Subsidiaries in Ukraine

Ukraine is emerging as an economic force but is a middle-income country. The country is in eastern Europe and has mixed income (income is generated via agriculture and services). Hence, the ecosystem has different industries, and you can register a subsidiary in Ukraine in any of these industries. 

The country has an annual GDP of $200 billion and is ranked 112th for GDP per capita worldwide. The service sector contributes to 60% of the GDP. Hence, services are the most lucrative sector if you want to start a subsidiary in Ukraine. Some significant industries doing well in Ukraine are electric power, food processing, chemicals, etc. 

Ukraine is surrounded by European countries like Belarus, Hungary, and Slovakia. So, you can serve all these countries with a subsidiary business in Ukraine.

Businesses can quickly expand in Ukraine by utilizing the growing infrastructure and skilled workforce. Creating a subsidiary system in Ukraine is an ideal way to enter the country and leverage these opportunities. 

Continue reading to understand how to expand your business effectively by opening a subsidiary in Ukraine. 

What are the Types of Subsidiaries in Ukraine?

There are different types of subsidiary businesses in Ukraine that you can set up, some of which are discussed below in detail:

Limited liability company

• In limited liability companies in Ukraine, the shareholder’s personal assets are protected from any business liabilities. 
• An LLC in Ukraine must have at least one shareholder, while it can have a maximum of 100 shareholders. 
• An LLC may have one or more directors. However, if the director is a foreign individual, they must obtain work and residence permits. 
• The shares of a limited liability company can be freely transferred as per the priority rights that are a part of the company charter. 
• The share capital of the limited liability companies in Ukraine is divided into parts instead of shares, and the members own a part of the company.
• It takes one or two days to set up a limited liability company. 

Joint stock company

• A joint stock company in Ukraine can issue its shares to the public. The company must register these shares with the National Securities and Exchange Commission. 
• A joint stock company can be a public or a private limited liability company based on the shareholding pattern. 
• A joint stock company must obtain registration to issue shares with the Securities Commission. 
• The Government regulates these companies, and several clauses that govern a JSC are a part of Ukrainian law. 
• In these companies, the shareholders are liable to the company’s commitments only to the extent of the money they bring in. 
• There are no limits on the maximum number of shareholders for a joint stock company in Ukraine. 
• The minimum amount you must bring to incorporate a joint stock company equals the minimum salaries of 1250 people.
• A joint stock company issues both ordinary and privileged shares. However, privileged shares cannot exceed 25% of the total shares. 

Joint venture

• With Ukraine’s focus shifting towards foreign investments, joint ventures have become a popular form of subsidiary business in Ukraine. 
• A joint venture in Ukraine usually happens between two companies trying to serve a common purpose and achieve a common goal. 
• In the case of a joint venture, companies can choose not to form a legal entity. 
• In Ukraine, joint ventures are created for a limited and an unlimited time. However, all the joint venture partners are liable for the company’s monetary commitments. 
• If a joint venture in Ukraine has a foreign investor, you must register the person with the local state authorities. 

How to Set Up a Subsidiary in Ukraine?

Let’s look at a few steps to establish a subsidiary business in Ukraine:

Step 1: Choose a company profile

• Before registering the company, you must decide on a company profile. 
• Once the profile is decided, you must draft an LLC charter (Memorandum and Articles of Association or Company Constitution). Alternatively, you can use the model charter accepted by the Cabinet of Ministers in Ukraine. 

Step 2: Hold a founder meeting

• You must meet with all the founders to decide on the incorporation of your company. You must also get the charter approved and appoint directors to complete the registration process.
• Once the founders approve the charter, the shareholders must sign it and get it certified by a notary.  

Step 3: Register the company

• Fill in the standard application form approved by the Ministry of Justice in Ukraine and draft an application for registering the company.
• Once you have all the pre-registration documents, you must file them with the Companies Registrar. 
• The Registrar then issues an application filing number to the representative and a receipt stating the list of filed documents. 
• You can use the application number to check your registration status online.

Step 4: Registration confirmation

• Once the company is registered, you must obtain the extract (company profile) from the Registrar. The extract contains the approved company profile, confirming the company’s registration.
• The Registrar notifies the tax authorities and the pension fund about the company’s registration. 
• Following the company’s registration, you can review all details related to the registration at https://usr.minjust.gov.ua/ua/freesearch.

Step 5: Final formalities

• Check if all the information on the registration files and company register is mentioned correctly. 
• Also, you must include the information asked by state bodies, like license information, in the registration file.

Benefits of Setting Up a Ukraine Subsidiary

There are several benefits to setting up a subsidiary business in Ukraine, which include: 

• In Ukraine, the corporate tax rate is 18%. The CIT is low compared to other European countries allowing a subsidiary business in Ukraine to retain more earnings. 
• You need significantly fewer documents if you register a subsidiary in Ukraine. Hence, incorporating a subsidiary in Ukraine is hassle-free.
• The country shares its borders with countries like Hungary and Slovakia. Hence, a subsidiary business in Ukraine allows you to expand your operations to these countries. 
• The workforce in Ukraine is well-educated, and the business environment is quite favorable for a subsidiary business. 
• The same rules apply to other Ukrainian businesses as a Ukraine subsidiary; hence, subsidiary employees have the same rights as employees of other companies.
• Ukraine is at 64th rank out of 190 economies in terms of the ease of doing business index. Hence, setting up a subsidiary business in Ukraine is relatively easy. 

Documents to Prepare When Opening a Subsidiary in Ukraine

You must submit the documents listed below when registering your subsidiary business in Ukraine.

• Registration application
• The founders’ decision to incorporate the company in Ukraine
• The decision to go with the simplified taxation system if the foreign company has less than a 25% stake in the company
• Company charter or the decision to use the model charter
• If necessary, an application of voluntary registration to VAT authorities
• The extract from the Company Registry of the parent company stating the business’s registered address in the parent country, along with the details of the shareholders.
• A document showcasing the shareholders’ right to incorporate the company
• Passports and tax certificates of the foreign founders

Most documents must be translated into Ukrainian by an official translator who provides corporate translation services. 

What Business Forms can Ukraine Subsidiaries Take?

Ukraine is a business-friendly nation, so it supports different forms of business. Therefore, a subsidiary business in Ukraine can take up different forms. You can incorporate a wholly or partially owned subsidiary business in Ukraine. 

Incorporating a limited liability company is quite popular in Ukraine. These companies do not have a minimum share capital requirement and are straightforward to incorporate. The best thing about an LLC is that the shareholders’ personal assets cannot be used to settle the company’s liabilities. It takes a maximum of 2 days to get an LLC registered in Ukraine.

Ukraine Subsidiary Laws

It is crucial to follow all applicable rules and regulations for a Ukraine subsidiary to run properly and prevent hefty fines. These guidelines are meant to maintain order in Ukraine’s commercial environment and safeguard the employees’ rights working for different Ukrainian subsidiaries.

You must submit the certificate of incorporation for the parent business and obtain the registration certificate for the subsidiary. You must also acquire the administrative fee slip to demonstrate that you have made all the payments. You must open a bank account to carry out all business-related financial transactions.

Post-Incorporation Compliance

Once the subsidiary business in Ukraine is registered,  you must perform the below steps for compliance for a foreign subsidiary in Ukraine. 

• Submit a copy of your company’s extract to specialized seal-producing companies and obtain a company seal. 
• File application Form 1 to register the company with the tax authorities. You need to contact the tax authorities of the region where you are incorporating your subsidiary business in Ukraine. 
• All employees must be registered with the social security system. If onboarding new employees, you must inform these authorities at least one day in advance. 
• You must open a bank account in Ukraine by submitting documents that showcase the right of the company’s representative to complete the activity. 
• Hire a professional accounting company to take care of the accounting process. You also need to create an accounting policy stating the accounting standards the company will use. 

Taxes on Subsidiaries in Ukraine

A subsidiary business in Ukraine is considered at par with any other business. Hence, the corporate tax rate remains the same for all companies, irrespective of their shareholding pattern. The standard corporate tax rate in Ukraine stands at 18%. 

If non-resident companies are earning revenue from other countries, they must pay a withholding tax of 15% if the country doesn’t have a double tax treaty with Ukraine. 

Tax Incentives for Businesses Setting up a Subsidiary in Ukraine

Ukraine invites foreign investment by providing tax incentives to subsidiary businesses in Ukraine. The country has 74 effective double taxation treaties with different countries, so you might not have to pay double taxes on the income from these countries. 

Also, Ukraine has provisioned a simplified tax system for companies based on their nature of activities and income level. These measures promote the growth of small and medium-sized subsidiary businesses in Ukraine. 

Other Important Considerations

It takes time to create a subsidiary business in Ukraine. You must take a few weeks off to concentrate on growing the company and fulfilling all legal requirements. If your parent firm keeps you busy, you can assign the responsibility to a different business executive or collaborate with them.

You must also follow a budget to finish setting up a subsidiary company in Ukraine. Make a budget before starting a foreign subsidiary in Ukraine since it will help you stay in control.

How Can Multiplier’s Employer of Record Help You Hire and Expand in Ukraine?

Planning the opening of a local or international firm requires time and money. Creating a subsidiary online requires assistance adhering to all of Ukraine’s pertinent labor laws and local ordinances.

Multiplier helps your business overcome growth obstacles and handles all formalities in entering a new market. Our expert team is familiar with domestic and foreign laws, ensuring that all labor rules and norms in Ukraine will be followed correctly. A PEO like Multiplier can help you swiftly assemble teams worldwide and leverage new market opportunities.