Opened for a client the subsidiary in Ukraine
A client, a natural person, applied to our company. That was a citizen of the Netherlands, an owner of an Internet-shop in one of the EU countries. The client’s project was being implemented during summer-winter 2018.
First of all, the client was interested in creation of enterprise namely in Ukraine which would be not an independent business (at least at the early stages), but perform an auxiliary function for the main business that is located in the EU.
Taking this into consideration, it was planned that the Ukrainian subdivision would be engaged in:
- IT-support of client’s website and of other information components of his business;
- performance of call-center functions.
Also an option of keeping some amount of trade through the company in Ukraine was considered.
At choosing the jurisdiction, the key factors were:
- resource saving – payment for labor in Ukraine is lower than in the EU, and with that, high quality remains (especially in part of IT);
- geographic factor – our country is situated in the close zone of reach, compared with other popular outsourcing markets (for example, India).
For that very reason, the following tasks were formed for our lawyers:
- registration of business in an optimal legal and organizational form which (business) would have tax privileges of the loсal tax law;
- obligatory having a VAT payer’s status;
- getting all the necessary migration and labor permissions for foreign management of a Ukrainian company.
What difficulties arose in the process of preparation of documents?
- since it is impossible to register an enterprise at the same time as a VAT payer and a single taxpayer, the client had to choose in what procedure the registration on each tax would be performed based on our explanations. This special feature of the Ukrainian legislation delayed significantly the completion of the project, but there are no alternative options in getting the said statuses;
- the foreign head wanted to manage the company basically remotely, with minimal presence in Ukraine. This plan could be implemented only partially (for example, getting a permission, without his personal presence, for his work as a director), because some stages required his coming to Ukraine (for example, opening a bank account).
When solving the question concerning the legal organizational form, it was decided to choose an LLC, since that form is flexible and simple enough from the point of view of legal regulation.
When choosing the system by which a Ukrainian company will be taxed, the main criteria were: sources of financing, expected number of employees and their salary. The best option was the third group of single tax.
With that, taking into consideration client’s wish, it was decided at first to provide getting the status of a VAT payer, and then to get the single tax already.
Since the management of the company was to be performed by a foreign citizen who did not plan to spend the main part of his time in Ukraine (the management was to be remote with regular trips to Ukraine), therefore the following steps were taken for legalization of his status as a director:
- inducting him as a co-founder of the Ukrainian LLC, which would allow getting permission for work for 3 years (instead of one year for ordinary workers);
- getting such permission at subdivisions of the State employment service;
- assess whether it is necessary to get a residence permit. As a result, it was decided what was needed. The matter is that being a citizen of one of the European Union countries, the future director had a right for visa-free entry in Ukraine according to the 90/180 rule (the right of staying 90 days during half a year), and the plan of his trips allowed using the advantages of such a status even without getting a residence permit).
- The last step was director’s arrival for opening a banking account (the head had to do it personally, however with our lawyer’s participation) and for getting electronic keys for submitting the tax accounting (remotely).
After opening a account, our company provided the accounting services of client’s company in Ukraine (for the period of search of a regular accountant).
What value did the client get while applying to us?
- choosing an optimal form for running business and the system of tax payment, understanding the procedure of getting a status of payer of this or that tax, which influences significantly the client’s business plans;
- explanations of the migration and labor law, which allows minimizing client’s management presence and reducing the list of permission documents;
- a possibility of support of not only legal aspects of opening business, but also carrying on the accounting/salary projects etc.
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