during the initial stages, in which the address will also be provided. The option is most optimal, when the company's financial holdings are not so large in order to rent its own office.

Important! Presently, many companies offer such an option as the "mass registration address". A disadvantage of the service is, first of all, if you get an official correspondence at the address, you will not know about it, which can cause negative consequences in the future, because public authorities (for instance, State Fiscal service of Ukraine, court etc.) send letters at the legal address.

4) Acquisition of your own office premise.

Conclusion

Consequently, based on the analysis of legislation and practice, we found that although registration at the address of own residential premises is not a direct violation of the law, in practice, tax authorities may apply certain sanctions on the basis of the norms of the Housing Code, which states that such premises are intended for citizens living. We also found that registration of a company at the address of a rented residential premise is strictly prohibited.

It should be noted that the issue requires a professional approach and analysis of the regulatory framework, so we advise you to study the requirements of the legislation by yourself or entrust this matter to professionals!

For additional information, please contact our lawyers by phone or through other forms of communication.