What should a foreigner do with an LLC in Ukraine that does not operate?
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One of the most common grounds for obtaining a residence permit in Ukraine is setting up a company by a foreigner and obtaining a work permit. This gives the right to apply for a temporary residence permit. Thus, a foreigner can reside in Ukraine, each time extending the work permit and residence permit respectively.
Usually, companies that are created by foreigners solely for the purpose of obtaining a residence permit, do not operate, do not pay wages and taxes, and in most cases do not even submit reports to the tax authorities. This situation has existed for a long time, but recently the legislation of Ukraine has changed somewhat.
In this article, our lawyers will tell about the main legislative changes in this direction, and what to do to foreigners with such "zero" LLCs.
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Innovations in the law concerning foreign companies in Ukraine
In October 2022 the Law of Ukraine "On Amendments to Certain Laws of Ukraine Regarding Employment of Foreigners and Stateless Persons in Ukraine" (hereinafter - the Law) came into force.
The Law provides for important changes related to work permits for foreigners, namely:
- The provision on the requirement to set a minimum wage for the employment of foreigners is no longer valid. In other words, it is not necessary to set 10 minimum wages (UAH 67,000) to employ a foreigner in a company. Accordingly, the labor law regulations, including those on wages (part-time workweek/month, etc.) may be applied to foreigners.
- The fee for the issuance of a work permit has increased.
- The period of validity of the work permit for workers and gig-specialists is 2 years.
At the same time, the law has provided some new grounds for revoking a work permit, which in turn leads to the revocation of the temporary residence permit:
- A petition from the National Police of Ukraine, National Security Service or other state body, if the foreigner's actions violate the norms of law or contradict the interests of national security of Ukraine, protection of public order or, if necessary for public health, protection of rights and legitimate interests of citizens of Ukraine.
- In case of employer's failure to pay the unified social tax for a foreigner within two months from the date of conclusion of the employment agreement.
That is, the legislator has provided additional reasons for revoking the work permit for foreigners, coming from reasons of national security. This is logical enough under martial law.
However, along with this, the legislator apparently decided to reduce the number of non-working companies of foreigners, which did not pay taxes and were used to formally obtain a work permit and a temporary residence permit.
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What are the options for operating an LLC that does not conduct business?
Given the legislative changes, a foreigner who already has a company, a work permit, and a temporary residence permit is faced with a rather difficult decision: to organize the company and pay taxes, or to leave everything "as it is" and hope that their company will not be affected by the changes.
The second option is a bad idea, and negligence can lead to negative consequences and additional costs, since the work permit will be revoked. The foreigner will again have to go through the procedure for obtaining a work permit, a temporary residence permit, and the costs could be higher.
In addition, according to Cl. 5 part 1 of Article 42-9 of the Law of Ukraine "On Employment of Population" in case of cancellation of the work permit due to non-payment of the unified social tax within 2 months from the date of the employment agreement, the documents for work permit can be re-submitted only after one year.
Accordingly, in case of non-payment of the unified social tax, a foreigner risks to lose the work permit and the temporary residence permit for the whole year. Therefore, our lawyers advise upholding the company by paying the foreigner's salary and the unified social tax due.
The employer may determine and accrue wages in the minimum amount of UAH 6,700 (starting from 01.01.2023) or in another amount as defined in the employment agreement (contract).
In order for the employer to accrue wages, the company must have an open bank account and an open account of the foreigner in a Ukrainian bank. It is also possible for the foreigner to establish part-time work (day/week) and other work formats determined by the Labor Code of Ukraine.
In addition, the employer can use the norms of the Law of Ukraine “On the Organization of Labor Relations under Martial Law” and send the employee on unpaid leave.
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Business support services for a foreign company in Ukraine
Since the Law came into force, we warned our clients about the changes in legislation and the need to pay the unified social tax. For clients interested in staying in Ukraine we helped to:
- Set up the operation of the company;
- Pay salaries and taxes;
- Submit accounting statements.
Thus, we try to ensure that our clients do not get their work permit revoked and help with legal and accounting support for the company.
We will help to:
- Set up the company so that wages and taxes are paid on time and the client does not have to worry about the cancellation of the work permit;
- Document vacations, business trips and other reasons for the foreigner's absence;
- Open a bank account for the company and for the foreigner;
- Create a payroll project (if necessary);
- Obtain an ID code, if you do not have one;
- Obtain signature keys for submitting reports.
On a monthly and quarterly basis, we provide the following services:
- Accounting support of the company and submission of necessary reports;
- Legal support of the company;
- Payroll (payment of wages and taxes).
If the company has not filed statements for previous reporting periods, our lawyers will also help you deal with this.
The cost of business support services is as follows:
If we are talking about a dormant company, and which you do not want to close, because it is your basis for obtaining a residence permit in Ukraine, the cost of service will be from 0 (if paid for the year).
If you pay quarterly or every six months, the service fee is 0 per month.
And in case of monthly payment (for example, the first month before the start of the activity) –0 per month).
Often such a company serves as an initial stage to move to Ukraine, to settle in and have time to really start a business and earn money from your favorite business, because now is a favorable time for this. In this case we can also help you when you decide to turn your company into a working business.
If today you have a company in Ukraine that is not operating, but you do not want to lose it, as well as lose your grounds for the permit in Ukraine, don't hesitate to contact us.
We offer comfortable service packages and assistance with any other legal issues that may arise in Ukraine.
You can find out the cost of services here or from our specialists.