Doing business in Ukraine: Tax benefits and opportunities for development

Our country has been at war for many years, but this does not prevent Ukraine from offering favorable conditions for business development thanks to reforms aimed at simplifying the tax system, digitizing public services and attracting foreign investment. Now more specifically on each point.

For small and medium-sized businesses in Ukraine, there is a simplified taxation system that simplifies reporting and reduces the tax burden, creating favorable conditions for entrepreneurial activity. Payers of the simplified system pay a single tax and are divided into four categories, each of which has its own criteria:

• The first group is individual entrepreneurs who work independently without employees. They trade in the markets or provide household services to the population, and their annual income does not exceed 1,336,000 hryvnias.

• The second group is entrepreneurs who can have up to 10 employees and work in the field of services (serving the population or other single tax payers), production, sale of goods or restaurant business. The marginal income is 6,672,000 hryvnias per year.

• The third group includes both individual entrepreneurs and companies whose annual income does not exceed UAH 9,336,000.

• The fourth group is agricultural enterprises, in which at least 75% of the income comes from agricultural products, as well as farmers who conduct economic activities within the boundaries of their farm lands.

Different taxation conditions apply to each group, which depend on many factors, so when switching to a simplified system, you can contact our lawyers for advice.

A special mode "Diya.City" has been introduced for IT companies and startups in Ukraine. Within this regime, favorable tax conditions are introduced: resident companies will be able to choose between a classic income tax (18%) or a tax on withdrawn capital (9%) , depending on their business model, as well as the opportunity to work under flexible labor contracts .

In addition, the tax code provides for a significant reduction of the tax burden on the salaries of employees of Diya City residents. Instead of standard deductions, they will pay only 5% personal income tax, 5% military tax and a fixed minimum contribution from the Social Insurance Institution (22% of the minimum salary) . This allows companies to transfer FOPs to the state without a significant increase in costs.

Expanding the capabilities of electronic document management, launching services in "Diya.Business" simplify business, through which it is possible to receive expert advice on starting and running a business, free trainings and webinars, help in finding financing (grants). In addition, the service helps entrepreneurs establish exports thanks to educational programs, consultations and cooperation with international organizations. Another important point regarding exports is that Ukrainian companies can use free trade agreements with the EU, Canada and other countries, which opens up access to new markets.

In addition, opening your own business in Ukraine has become much easier thanks to the digitization of public services and the simplification of registration procedures. Now you can register a sole proprietorship or LLC in a matter of hours. Ukraine also attracts foreign investors due to its cheap labor force, which lowers production costs. The easy availability of cheap labor stimulates the development of outsourcing (especially IT, production, logistics).

As we can see, Ukraine offers businesses tax benefits and access to international markets, a reduction in the tax burden, and support for investors. The development of the digital economy makes the country attractive for entrepreneurs, despite the military actions .

Templates that may be useful:

- Statute / Decision / Minutes / Structure for a newly formed company, Ukraine ;

- Regulations on document circulation in the Limited Liability Company ;

- Regulations on accounting policy and organization of accounting ;

- Regulations on the use of the electronic document management system + Order on approval ;

- Employment contract Ukrainian, English, Ukrainian-English + Employment order ;