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Doing business in Ukraine
02 March 2021 09:50

 Ways of entering the Ukrainian market by foreign investors

  1. Direct sales - the simplest option to enter the Ukrainian market. A foreign legal entity which sells goods or services to customers (or distributors) in Ukraine directly from abroad would not be subject to Ukrainian taxes on income. Depending on the agreed terms of delivery, Ukrainian customers (or distributors) would be responsible for customs.
  2. Agency and commission arrangements - another comfortable alternative for structuring business in Ukraine. From a legal standpoint, such arrangements allow a foreign company to carry out commercial activities in Ukraine without setting-up a corporate entity, employing personnel, complying with local accounting and reporting rules, as well as bearing the associated costs and risks. From a tax perspective, agency and commission contracts may trigger taxation in Ukraine, specifically when an agent acts exclusively on behalf of a particular foreign company, and the supply of agency or commission services does not constitute its core business (as may be the case for securities, insurance brokers, etc.). Agency and commission contracts for activities of a preparatory or auxiliary nature (such as market research and analysis) should not generally create a permanent establishment of the foreign enterprise, and hence its profits would be taxed only in the country of tax residence.
  3. Joint venture with a Ukrainian partner - can take the form of a simple partnership agreement, a joint production, or a joint co-operation agreement with a Ukrainian partner(s)). Investment of this kind may be subject to state guarantees and should be registered with local state authorities of Ukraine.
  4. Registration of the representative office (commercial and non-commercial) - A representative office (“RO”) is not a legal entity but a subdivision of a foreign company registered in Ukraine. Its head office assumes all rights and obligations of the RO and bears the liability for its actions. A RO which carries out commercial activities in Ukraine is deemed to be a commercial RO and triggers a permanent establishment of the foreign company in Ukraine for tax purposes. This, in turn, implies that if the relevant double taxation treaty is in place between Ukraine and the jurisdiction of the foreign company’s tax residence, only a portion of the company’s profits attributable to the RO will be taxed in Ukraine. A RO which undertakes activities of a preparatory or auxiliary nature usually does not create a permanent establishment and is not subject to corporate income taxes in Ukraine. Generally, a RO would be subject to registration in the Ministry of Economic Development and Trade, the tax authorities, the State Statistics Service, and the State Pension Fund. A foreign bank’s RO shall be registered with the National Bank of Ukraine (“NBU”). However, the list of registration authorities may be expanded due to specific industry requirements. Registration takes up to 30-60 days following submission of all necessary documents and payment of the state duties. The preparation of documents may take additional time as in many cases they would require approval, notarization, and/or legalization.
  5. Registration of the Ukrainian subsidiary. A Ukrainian subsidiary controlled by foreign companies or nationals generally enjoys the same legal treatment as legal entities without foreign participation. Such company, with minor limitations justified by national interests, may enter into agreements, assume legal obligations, acquire property, as well as sue and be sued in its own name. It may be engaged in any commercial activity envisaged in its charter (articles of incorporation).


Licenses are required for the following business:

  1. financial services (including insurance);
  2. medical and veterinarian practice;
  3. tourism services;
  4. cargo, passenger and baggage transportation;
  5. educational activity;
  6. transportation of oil and petroleum products via long-distance pipelines, activities in the natural gas market, which are licensed considering all the specifics denoted in the Law of Ukraine “On natural gas market”.

Licensing procedures for some business activities are governed by special laws; such business activities include the following:

  1. banking;
  2. professional stock market activity;
  3. business activities in telecommunications, TV and radio broadcasting;
  4. manufacturing and sale of ethanol, cognac and fruit spirits, alcohol beverages and tobacco;
  5. construction activity (for complex objects);
  6. certain types of cross-border business activity; and
  7. production, import and sale of pharmaceuticals etc.

The Ukrainian legislation enables companies to lodge documents for obtaining a license via electronic means.

The licensing authority is prohibited to require documents other than those prescribed by legal acts and original copies of documents except for those prepared by the applicant. A license may be issued both in electronic and hard copy. In addition, information about a license should also be included into the Unified State Register, which is open to public.

Unless the special law provides otherwise, in order to obtain a license a standard application and other required documents are to be submitted to the relevant licensing authority, which will normally take a decision within 10 days. Issuing a license is subject to a state duty (i.e., generally amounting to one minimum monthly salary (UAH 3200 as of January 2017).

A license should be obtained for each particular type of licensed activity. Transfer of license is prohibited. A license terminates when a business winds up, or in case it is cancelled by the issuing authority as a result of violation of the licensing conditions.

Carrying out a licensed activity without an appropriate license is subject to administrative sanctions.

In addition to the above, starting an investment project may require special permits and/or authorizations (e.g., land allocation approvals, construction permits, and permits for outdoor advertisement). For some types of activities, a declaration to certify the business’ compliance with licensing requirements submitted to a responsible state authority should suffice to start operating the business. The principle of “implied consent” (when a business is deemed to have obtained a license after the deadline for deliberations of the relevant state authority has lapsed) also applies in Ukraine.


In Ukraine, taxes and statutory charges are levied in accordance with the Tax Code of Ukraine (“TCU”) (entered into force as of 1 January 2011, except for Chapter “Corporate Income Tax” effective as of 1 April 2011, as subsequently amended).

The main taxes are:

  1. corporate income tax (“CIT”) (18%) In Ukraine, the CIT administration is centralized, no additional corporate profits taxes are imposed at regional or local levels. The taxable base for CIT purposes is calculated based on the taxpayer’s financial statements subject to adjustments and limitations provided by the TCU.;
  2. value added tax (“VAT”) (20%). In general terms, VAT is levied on the supply of goods and services in the customs territory of Ukraine and on the importation of goods and services to Ukraine at a rate of 20%. VAT at a rate of 7% applies to the import and subsequent supply of the list of pharmaceuticals specified by the Cabinet of Ministers of Ukraine. Export supplies of goods and related services as well as other designated types of supply are zero-rated. Supplies of certain goods and services (e.g., charitable aid, financial services, etc.) are exempt from or not subject to VAT. From 1 January 2013 till 1 January 2023, supply of software products is VAT exempt.;
  3. personal income tax (“PIT”) (18%). In Ukraine, individuals are subject to PIT, regardless of whether they are tax residents in Ukraine or not. Tax resident individuals are taxed on their worldwide income, while non-residents are taxed on their Ukraine-sourced income only.;
  4. property tax. Property tax includes real estate tax, transport tax, land tax. The real estate rate is established by municipal authorities as a percentage of a minimum monthly salary established on 1 January of the tax year per 1 sq.m. If the property is owned by an individual (both resident and non-resident of Ukraine) and its size exceeds 60 sq.m (in case of an apartment) or 120 sq.m (in case of a house), each exceeding sq. m. will be subject to the real estate tax at a rate up to 1,5% of a minimum monthly salary (this will also be the case of the individual holding more than one property item the total size of which exceeds 180 sq.m). In addition, owners of apartments exceeding 300 sq.m or houses exceeding 500 sq.m. should pay additionally UAH 25,000 on an annual basis. In addition to real estate tax, there are also certain statutory charges levied on the sale/ purchase of real estate (state duty and contribution to the State Pension Fund, each at 1% of the contract price). The transport tax is levied in respect of cars with the market value exceeding 375 minimum monthly salaries established on 1 January of the tax year which are less than 5 years old held by individuals (both residents and non-residents of Ukraine). The amount of tax is UAH 25,000 per each car. The land tax is levied in respect of land plots owned or used by individuals or legal entities in the form of land tax or lease payments. The taxable base is the registered value of the land or the size of the land plot if the valuation of the respective land plot was not valuated. The tax rate depends on the location and use of the land plot and may vary. Usually it does not exceed 5% from the value of the land plot.
  5. unified social security charge. In addition to PIT, remuneration, and similar payments made to employees (either Ukrainian or foreign nationals) through payroll of a Ukrainian entity or a local representative office are subject to the unified social security charge (“USSC”), which is due from the employer. Only foreign individuals working in a foreign company’s representative office or in the Ukrainian company are not subject to USSC. The taxable base for USSC is capped by 25 monthly minimum subsistence; as of 1 December 2016, the cap is UAH 40,000. USSC is payable at the time when the remuneration is paid at a rate of 22% of the gross income/cap.
  6. withholding tax (“WHT”) (15%). Any Ukraine-sourced income of a non-resident company is subject to a withholding tax (“WHT”) in Ukraine at a rate of 15%. Such income includes, inter alia, dividends, interest, royalties, capital gains, lease payments, brokerage and agency commission, etc. Income received as a consideration for goods/services/works provided to a resident is mostly WHT-exempt. Different WHT rates apply to certain types of non-residents’ income (e.g., freight, insurance premiums paid abroad and advertising fees). Since 2004 Ukraine and the UAE have an Agreement between the Government of Ukraine and the Government of the United Arab Emirates for the Avoidance of Double Taxation in force.

Chart of withholding tax rates for the UAE residents

Withholding tax rates (WHT)

Dividends, %

Interest, %

Royalties, %

5 (10)/15



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Property rights


In Ukraine, different regulations will apply to land relations depending on the type of land in question. The land is classified according to its designated purpose, which may be residential, industrial, recreational or agricultural. Each category has specific legal status (regime).

The effective land laws and regulations stipulate a number of restrictions for foreign entities to acquire title to land in Ukraine. For instance, foreign companies and individuals are prohibited from owning agricultural land.

Non-agricultural land may be acquired by foreign persons only within inhabited areas, or outside inhabited areas when the land is located under real estate owned by such foreigners. In urban areas foreign entities may acquire land for purposes of acquisition or construction of business-related facilities. These rules also apply to joint ventures with foreign persons or entities.

In case of purchase of state-owned or municipal land, a foreign entity would be required to register a commercial representative office in Ukraine. Furthermore, the approval of the Parliament of Ukraine for state-owned land or the Cabinet of Ministers of Ukraine for municipal land will be required in such a case.

Until 1 January 2018, share capital contribution in kind may not be made in the form of rights to agricultural land. On the same date, the moratorium on sale of agricultural land in Ukraine expires.

Unlike in the case of ownership, foreign entities may hold a lease of both agricultural and nonagricultural land without significant limitations. Lease rights to land can be granted for up to 50 years. The minimum period of 7 years is set for the lease of agricultural land for the purposes of manufacturing agricultural goods, farming and holding personal agricultural estate.


Real estate (other than land)

Unlike in the case of land, foreign entities are generally allowed to acquire real estate other than land (buildings, installations) situated in Ukraine. The rights to real estate (e.g., ownership), as well as any encumbrances related to such property (e.g., mortgage), are subject to state registration.


Intellectual property

The Ukrainian system of intellectual property (“IP”) safeguards combines both national (laws and by-laws) and international standards (more than 15 international treaties on IP protection to which Ukraine is a party). To the extent that effective international treaties conflict with the Ukrainian laws, provisions of such treaties shall prevail.

The Ukrainian copyright laws protect literary, dramatic, musical works, works of architecture, audio-visual and photographic works, computer software and databases, as well as other literary, artistic and scientific works from illegal copying, regardless of whether such works exist in a written or oral form.

Under the Ukrainian trademark law, legal protection is granted to any mark for goods or services not contravening the public order, principles of humanity and morals, regardless of whether such mark was registered in Ukraine or in another jurisdiction by virtue of international trademark protection treaties to which Ukraine is a party.

In Ukraine, rights to inventions, utility models and industrial design are subject to patent registration with the State Intellectual Property Service. A patent is a protective document confirming priority, authorship and title to invention, utility model or industrial design.

Currency regulations

Ukraine has strict administratively burdensome currency control rules. In recent years, attempts to lift excessive state regulation have been made in this area. For instance, according to the latest amendments, it is allowed for residents to restructure the debt by transferring its principal amount to the authorized capital as an additional contribution made by non-residents. As well as settlements between residents and non-residents of Ukraine in trade transactions are allowed in both hard currency and UAH.

Settlements under export/import of goods/works/services contracts should be made within the period not exceeding 120 calendar days (instead of a standard term of 180 days); otherwise, a penalty for each day of delay will apply.

Repatriation of profits of foreign investors is guaranteed by the Law of Ukraine On the Regime of Foreign Investment. After the payment of taxes, duties, and other mandatory payments, foreign investors are guaranteed the right to the unimpeded and immediate transfer abroad of all profits and other proceeds in foreign currency legally earned as a result of their investment activity (subject to applicable currency exchange regulations).


Winding up a business in Ukraine can be made through either voluntary or forced liquidation.

Ukrainian laws stipulate several legal grounds for initiating liquidation procedures for a business, inter alia:

  1. in case of expiration of the period for which it was set up or after achieving the objectives it was created for;
  2. by virtue of a decision of the highest decision-making body of the company; or
  3. based on a court judgment.

The voluntary liquidation may take from 6 months to 2 years to complete.

Potentially insolvent company should owe undisputable debts of no less than UAH 510,000. 

Download Baker McKenzie’s "Conducting Business in Ukraine" brochure.

Download KPMG`s "Your Business in Ukraine Tax and Legal Guide" brochure.

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