1. TAX GUIDE OF DOING IT-BUSINESS IN UKRAINE
“A&T CONSULTING”
TAX GUIDE OF DOING IT-BUSINESS IN UKRAINE
Andriy Tsura
Roman Gumeniuk
March, 2017

2. COMMON STRUCTURE OF IT-BUSINESS IN UKRAINE
Beneficial owner of the Company
(foreign IT-company)
Lessor of office
1. Non-Residential Premises
Lease Contract
IT -Company in Ukraine
(Limited Liability Company)
2. Contracts of subletting of workplaces
PE 1
(IT-specialist)
PE 2
(IT-specialist)
PE 3
(IT-specialist)
PE 4
(IT-specialist) …
PE n
(IT-specialist)
*PE - private entrepreneur

3. Features of limited liability company
Limited liability Company (LLC) in Ukraine is the most optimal legal form. LLC in Ukraine may consist of one and up to a hundred shareholders.
There are no requirements to a minimum share capital of LLC in Ukraine.
The share capital shall be paid within 365 days from the date of incorporation.
Each member of LLC in Ukraine is liable in proportion to share capital part invested. The liability of the company before third parties (employees, government agencies etc.) is assumed by the Director of the Company.
The Director of LLC can be Ukrainian resident or non-resident having a work permit in Ukraine.
The Director has the right to access Company account and make all decisions except for the limitations imposed by the Charter.
LLC in Ukraine is a legal unit and is authorized to do all the activities stipulated in the Charter, as well as all operations necessary or useful for the attainment of social purpose of the LLC.

4. Taxation of Limited liability company (one of the following options)
COMMON SYSTEM
Profit tax – 18 % of the profit Profit = Income – Expenses
VAT** (Value added tax) – 20%
Other taxes (depends on the activity of the company)
SIMPLE SYSTEM
Simple tax – 5% of the total income OR
Simple tax – 3% + VAT**
*Simple system can be used only in case when total income of LLC per year is not more
than UAH (≈ USD). This system is preferable for most of IT-company`s
in Ukraine.
** VAT is applicable in common system only in case when LLC is registered as VAT payer.
The model of VAT in Ukraine is the input-output one. VAT-registered persons deduct
the VAT paid on their inputs from the VAT charged on their sales and account
for the difference to the tax authorities.

5. Taxation of dividends
A 15% withholding tax is levied on dividends to nonresident companies and individuals. BUT There are a lot of Conventions between Ukraine and other countries for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital. According to the most of them the rate of withholding tax is 5% and this tax can be paid in Ukraine or another country – country of shareholder of Limited Liability Company in Ukraine.

6. Differences of taxation of employees of the Company and PE
Income tax – 18% of the salary (paid by employee).
Temporary military tax – 1.5% of the salary (paid by employee)
Unit social contribution – 22 % of the salary: max≈ 320 USD (paid by the Company).
PRIVATE ENTREPRENEURS
Single tax – 5% of the total income (paid by PE).
Unit social contribution – 22% of the minimal salary in Ukraine ≈30 USD every month (size of minimal salary is changed sometimes) (paid by PE)
Period of payments - every month
Period of payments - every quarter (but there is a possibility to pay every month)

7. Example of taxation of IT-specialist
Upon mutual consent IT-specialist will get UAH every month
IT-specialist – employee UST = UAH * 22% = UAH Max UST = UAH UAH<8 800 UAH UST = UAH Total expenses of the Company = UAH UAH = UAH Income tax = UAH *18% = UAH Temporary military tax = UAH * 1,5% = UAH Net income of IT-specialist = UAH – UAH – UAH = UAH
IT-specialist – private entrepreneur Total expenses of the Company = UAH UST = 704 UAH Simple tax = UAH * 5% = UAH Net income of IT-specialist = UAH – 704 UAH – UAH = UAH

8. Main reasons of due organization of business in Ukraine
Avoiding of risks of negative tax consequences (If PE will not sublease work-places there will be a risk of defining them as employees. In this case tax authorities will demand to pay additional taxes and will use sufficient penalties to the Company and PE)
Higher level of supervising and control by the foreign company
Official payments of daily expenses (Internet, telephone communication etc.)
Security of business in Ukraine

9. Always at your disposal)
“A&T CONSULTING”
Always at your disposal)
Ukraine, Lviv - Kyiv
tel/fax +38(032)