Immigration to Ukraine of highly qualified employees in 2021

According to Art. 4 of the Law on Immigration, a foreigner has the right to obtain an immigration permit if he is a highly qualified worker. The immigration permit is the first step in obtaining a permanent residence certificate or Ukrainian citizenship.

Immigration permits for highly qualified professionals are issued within established quotas.

In 2021, the Ministry of Economic Development, Trade and Agriculture of Ukraine approved a list of specialties in need in Ukraine and the qualification requirements for them.

To be eligible for immigration, an work candidate should meet the mandatory requirement set out in the list and, at least one additional requirement.

Such a requirement as work experience can be confirmed by one or any combination of documents, for example:

  1. the employee’s employment record book or its analogues;
  2. letters of recommendation confirming the provision of services in the relevant field;
  3. agreements on the provision of services in the relevant field;
  4. protocols of acceptance of provided services in the relevant field;
  5. other documents confirming work experience issued in the applicant’s country of residence.

The document attached to this article contains a complete list of professions and requirements for them. Here are some eligable professions as an example:

Technical manager/director – quota 500 persons

Mandatory qualification requirement:

  • confirmed work experience in the information technology industry-, and for not less than 3 years.

Additional qualification requirements:

  • higher education in a technical field of expertise;
  • income for a certain professionfor the previous calendar year to the equivalent amount of 24,000 US dollars or more;
  • certificate from Massachusetts Institute of Technology in a relevant field.

Software engineer/ Programmer (database)/ Application programmer/ System programmer – quota together with other IT specialties is 3013 persons

Mandatory qualification requirement:

  • confirmed experience in the profession in the relevant field  – for not less than 3 years.

Additional qualification requirements:

  • higher education in one of the technical areas of training: “Computer Engineering”, “Cybernetics”, “Mathematics”, “Applied Mathematics”, “Computer Science”; 
  • income for a certain profession for the previous calendar year to the equivalent amount of 24,000 US dollars or more; 
  • higher education in one of the technical areas of training: “Computer Engineering”, “Cybernetics”, “Mathematics”, “Applied Mathematics”, “Computer Science”; 
  • certificate from Massachusetts Institute of Technology in a relevant field.

Laudis Legal&Accountancy is always ready to provide qualified professional assistance and accompany you in obtaining an immigration permit. 

Compulsory notification on the ultimate beneficial owner of a legal entity in Ukraine to state registrar

On April 28, 2020 the Law of Ukraine “On Prevention and Counteraction to Legalization (Laundering) of Proceeds from Crime, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction” (hereinafter – Law № 361-IX) came into force. According to the law, legal entities were obliged to submit information about the ultimate beneficial owner to the extent specified by the Law along with the ownership structure to the state registrar within three months from the date of entry into force of the regulatory legal act approving the form and content of ownership structure.

Accordingly, the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Associations” (hereinafter – the Law on Registration) was amended and all newly created legal entities are obliged to submit information and documents on the ultimate beneficial owner to the state registrar within 14 calendar days  each calendar year following the year of registration of legal entity. Also entities should further notify the state registrar of any changes within 30 working days from the date of their occurrence and submit documents confirming these changes.

We reported about this in a previous article “Compulsory notification of the State Register about ultimate beneficial owner”

Form and Content of Ownership Structure is approved, countdown started

On June 11, 2021, the Government Courier published Order of the Ministry of Finance of Ukraine # 163 of March 19, 2021 “On Approval of the Regulations on the Form and Content of Ownership Structure” (hereinafter – Order № 163), which enters into force July 11, 2021, and therefore the specified period of 3 months will finally begin its countdown from 12.07.2021.

According to Order 163, the ownership structure by form is an official document that is a schematic representation of the ownership structure of a legal entity, showing all persons who directly or indirectly own this entity alone or jointly with other persons or regardless of formal ownership have the ability to significantly influence the management or activities of the legal entity.

Samples of the schematic representation of the ownership structure are published on the official website of the Ministry of Finance.

The beneficiary about whom detailed information should be provided

The Law # 361-IX, according to which the Order 163 was adopted, stipulates that the ultimate beneficial owner is:

for legal entities – any natural person who has a decisive influence on the activities of a legal entity (including through the chain of control) is the beneficiary in respect of which detailed information must be submitted;

for trusts – the founder, trustee, defender (if any), beneficiary (beneficiary) or group of beneficiaries (beneficiaries), as well as any other individual who has a decisive influence on the activities of the trust (including through the chain of control / ownership );

for other legal structures – a person who has a status equivalent to or similar to the persons specified for trusts. 

Indications of direct decisive influence on activity is the direct ownership by a natural person of a share in the amount of not less than 25 percent of the authorized capital or voting rights of a legal entity.

Indications of indirect decisive influence on the activity is the possession by an individual of a share of at least 25 percent of the authorized capital or voting rights of a legal entity through related natural or legal persons, trusts or other similar legal structures, or exercising decisive influence by exercising control rights, possession, use or disposal of all assets or their share, the right to receive income from the activities of a legal entity, trust or other similar legal structure, the right to decisive influence on the formation, voting results of governing bodies, as well as transactions that determine the basic conditions economic activity of a legal entity, or the activity of a trust or other similar legal structure, to make binding decisions that have a decisive impact on the activities of a legal entity, trust or other similar legal entity, regardless of formal ownership.

In this case, the ultimate beneficial owner may not be a person who has a formal right to 25 percent or more of the authorized capital or voting rights in the legal entity, but is a commercial agent, nominal owner or nominal holder, or only an intermediary for such a right.

That is, despite the reflection in the ownership structure of all persons who directly or indirectly own a legal entity, the application form provides information only about those persons who meet the definition of the ultimate beneficial owner, enshrined in Law # 361-IX and the document specified in the law is given only in relation to this person (persons).

List of documents to be submitted

According to Art. 17-1 of the Law on Registration to confirm information about the ultimate beneficial owner of the legal entity, the following documents are to be submitted:

  1. application for confirmation of information on the ultimate beneficial owner (form 6);
  2. ownership structure according to the form and content determined in accordance with the legislation;
  3. an extract, certificate or other document from the commercial, banking, court register, etc., confirming the registration of a non-resident legal entity in the country of its location – if the founder of the legal entity is a non-resident legal entity;
  4. a notarized copy of the document certifying the person who is the ultimate beneficial owner of the legal entity for a non-resident individual and, if such a document is issued without the use of the Unified State Demographic Register (book format passport issued before July 2016) for a resident individual.

Additional documents required in some cases

The Order also stipulates that in certain cases, it may be necessary to submit additional documents with regards the ownership structure.

Thus, if there are foreign legal entities and / or persons who are not citizens of Ukraine and are citizens (subjects) of another state or states, trusts, and or other similar legal structures in the ownership structure of the legal entity, official documents are to be submitted (their copies, in particular notarized copies) confirming the ownership of these persons, trusts and / or other similar legal entities of corporate rights in a legal entity, except when information about the relevant entities is available in the Unified State Register of Legal Entities, Individuals persons – entrepreneurs and public formations.

If there is a final beneficial owner in the ownership structure of a legal entity, information on the possibility of exercising a decisive influence on the management or the activities of the legal entity are not clearly tracked according to the Unified State Register, to carry out the registration action in the package of documents together with the ownership structure the schematic representation of the ownership structure must also be accompanied by official documents (copies, including notarized copies), confirming the ability to exercise decisive influence on management or activities of the legal entity by control / possession.

In particular this can be:

  • a contract of sale or gift of corporate rights (shares in the authorized capital); 
  • the decision of the general meeting of participants (the decision of the sole participant) of the legal entity to determine the size of the authorized (composed) capital and the size of the shares of the participants; 
  • the act of acceptance-transfer of a share (part of a share) in the authorized (composed) capital of a legal entity; 
  • account statement in the depositor’s securities;  
  • statement of account in the securities of the nominal holder; 
  • property management agreement; trust agreement; 
  • trust declaration and / or agreement; 
  • marriage certificate; 
  • extract or other document from an official source, including trade, banking, court register; 
  • other documents confirming the exercise of decisive influence (control) on the activities of the legal entity.

Can a limited liability company not have beneficial owners?

We are awaiting clarification from the Ministry of Justice on this issue. To date, the practice is such that registrars do not require information on beneficial owners in the case when the shareholders of a limited liability company are joint stock companies (both Ukrainian and foreign) and non-profit organizations.

Procedure of submitting documents

The application and documents are submitted in paper or electronic form, in person (representative) or by post. In the case of filing an application for state registration by post, the authenticity of the applicant’s signature must be notarized.

In the case of the application of documents not by the head of the legal entity, or the case of creation not by the founder (another person authorized by the meeting), the documents are also accompanied by the original (notarized copy) of the document certifying the authority of the representative such as power of attorney (unless information about the authority of this representative are contained in the Unified State Register).

Regarding the amount of the administrative fee for submitting information on the ultimate beneficial owner, if the legal entity submits documents within the above three-month period, the administrative fee is not charged. In case of simultaneous changes to the Unified State Register of the legal entity or expiration of three months from the date of entry into force by a normative legal act approving the form and content of the ownership structure, the administrative fee will be levied for the sum of the amount established by Article 36 of the Law on Registration (0.3 of the subsistence minimum for able-bodied persons, which amounts to UAH 714 in 2021).

Сonsequences the company would suffer if it fails to comply with the law?

The Code on Administrative Offences of Ukraine shall impose a fine on the manager(s) of a company which fail to comply with above mentioned requirements. The amount of fine is between 1000 to 3000 non-taxable minimum incomes (means 17 000,00-51 000,00 UAH).

Laudis Legal&Accountancy is always ready to provide qualified professional assistance and accompany you in the procedure of notifying the state registrar about the ultimate beneficial owners.


Galina Bastieieva

Counsel
Laudis Legal & Accountancy

Tax planning in international secondments

The exchange of employees between companies has become common practice amongst international companies in Ukraine. The word "secondment" no longer attracts the question "What is it?" but rather is used in HR circles instead of long explanatory phrases like "a business trip/assignment to work abroad for a certain period of time to acquire knowledge, skills and share experience". (Secondments may also be for the purpose of implementing projects, introducing new processes and management technologies, etc.). 

The concept of secondment

Despite the fact that the general meaning of secondment is clear, namely the transfer of an employee to work abroad, in international companies neverthelss, secondment does not refer to the transfer of an employee to another company. In general, and depending on the structure of the employment relationship for the period of the work abroad, international companies distinguish between the following two options for relocating employees:

  • secondment – an employee maintains an employment relationship with his/her employer (the sending company) and is sent to work in a foreign company (the receiving company) for a certain period of time. The employee is paid at the place of employment (i.e. by the sending company), but performs his or her work by order of the employer – at the place of the receiving company and in accordance with its instructions.
  • transfer – the employment relationship between the employee and the sending company is terminated for the period of employment abroad and a new relationship is established with the foreign, i.e. receiving company.

Also, in practice, a dual employment option can be applied, where the employment relationship with the sending company is maintained and at the same time a new work relationship is also established with the receiving company for whatever reason (e.g. due to legal requirements of the receiving country). Dual employment is not prohibited by the law of Ukraine.

Below we consider tax planning options for secondments in situations where a Ukrainian company sends its employee to work for a foreign company, as well as situations where, in order to optimise tax costs, it is advisable to transfer the employee instead of secondment.

Tax planning in the formation of an employee's compensation package

When deciding whether to undertake the secondment or transfer of an employee,  an important issue to consider is the nature of the employee's compensation package, and whether it includes elements and arrangements that encourage the employee to work abroad. If however the tax efficiency of the compensation package is not assessed, it may not be cost-effective nor attractive for the company or the employee.

When forming the employee's compensation package, it is important to consider the tax liabilities that arise in both countries so as to avoid double taxation of the same income (i.e. wages, compensation payments, additional benefits) in the respective countries. With a secondment, any remuneration from the Ukrainian company is be subject to taxation in Ukraine. The same remuneration may also be subject to taxation in the receiving country.

At the tax planning stage, the following issues need to be taken into account: 1) the employee's residence status for tax purposes in both countries (tax residency), 2) the source of  remuneration and 3) the period of residence in the receiving country.

Let's consider and analyze why these questions are important.

Criteria for international taxation of individuals

The right to tax the income of an individual is traditionally based upon factors that determine the relationship of that individual with the tax jurisdiction of a particular state. The concept of tax jurisdiction includes the right of a state to tax certain entities in its territory.

There are two criteria that determine the limits of the tax jurisdiction of the state with respect to individuals:

Tax residency – implies taxation of the income earned by a resident both in and outside the country of residence.

Source of income – defines the tax obligations of both residents and non-residents only in relation to income derived from a source located on the territory of the state.

Tax residency 

Among the general criteria for tax residency of individuals used in various countries are the following:

  • Length of stay in the country;
  • Homeownership in the country;
  • Centre of vital interests, that is, the closest personal or economic ties (family, work or business, real estate, etc.);
  • Citizenship.

However, the criteria for determining residency may differ from country to country. Therefore, a situation may arise where the same individual may be recognised as a tax resident in more than one country.

To solve this problem, international agreements known as double taxation treaties provide rules that take precedence over domestic legislation. These treaties allow for a test in which the individual's ties with specific countries are judged according to the following criteria:

  • Homeownership in the country;
  • The close personal and economic ties;
  • The country of permanent residence;
  • Citizenship.

If this test does not establish the tax residency of the individual, then the issue shall be resolved by mutual agreement between the countries.

The concept of "tax resident of Ukraine" is set out in Article 14.1.213 of the Tax Code of Ukraine (hereinafter, the Tax Code). The Tax Code provides a consistent procedure for determining residency status according to the following criteria (whereby compliance with one previous criterion (its availability) no longer requires the availability (compliance) with subsequent criteria):

  • a place to live in Ukraine (owned or rented); 
  • a place of permanent residence in Ukraine. The tax legislation does not define the concept of "place of permanent residence" and the period from the expiry of which a person is deemed to have a place of permanent residence in Ukraine. By analogy with other areas of law, it can be considered that such a period must exceed 6 months per year;
  • centre of vital interests in Ukraine;
  • staying in the country for at least 183 calendar days during the period or periods of the calendar (tax) year. If it is not possible to determine the residency status of an individual using these criteria, an individual is considered to be a resident of Ukraine if he/she is a citizen of Ukraine.

Thus, in most cases an employee is deemed not to be a tax resident of Ukraine where he/she has moved to work in another country for an extended period (more than 6 months), his/her family has also moved to that country and he/she has spent most of the year in another country.

The source principle

In contrast to the residence principle, which binds an individual to a tax liability if there is some connection between the individual and the state, the source principle establishes a tax liability if there is some connection between the state and the income (the object of taxation). The criteria for determining source are the following:

  • place of business (in the case of entrepreneurial activity);
  • location of the payer of income. Used for passive income, for example, if the payer is located in a particular country, the income is recognized as having a source in that country;
  • location of the property. Used for real estate income;
  • place of actual work. Used in determining the source for income from employment.

Domestic legislation of a country may establish a list of income and rules for determining the source of income. For example, source income from Ukraine includes (Article 14.1.54 of the Tax Code) dividends, interest, income from the rental of property, wages from a Ukrainian employer and wages from a foreign employer for work performed in Ukraine.

General rule of taxation of individuals in Ukraine

Ukrainian residents are taxed in Ukraine on all income received from various sources, both in Ukraine and in other countries. Non-residents – only on income originating from Ukraine.

Avoidance of double taxation

In international secondment tax planning, particular attention should be paid to the issue of avoiding double taxation of an employee's income, which may arise when both the employee's home country and the host country are entitled to tax the same income under the local laws of each country. This issue can be resolved by international double taxation treaties where the member states agree between themselves which is entitled to tax the income of an individual. Such treaties are drawn up on the basis of model tax conventions. The most commonly used is the Model Tax Convention of the Organisation for Economic Co-operation and Development (hereinafter referred to as the Convention). Such treaties prescribe the rules for taxation of certain types of income, mechanisms and procedures for avoiding double taxation.

Let's take a closer look at how the Convention regulates the double taxation of income from employment.

This type of income is dealt with in Article 15 of the Convention, which provides the following rule. If an individual resident in country A is sent by company A to country B to be employed by company B, the remuneration received by the individual from employment in country B may be taxed in country B (if required by domestic law). However, such remuneration will only be taxable in country A (and exempt from tax in country B) if the following conditions are met:

  • the period of stay of an individual in country B does not exceed 183 days in any twelve-month period beginning or ending in the reporting year (some treaties specify the stay limit as 183 days in a calendar year), and
  • the remuneration to the individual was paid by company A, which is not a resident of country B, and
  • the costs of remuneration are not borne by the permanent establishment or permanent base that the employer has in country B, nor are these costs recharged to company B.

If these conditions are not met, the remuneration may be taxed in country B. Then the issue of double taxation is resolved through other mechanisms provided for by the relevant international treaty. The most common one is a tax credit – when one country (namely the country of residence of an individual) sets off the tax paid in another country against its own tax.

The procedures for applying double taxation treaties have practical features in each country. For example, in Ukraine, in order to offset the tax paid in another country against the Ukrainian tax on the basis of the relevant international treaty, it is necessary to submit to the tax authorities along with the tax return an original document issued by the competent authority of another country, confirming the amount of income received and tax paid.

Let's consider examples of applying the above rules in practice.

Case 1

In 2019, Ukrainian company A sent its employee to work in Germany at company B. The employee remained an employee of company A. No employment contract was concluded with company B. The remuneration in Ukraine was taxed at the source of payment. The duration of the secondment was 1 year; the period was from the end of May 2019 to the end of May 2020. The employee's stay in Germany in 2019 was 195 days. The worker's family stayed in Ukraine. In accordance with the domestic legislation of both countries and the Treaty on Avoidance of Double Taxation between Ukraine and Germany (hereinafter referred to as Treaty 1), the employee was a tax resident of Ukraine. The employee's remuneration for work in Germany was also subject to taxation in Germany in accordance with domestic law (the employee had to file a tax return and pay tax at the end of 2019). The tax rate in Germany is much higher than in Ukraine (a progressive scale from 15% to 42% is applied). Company A did not recharge the remuneration expense to Company B.

Case study

In this situation, double taxation arises though can be eliminated in two ways.

1) Pursuant to Treaty 1, the employee's remuneration is not taxable in Germany if his/her stay in Germany does not exceed 183 calendar days in a calendar year. Thus, when planning an employee's secondment to Germany, the beginning of the secondment could be moved to mid/late June or early July 2019 (taking into account possible short-term departures from Germany) and thus the employee's stay in Germany could be reduced so that it does not exceed 183 days. This approach could also be applied to the end of the 2020 secondment.

2) If it is not possible to comply with the "183 days" condition, then under Treaty 1, Germany is entitled to tax the employee's remuneration. Tax paid in Germany can be offset against Ukrainian tax on the basis of a document issued by the competent German authority confirming the amount of tax paid. However, this method of resolving double taxation issues is less beneficial, as the tax rate in Germany is higher than in Ukraine, therefore, the company or the employee will incur additional expenses. Also, in practice, refund of tax that has already been paid in Ukraine (when remuneration was paid by company A) is a rather complicated and time-consuming procedure.

Case 2

Ukrainian company A sent its employee to work in Kazakhstan at company B. The employee remained an employee of company A. No employment contract was concluded with company B. The remuneration paid by the Ukrainian company is source income from Ukraine and, in accordance with the Tax Code, is taxable in Ukraine unless other rules of taxation are provided by the Treaty on Avoidance of Double Taxation between Ukraine and Kazakhstan (Treaty 2) (i.e. the Ukrainian company must withhold and pay tax on the remuneration until such time as there is no reason to apply other rules under Treaty 2). The duration of the secondment is 3 years and the period is from the end of January 2017 to the end of January 2020. The employee's stay in Kazakhstan each year exceeds 183 days. In accordance with the domestic legislation of both countries and Treaty 2, the employee was a tax resident in Kazakhstan. The employee's remuneration for work in Kazakhstan was taxable in Kazakhstan under domestic law (the employee was required to file a tax return and pay tax at the end of each year).

Case study

In this situation, double taxation arises. This can be eliminated on the basis of Treaty 2, which provides for taxation of the employee's remuneration only in Kazakhstan. However, in accordance with the Tax Code, the application of the provisions of Treaty 2 for the exemption of taxation of the employee's remuneration in Ukraine is permitted only if the employee provides the Ukrainian company with a certificate confirming his status as a tax resident of Kazakhstan by the end of the reporting year. Such a certificate must be issued by a competent authority of Kazakhstan, duly legalised and translated into Ukrainian.

Thus, in this situation the elimination of double taxation on the basis of Treaty 2 is only possible if the procedure described above is followed. Failure to obtain and submit the above-mentioned certificate to the Ukrainian company in due time will result in double taxation and negative tax consequences for the Ukrainian company. This risk cannot be ignored. Therefore, in this situation, the preferred option is to replace the secondment with the transfer of the employee – to terminate the employment relationship with the Ukrainian company and to conclude an employment contract with the company in Kazakhstan.

In order to keep the employee in the social insurance system of Ukraine, it is possible to consider the option of double employment with a minimum amount of remuneration in Ukraine.

Summary 

Tax planning is an essential part of the process of organizing an international secondment, and should help to optimise the employee's compensation package by reducing tax liabilities and eliminating possible double taxation.

In addition to the application of international treaty rules, avoidance of double taxation and the reduction of tax liabilities for international secondments can also be optimised by planning the working hours and conditions of the employee's stay in the other country (manipulating the tax residency status). This can also be achieved by choosing the source of remuneration to the employee and by determining the optimal structure of employment for the particular situation.


Import of a car to Ukraine without paying customs duty for those who got permanent residency in Ukraine

According to Article 384 of Customs code of Ukraine the person who obtained permanent residency in Ukraine is entitled to import to Ukraine without payment of customs duties the goods intended to meet the usual daily needs of the person and the initial arrangement, which are imported (shipped) by him in connection with relocation to a permanent place of residence in Ukraine.
The car for the import should weigh less than 3,5 tons and it can be one car for one individual who reached 18 years old.
The permanent resident of Ukraine (ex-foreigner) can import his own car without payment duty, meeting the following conditions:

  • import of vehicles is carried out within six months from the date of issuance of a document confirming the right of a citizen to permanent residence in Ukraine
  • until the date of issuance of the document confirming the right of a citizen to permanent residence in Ukraine, the citizen has lived in the country from which he came for at least three years
  • prior to the date of issuance of the document confirming the right to permanent residence in Ukraine, the citizen was the owner (or co-owner) of the vehicle imported by him for at least one year
  • a vehicle imported by a citizen has been on permanent registration (registration) with the relevant registration authorities of the country of permanent residence of the citizen for at least one year, if he is subject to registration in that country.

That vehicles imported by individuals when relocating to a permanent place of residence in Ukraine are subject to temporary registration for up to two years with registration of a vehicle registration certificate for the right of temporary operation of such vehicles valid for two years without the right of alienation or transfer for use by others.

International contracts. Concepts and essential terms

The main requirements and terms of international contracts are defined by the Law of Ukraine “On Foreign Economic Activity” № 960-XII dated on 16.04.91 (hereinafter referred to as the “Law № 960”).

An International Contract (hereinafter referred to as the “Contract”) it is an agreement between a company founded in Ukraine and an international company, and is aimed at creating, modifying or terminating their mutual rights and obligations in international trade.

International Contracts are executed in either a written or electronic form.

In the case of export of services (other than transport services), the Contract may be concluded by accepting a public offer, by exchange of e-mails, or in other ways, such as issuance of an invoice in electronic form for the services provided.

In cases where parties decide to enter into an agreement in electronic form, they shall be guided by the requirements of the Law of Ukraine “On Electronic Commerce” and the Law of Ukraine “On Electronic Trust Services”.

Executing the Contract

The main requirement of an electronic form of contract it is that the parties shall sign the contract using electronic digital signatures or facsimile signatures.

In practice there are difficulties with these methods of signing.

The complication of using an electronic digital signature lies in the legal acceptance of signatures between Ukrainian and foreign electronic signatories.

One of the conditions for acceptance of foreign digital signatures in Ukraine is the conclusion of an international treaty with Ukraine; however at the time of publication of this article no such treaty has yet to be concluded with any country, though such treaties are planned for the future.

The complication for using facsimile signatures is that the parties must beforehand execute a separate contract (with wet signatures) and agree on the terms of using facsimile signatures. Such a contract must also contain specimens of their respective handwritten signatures.

This type of electronic signing can be comfortable and convenient to use for parties who, for example, have long term business partnerships in Ukraine and often make multiple transactions.

Governing Law

Parties to the Contract are entitled to choose the governing law (also known as applicable law), but that doesn’t mean that the terms of the contract are allowed to contradict Ukrainian legislation.

Law № 960 sets forth that a Contract may be judged by a court to be invalid if it does not meet the requirements of Ukrainian law or with international treaties made by Ukraine.

Therefore, notwithstanding the right to choose the governing law, the Contract shall comply with the requirements of the Civil Code of Ukraine, the Commercial Code of Ukraine and other legislative requirements of Ukraine for a particular type of contract.

Essential (material) Contract Terms

All Contracts shall include essential terms as:

  • Subject (scope of the contract), Consideration (reciprocal exchange of value) and Term (duration of the contract);
  • terms that are defined by law as essential or mandatory for certain types of contracts;
  • all those terms on which, at the request of at least one of the parties, agreement shall be reached.

Particular attention shall be paid to the place where the contract is concluded and the place of dispute resolution. This may in effect determine what the governing law will be (unless there is a specific clause to that effect), what taxation will be imposed and what costs the parties will incur to resolve a dispute should one arise.

Mandatory (Imperative) Rule of Law

As discussed at the outset of the article, regardless of the selected governing law, the effect of the mandatory application of the law of Ukraine governing the relevant relations of the Contract cannot be limited.

An example of such a rule is the mandatory notarization of conveyancing agreements and their registration by the state.

Furthermore, if one deals with an international contract then it is also necessary to comply with the mandatory rules established by the National Bank of Ukraine (NBU) with regards international settlements.

One example of a NBU mandatory rule is a set deadline for cross-border transactions of 365 calendar days.

In other words, it is legally stipulated that payment under an international contract, as well as the delivery of goods, services and works, must be made within 365 days. Failure to comply with this requirement will result in the imposition of penalties.

This deadline does not apply to transactions related to Contracts of less than UAH 400 000.00 (or its equivalent in foreign currency).

We are happy to have presented in this article the main terms relating to international contracts. Rest assured, subject to correct contract drafting, foreign trade in Ukraine is not complicated to carry out.

Furthermore and finally, Ukrainian Law does not require special permits nor licenses for companies or entrepreneurs of Ukraine to participate in foreign trade.

Galina Bastieieva

Counsel
Laudis Legal & Accountancy

Registration of a Foreign Company with the Tax Office in Ukraine

On January 1, 2021, the Law of Ukraine of “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Ensuring the Collection of Data and Information Necessary for Declaring Certain Objects of Taxation” dated December 17, 2020 № 1117 (hereinafter – Law № 1117) entered into force.

Law No. 1117, inter alia, amended paragraph 60 of subsection 10 of section XX of the Tax Code of Ukraine (hereinafter – the Code), according to which foreign companies with a representative office in Ukraine, registered at the Ministry of Economy shall within three months from 01.01.2021 submit to the tax authorities the documents for their registration (as foreign company) in accordance with the procedure established by paragraph 64.5 of Article 64 of the Tax Code.

This three-month period was postponed by the Order of the Ministry of Finance of Ukraine # 62 dated 08.02.12021 “On approval of Amendments to the Procedure for Registration of Payers of Taxes and Fees”, which entered into force on 19.03.2021 (hereinafter – Order # 62). 

Under Order # 62, foreign companies are required to register with the tax authority within two months of the entry into force of the Order, i.e. by 19.05.2021.

For this, a foreign company shall submit to the tax authorities in the city / town where its Representative office in Ukraine is located the following documents:

  1. Application form 1-OPN (a new one, approved by Order № 62), and a cover letter. 
  2. Attached to the application shall be copies of the following documents (with presentation of originals):
    • an extract from the relevant national business register (trade, banking or other register, which records the company registration), legalized in the prescribed manner, unless otherwise provided by international treaties, the consent binding nature of which is provided by the Verkhovna Rada of Ukraine, and accompanied by a notarized translation into Ukrainian;
    • a document containing the identification number (registration or accounting code) of the foreign company in the country of its registration, if the extract from the relevant business register does not contain information about such a number (code), accompanied by a notarized translation into Ukrainian;
    • a document confirming the authorisation of the foreign company’s representative. If such a document is issued in the country of registration of the foreign company, it must be legalized in the prescribed manner, unless otherwise provided by international treaties approved by the Verkhovna Rada of Ukraine, and accompanied by a notarized translation into Ukrainian.

    In this case the representative shall, along with the power of attorney to submit documents to the tax authority, have the right to represent the interests of the foreign company in Ukraine, and the data on such a representative shall be given in the application form in the columns “manager” and “chief accountant”. A copy of the passport, identification code and/or other document containing the information specified in the application form for the representative shall be submitted together with the power of attorney.

    • a document confirming the accreditation (registration, legalization) of the representative office of a foreign company located in Ukraine (the Representative office). 

In the case of establishment of a Representative office, the foreign company shall register itself with the tax authority within ten days after the registration in Ukraine of the Representative company at its registered address in Ukraine.

At the same time along with the registration of the foreign company shall be the registration of the Representative Office of the foreign company.

The Tax Code also provides for other grounds for compulsory registration of a foreign company with the Ukrainian tax authority, namely:

  • acquisition of real estate or obtaining property rights to such assets in Ukraine;
  • opening a bank account in Ukraine;
  • acquisition of title to an investment asset in Ukraine from another foreign company which doesn’t have a representative office in Ukraine.

Consequences of non-compliance with the legal requirements regarding registration with the tax authorities by a foreign company.

If the tax authority, based on the results of tax control, discovers that a foreign company is conducting business in Ukraine, including through a Representative office, without registration of the foreign company in tax authority, the supervisory authority shall appoint an audit for the further inspection of such business activities.

Based on the results of an inspection, the tax authority may draw up an act of inspection, and on the basis of which it may unilaterally register the foreign company in Ukraine.

In accordance with subparagraph two of paragraph 60 of subsection 10 of section XX of the Tax Code, audits (inspections) of foreign companies engaged in business activities in Ukraine, which under requirements of the Tax Code should have been registered with the Tax Office and which have not fulfilled such requirements, may be instructed from 1 July 2021.

Clause 117.4 of Article 117 of the Tax Code states that a foreign company which carries out its activity through a Representative Office without being registered for tax purposes as provided for by Tax Code, shall be fined UAH 100,000.

The above amendments have raised many questions but unfortunately the tax legislation has no direct answers to them.

In order to eliminate ambiguous interpretations of certain provisions of the tax legislation, the Ministry of Finance of Ukraine by its Order No. 277 dated 19.05.2021 approved a general consultation with regard the registration of non-residents with the tax authorities and the performance of their obligations as corporate tax payers in Ukraine, as well as providing answers to 6 main questions.

In this article we focus on two of these questions that in our view are the most important for business.

The first: who now exactly has to pay corporation tax, the foreign company-taxpayer himself directly or his Representative office?

The Ministry of Finance has clarified that tax shall be paid by the foreign company through its Representative office, subject to due authorisation (powers).

That is, a Representative office may pay income tax on behalf of a foreign company, provided that the head of the Representative office is authorised to do so as a representative of the foreign company under a power of attorney.

The second question is whether a foreign company that is not registered as a corporate tax payer in Ukraine nor forms a permanent establishment there (i.e. carries out preparatory and auxiliary activities) but which does have a tax authority registered Representative office in Ukraine, whether it should now also be registered with the tax authorities?

The Ministry of Finance has clarified that in this case the foreign company must be registered with the tax authorities without registering as an income taxpayer.

We admit that the procedure for registering a foreign company in connection with their activities through Representative Office, including a permanent establishment, is new and has many nuances, and the supervisory authorities are continuing to clarify them and make amendments that should be taken into account when collecting, preparing and submitting documents to the supervisory authority.

Laudis Law Firm as always will be pleased to assist you with any such registration, to establish a representative company office in Ukraine and with all related procedures.
 

Galina Bastieieva

Counsel
Laudis Legal & Accountancy

International Financial Reporting Standards in Ukraine: obligatory or voluntary implementation?

Rapid expansion of information technologies, globalization, international cooperation, multinational corporations – all these factors have been accompanying our lives for almost a century.

Different countries and different laws, but what about financial reporting? To be able to read financial statements, the approaches to compilation must be identical, and financial statements must be clear to all users without exception.

The only way out of this situation was implementation of a common reporting standard, which would implement a unified approach to the preparation of financial statements. Such a unified approach is implemented with the International Financial Reporting Standards (IFRS).
In Ukraine, the implementation of IFRS began with the reform of accounting, and the adoption of the Law of Ukraine dated 16.07.1999 № 996-XIV “On accounting and financial reporting in Ukraine” both with the implementation of Local Accounting Principles (UA GAAP) which in almost all aspects meets provisions of IFRS.

Clear accounting and financial reporting prepared in accordance with the requirements of IFRS is a kind of a “quality mark” and confirmation that information provided in the reporting is reliable. For those companies planning to enter international markets, with shares listed on stock markets, attracting investments from international donors (both private companies and financial institutions such as EBRD or IMF) IFRS standards for the financial statements are mandatory.

Most of the accountants in Ukraine are focused primarily on tax accounting and tax consequences. However, the Tax Code of Ukraine foresees maintaining the accounting practices whether according to Local Accounting Principles or IFRS, which are also a basis for taxation. So importance of accounting cannot be ignored. Is there a choice? Who should decide how to maintain the accounts: according to local accounting principles or IFRS?

Part 2 of Article 12 of the Law № 996-XIV provides a list of enterprises for which the application of IFRS is mandatory:

  • enterprises of public interest
  • large enterprises
  • public joint-stock companies
  • enterprises engaged in the extraction of minerals of national importance
  • enterprises engaged in economic activity by types, the list of which is determined by the Cabinet of Ministers of Ukraine

The rest of the companies can choose IFRS as a conceptual basis for accounting at their own discretion.

So, IFRS or UA GAAP? What is the best choice for the company if your activity is not found in the list above? However, if you are focused on long-term development, attracting investments, entering international markets – the earliest application of IFRS will clearly simplify and facilitate the life of the company.

The transition to accounting in accordance with the IFRS system requires a change in accounting policy and certain actions aimed at harmonizing (transforming) accounting between UA GAAP and IFRS. Transformation means to identify and implement discrepancies in accounting between UA GAAP and IFRS. Transformation should be completed in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”.
The indicative algorithm for the transition to IFRS is as follows:

Step 1. Determine the date of transition. This is usually January 1st, but the period would be different if reporting users set a different reporting period for the fiscal year.

Step 2. Develop an accounting policy in accordance with the requirements of IFRS. The provisions of this accounting policy to previous periods are applied retrospectively, which will be reflected in the transformation adjustments.

Step 3. Prepare a trial balance on the accounts in accordance with UA GAAP.

Step 4. Analyze the remnants of each of the accounts for their compliance with IFRS and accounting policy.

Step 5. Make transformational (corrective) records to reconcile with the identified differences. These can be, for example, differences in the amount of depreciation, disposal or recognition of certain items, reclassification of assets/liabilities and so on.
Important! Transformation records should not affect the financial result of the year, so they should be made through the account of retained earnings (loss).
An example of such a transformation table is given below.

Step 6. Make a transformed trial balance.

Step 7. Based on the transformed trial balance, prepare financial statements.

In addition to the usual practice for every accountant report to consist of a balance sheet (statement of financial position) and statement of financial performance (statement of profit and loss), the IFRS reporting package includes a statement of equity, a statement of cash flows and a notes part.

Perhaps the most important component of financial statements is the notes section.

The notes reveal:

  • general information about the company;
  • basics of preparation, approval and submission of financial statements;
  • significant provisions of the accounting policy;
  • significant judgments and assumptions;
  • disclosure of information regarding fair value use;
  • reclassifications in the financial statements for the reporting year compared to the financial statements of the previous year and correction of errors;
  • disclosure of information, which confirms the articles submitted in the report.

It is also necessary to take into account the transition (comparative period). In accordance with the requirements of clause 30 of IFRS 1 “First-time adoption of International Financial Reporting Standards”, there should be two comparative periods for each type of reporting and three for the income statement.
Thus, implementation of IFRS as a conceptual basis for accounting and reporting is evidence of the reliability of information, its complete coverage and, accordingly, such reporting fosters more confidence among its users. The need to use unified accounting approaches is caused by market conditions, so IFRS is being implemented by more and more companies in Ukraine.

Wishing you good luck on the way of transformations!

Maria Vasilenko

Junior accountant
IFRS consultant
Laudis Legal & Accountanc

Esports – relevance and future perspective for the provision of legal services for Esports in Ukraine

The development of the Esports industry in Ukraine started in the late 1990’s continuing into the early 2000’s. At first events consisted of small tournaments held in computer clubs where players competed with each other. Since 2010 the industry has transformed, both at a national and international level. Professional Esports organizations have formed to oversee participation at international tournaments in various disciplines: Counter-Strike, FIFA, World of Tanks, Starcraft in various multi-jurisdictional areas (USA, South Korea, Australia, China, etc.). Prize funds at these competitions now run into several hundred millions of dollars anually.

Cybersport or Esport is a video game competition and sport in which players develop and train both mental and physical skills.

1.The use of intellectual property rights in Esports

Unlike other sports, each Esport discipline has its own developer and copyright holder. The copyright holder controls the use of their game.

A computer game publisher (the copy-right holder) is able to choose from several legal options and mechanisms to govern the use of their IP for Esport tournaments. This can range from low levels of control allowing users to use their game to hold championships free of charge with minimal formalities, to more regulation and agreements governing the conduct of games and income from competitions. In the latter scenario, the publisher independently sells the right by concluding a license agreement (tournament license) for a fee. The publisher can monitor the competition because the name of the game registered as a trademark, prevents anyone from using the commercial name of the game.

Therefore, copyright holders can either promote a discipline or restrict it by restricting access.

2.Regulation of national and international legislation in Esports

In general, legal aspects of the ESport industry are regulated by the national legislation of respective countries. In Ukraine however there exists no specfic legislation aimed at sustainable sport and which deals with the specificity of Esports. Unlike in classic sports where associations and federations organise relationships between stakeholders (individuals or legal entities that have a legitimate interest in the activities of the organization, that depend on it or influence its activities), the Esports industry is not governed by laws, regulations or rules of sports federations or associations. Instead, relevant agreements are concluded directly between interested parties (for example, on cooperation between the player and the club, on the transfer of the player from one club to another, on the organization of competitions, marketing agreements, license agreements for a tournament, etc. ).

In Ukraine, the legal regulation for the provision of legal services for contractual relationships, including the conclusion of sponsorship agreements for Esports tournaments between the publisher of games, tournament organizers and e-sportsmen, is regulated by domestic law, namely:

• The Civil Code of Ukraine;
• Economic Code of Ukraine;
• Code of Labor Laws in Ukraine;
• Law of Ukraine “On Advertising”.

One of the key problems of Esports at an international level is that there are no uniform “rules of the game” to cover all disciplines. Strict regulation of rules and associated powerful legal mechanisms for their implementation do not exist, as is the case with football, hockey, basketball where international organizations (FIFA, the NHL, NBA) tightly control the game. The legislation of many countries around the world does not have specific laws for the Esport industry.

In 2008, at the international level, the International Esports Federation (IeSF) (https://ie-sf.org/) was established, with its headquarters in Busan, South Korea. As of the 9th September 2020, it has 82 national member states, including Ukraine.

3.Contractual relations of advertising and sponsorship in Esports

Contracts in the field of advertising and sponsorship are by their nature service contracts. According to Art. 901 of the Civil Code of Ukraine, under the contract for the provision of services one party (the “Contractor”), undertakes on behalf of the other party (the “Customer”) to provide a service to carry out certain actions or activities, and the Customer undertakes to pay the Contractor unless otherwise provided by the contract.

According to Art. 638 of the Civil Code of Ukraine, the contract is concluded if the parties have duly agreed on all the essential terms of the contract. The essential terms of the contract are the conditions forming the subject of the contract, the conditions defined by law as essential or necessary for contracts of this type, as well as any further conditions which at the request of at least one of the parties have been mutually agreed.

According to Article 1 and paragraph 1 of Article 5 of the Law of Ukraine “On Advertising” sponsorship is voluntary, material, financial, organizational and other support of individuals and legal entities of any activity to promote only their name, name and their mark for goods and services. In TV, radio programs, materials in other mass media, entertainment and events created and held with the participation of sponsors, it is prohibited to provide any information of an advertising nature about the sponsor and / or his products, except for the name or name and mark of the goods and sponsorship services.

In TV programs it is forbidden to provide any information of an advertising nature, which is presented in the form of narration and / or sound, about the sponsor – the producer of alcoholic beverages, his name (name) and / or mark for goods and services belonging to the sponsor.

4.The conclusion of employment contracts in Esports

Concerning employment between Esports and organizations, contracts used in Esports are similar to those used in traditional sports. In fact, a significant number of Esports contract provisions have been borrowed from contracts in other sports. These for example can be a unilateral contract in which the e-athlete receives a salary, regardless of whether he plays in the second team or in the first, or a bilateral contract which sets out in detail the various conditions under which the athlete must perform and in which team or league they must play.

A special form of employment contract may be established by agreement and can cover the term, rights, obligations and responsibilities of the parties (including material), conditions of material support and organization of the work of the employee, conditions of termination of the contract, including early termination. The scope of the contract is determined by the laws of Ukraine and applies only to certain categories of employees.

Also in the Esports industry, so-called “smart contracts” are becoming increasingly popular. These make use of blockchain technology to automate the process of executing the contracts. Smart contracts can govern eSports relationships such as fees and player transfers, sponsorship and sale of media rights, advertising deals, and tournament prize money, as well as the use of Cryptocurrency for payment. Smart contracts are signed and executed via one of the many existing blockchain platforms, some of which already specialize exclusively in Esports.

The advantage of smart contracts is their autonomy and economy as parties can do without the services of lawyers, banks and various intermediaries. Smart contracts are inherently reliable, because the process of their implementation involves cryptographic tools and encryption of Internet pages which provides documents with a high degree of protection. The disadvantage of choosing this method of registration of legal relations can be considered the lack of regulation at the legislative level in Ukraine and an insufficient understanding of the legal nature of such contracts.

5.Dispute resolution in Esports

The most common form of dispute resoluation in the Esports industry is negotation and mediation, given the evolving nature of the industry.

In exceptional cases, parties can apply to a court of relevant jurisdiction or arbitration. . Unlike in mainstream sports, in Esports there is no balanced regulation by independent international sports associations.

At an international level, Esports disputes can be resolved, for example, in the International Court of Arbitration for Sport (https://www.tas-cas.org/en/index.html) or in a special Esports arbitration court ad hoc at the World Esports Association (http://www.wesa.gg/). If parties to the arbitration agreement (the “arbitration clause”) do not have a clause on the referral of the dispute to arbitration or on the law of the country to resolve the arbitration dispute, they must refer to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10.06.1958 year.

Arbitration disputes may involve a breach of contractual obligations, licensing and sponsorship agreements, transfer of players from one club to another, doping, manipulation of results, distribution of winnings, royalties, etc.

Based on the above, we conclude that the development and prospects for providing legal services in the field of Esports in Ukraine is gaining momentum with the increasing popularity and market size of the industry. In some instances, Esports have already overtaken some traditional sports.

In Ukraine there is a need to adopt relevant legislation, in particular, the “Sports Code”, which will regulate sports and legal relations between athletes, e-athletes, national associations, federations. Today, relations in Esports are governed by the general rules of civil and commercial law, as well as internal rules of specialized organizations.

So, careful reconciliation of VAT within periods, the correct accounting system and the confirmation primary documents, allows the company to pretend for VAT reimbursement into bank account and to not “freeze” funds, but to re-invest them already in development. Completing of contract conditions: payment from the buyer to the supplier and delivery of goods/services to the buyer is enough background to pretend for VAT reimbursement. Any additional conditions proposed by fiscal authorities, for example, fact of commissioning or anything else, are illegal and may be successfully claimed.

Lawyer Laudis Legal & Accountancy, Yevhen Vvedenskyi

Our professionals will be delighted to share addition information if you need it.



Successful VAT reimbursement: background and action plan

Dear colleagues,

Today we would like to discuss the issue of value added tax (VAT) reimbursement. In this overview we will disclose general principles of the VAT reimbursement procedure in Ukraine and share our practical experience. We are not going deeply into the algorithm of filling in VAT returns or the legal background of one or another transaction, but will review a general scheme and action plan for VAT reimbursement.

We believe you have heard about the VAT reimbursement procedure. You have also heard that it is complicated (or even impossible) and probably decided not to risk pretending for reimbursement, but to wait to offset accumulated VAT deductibles against future VAT obligations. This may be good for short-term projects, but if we are speaking about long-term projects, ‘freezing’ of 20% of the project value is not a good way to go, especially when financing is limited, counting value of money in time and other circumstances. Moreover, the whole project can turn out not to be attractive from an investment point of view if not refunding the VAT paid to suppliers/customs clearance and not reinvesting this money in further development.

Current legislation of Ukraine identifies the mechanism of VAT reimbursement and its terms. In case all criteria are met, transactions are correctly reflected in the company’s books and reports, the amount of VAT applied for reimbursement is deposited into the bank account of the company a maximum of 2 months from the application date. So, let’s see what the action plan is.

Firstly, let’s consider the nature of VAT itself: it is indirect tax, which is paid by the final consumers. So, companies – VAT payers, are only a ‘transit’ source: accumulating VAT credits (deductibles) of the value of goods/services paid to suppliers and VAT obligations (payables) of value of the sold goods/services. VAT itself does not impact PL statement and is counted separately (despite cases when VAT cannot be utilized). As a result of the reporting period, in Ukraine it is 1 calendar month, the positive difference between VAT obligations and VAT credit is to be paid to state budget. A negative difference can be reported as part of VAT credit of the next reporting period or reimbursement to the bank account can be pretended for.

The following scheme has a place:

So, the decision is made, and you decided to apply for VAT reimbursement. What is next? We recommend that you follow the action plan described below:

  1. Analysing if the company has a right to pretend for reimbursement. Following conditions must be complied with at the same time:
    – There is no VAT debt
    – There is a registration limit equal to or exceeding the amount to be applied for on the date of submitting the VAT return
    – VAT was actually paid as a part of payment to suppliers for goods/services and in case of import – paid at the point of customs clearance
  2. To ensure availability and conformity to all criteria of primary documents to confirm actual delivery of goods/services. Also, it is important to check conformity of reflection transactions in accounting records and financial statements. Tax Code of Ukraine (TCU) does not contain a norm regarding obligatory delivery fact as a background for VAT reimbursement. Art. 200.4 of TCU foresees the following conditions for the amount to be reimbursed: “…in amount of tax, actually paid by the buyer of goods/services in previous and current reporting periods to suppliers of such goods/services”. But fiscal authorities consider the wording “suppliers” as confirmation of delivery fact. This position was also supported by the courts, so we recommend keeping to the current practice and pretending VAT reimbursement only after both actions (payment and delivery) are completed. It would also be very good if you can monitor your contractors and make sure they have enough facilities to complete the contract (fixed assets, personal assets, etc.), absence of active criminal cases. To secure delivery fact with additional documents such as delivery invoices, acts of acceptance, stock records or photos.
  3. After the amount is identified, the VAT reimbursement application should be prepared and submitted as a part of the monthly VAT return. In order to avoid formal rejection of the application due to mistakes in the VAT return, all demands regarding the correct filling in of the reporting package must be complied with. The amount to be reimbursed should be stated in a section 20.2.1 of the VAT return. Do not forget to mention the registration limit according to art. 2001.3 of chapter V of TCU on the date of submission. Together with the monthly VAT return, the following amendments must be submitted: Amendment 3 – calculation of state reimbursement; Amendment 4 – reimbursement application Note: in the final part of the VAT return in the fields “Marks about amendments” each amendment submitted must be marked.

Pay attention! The amount, applied for to be reimbursed to the bank account, for the period while it is being audited by fiscal authority, does not form part of the registration limit of the VAT system (SEA) nor does it consist of VAT credits of the next reporting period. In case the following month’s VAT obligations exceed the VAT credit, such difference should be paid to the state budget, despite the accumulated amount of VAT credit, in respect of which reimbursement was applied for.

Terms for tax audit are as follows:

  1. 30 calendar days, following deadline for VAT return submission to on-desk tax audit (art. 200.10 of TC). During on-desk audit the correctness of the VAT return and arithmetic is to be confirmed. If you are lucky, you can go to p. 3 and 4 from this point, but most likely an additional audit will be assigned.
  2. 60 calendar days, following the deadline for the VAT return to documentary tax audit. During this stage, tax officers visit the company and check all primary documents for correctness, they also can visit a site in order to make an inventory.
  3. If, as a result of the tax audit (according to p. 1 (and) p. 2 above), the fiscal authority has not identified any violations, a confirmation certificate is issued within 5 business days after completing of tax audit.
  4. Within 5 business days from the date the confirmation certificate was sent to the company, the amount of VAT applied is deposited into the company’s bank account.

So, careful reconciliation of VAT within periods, the correct accounting system and the confirmation primary documents, allows the company to pretend for VAT reimbursement into bank account and to not “freeze” funds, but to re-invest them already in development. Completing of contract conditions: payment from the buyer to the supplier and delivery of goods/services to the buyer is enough background to pretend for VAT reimbursement. Any additional conditions proposed by fiscal authorities, for example, fact of commissioning or anything else, are illegal and may be successfully claimed.

We wish you good luck!

Managing partner, Oxana Kuzyura

We would be glad to share our experience with regard to reimbursement procedures and provide you with a professional support.





Legalization of documents for Ukraine and from Ukraine. Apostille

For purpose of presenting in Ukraine official documents issued abroad, or official documents of Ukraine to other countries, such as extract from business register of companies, power of attorney, these documents are to be legalized in order to have legal validity in Ukraine.

There are 3 ways of legalization of documents.

a. Apostille

It is simplified legalization, available to countries, which entered Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents _Convention (the Apostille Convention).

The following countries are in the list according to the Apostille Convention: Albania, Andorra, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Barbados, Belarus, Belgium, Belize, Bosnia and Herzegovina, Botswana, Brazil, Brunei, Bulgaria, Burundi, Cape Verde, Chile, Colombia, Cook Islands, Costa Rica, Croatia, Cyprus, Czech Republic, Kingdom of Denmark, Dominica, Dominican Republic, Ecuador, El Salvador, Estonia, Fiji, Finland, France, Georgia, Germany, Greece, Grenada, Cyprus, Honduras, Guatemala, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Kazakhstan, Kosovo (but Ukraine objected to accession of Kosovo to Convention, so classical legalization between the countries are required), Kyrgyzstan, Latvia, Lesotho, Liberia, Liechtenstein, Lithuania, Luxembourg, Macau, Macedonia, Malawi, Malta, Marshall Islands, Mauritius, Mexico, Moldova, Monaco, Mongolia, Montenegro, Morocco, Namibia, Kingdom of the Netherlands, New Zealand, Nicaragua, Niue, Norway, Oman, Panama, Paraguay, Peru, Poland, Portugal, Romania, Russia, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, São Tomé and Príncipe, Serbia, Seychelles, Slovakia, Slovenia, South Africa, South Korea, Spain, Suriname, Swaziland, Sweden, Switzerland, Tonga, Trinidad and Tobago, Turkey, Ukraine, United Kingdom, United States, Uruguay, Uzbekistan, Vanuatu, Venezuela.

Double apostille

Some countries require 2 apostilles on official documents, first on document, second on notary certified translation of already apostilled document. These countries are Austria, Belgium, Spain, France, United Kingdom, Portugal, Switzerland, the Netherlands and Italy.

b. Notarization of the copy

The most simple way of document legalization is notary certification. List of countries which concluded mutual legal assistance treaties according to which the simple notary copy in country of issuance is sufficient for state bodies of Ukraine is as follows: Algeria, states from former Republic of Yugoslavia, Estonia, Kyrgyzstan, North Korea, Latvia, Lithuania, Mongolia, Azerbaijan, Albania, Belarus, Armenia, Bulgaria, Georgia, Kazakhstan, Cuba, Moldova, Poland (for Ukrainian documents Poland requires apostille), Turkey, Uzbekistan, Tadzhikistan, Russia (for Ukrainian documents Russia requires apostille), Romania, Slovakia, Vietnam, Turkmenistan, Hungary, Czech Republic (for Ukrainian documents Czech Republic requires apostille). Means that even if the country is in the list above as member of Apostille Convention, no apostille is needed if the mutual legal assistance treaty is concluded.

c. Legalization

Means classical legalization of document through embassy. If the country of official document issuance is not in any of the lists above, the legalization is needed. It involves Embassy certification, which is more time consuming. These are such countries as Abkhazia, Angola, Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Bhutan, Vatican City, Timor East, Gabon, Haiti Guyana Gambia Ghana Guatemala, Guinea Guinea-Bissau, Djibouti Egypt Zambia Zimbabwe Indonesia Jordan Iraq Iran Yemen Cambodia Cameroon Canada Qatar Kenya Comoros Congo Korea D.P.R. Cote d’Ivoire Kuwait Lao P.D.R. Lebanon, Libyan Arab Jamahiriya, Mauritania Madagascar Malaysia Mali Maldives, Federated States of Micronesia, Myanmar, Nauru, Nepal, Niger, Nigeria, Nicaragua, United Arab Emirates, Pakistan Palau Palestine, Papua New Guinea, Rwanda, Saudi Arabia, Senegal, Singapore, Syria, Solomon Islands, Somalia, Sudan, Sierra Leone, Thailand, Taiwan, Tanzania, Togo, Tuvalu, Tunisia, Uganda, Philippines, Central African Republic, Chad, Sri Lanka, Equatorial Guinea, Eritrea, Ethiopia, South Ossetia, South Sudan, Jamaica.