Registration of foreigners as private entrepreneurs is simplified

30-01-2018

From now on, foreign private entrepreneurs do not need a residence permit to register, and a location address can be confirmed by other documents – for example, by a contract for the lease of real estate located in Ukraine. This significantly simplifies the cooperation of Ukrainian companies with foreign citizens as PEs. Thanks to the joint work of representatives of the committee on finance & law of the IT Ukraine Association, BRDO experts and the Ministry of Justice of Ukraine, an explanation regarding the definition of “Place of residence/location of a private entrepreneur” was issued.

One of the main factors contributing to the development of the IT industry and IT business in Ukraine is the possibility of using the simplified taxation system, the so-called “third group”, which is currently serving as an analogue of incentive-based systems in other countries. Another factor that has a positive impact both on the IT industry and other sectors as well is the conditions for the free movement of specialists between countries and a clear mechanism to establish legal business activities for foreigners in Ukraine. But before then, there were restrictions, which significantly complicated the cooperation of Ukrainian companies with foreigners as private entrepreneurs, in our country.

The following two conditions are required to enable an enterprise to enter into a contract with a foreigner as a PE (for example, with a software developer from another country): the foreigner should legally stay in Ukraine and be registered as a PE in Ukraine.

It seems there are no hassles. But both points create significant restrictions.

First, legal grounds for staying in Ukraine imply among other things having a temporary residence permit, which can not be obtained if foreigners would like to work in Ukrainian enterprises without official employment contracts or work as PEs without a long-term residence in Ukraine.

Secondly, to register as a PE in Ukraine, a foreign citizen should submit an application for the state registration of a private entrepreneur, which contains a column “Place of residence/location of a private entrepreneur”. And this column caused difficulties – registrars interpreted this provision as a duty of foreigners to have a registered place of residence within the meaning of the Law “On Freedom of Movement and Free Choice of Residence in Ukraine”, which in turn required having a temporary residence permit. That is, foreigners were not able to be registered as PEs in Ukraine without obtaining a residence permit.

“We have revealed the fact that it was impossible for foreigners to register as entrepreneurs without a residence permit during our comprehensive analysis of the software development market. This barrier is described in detail in the Green Paper developed as a result of this analysis and available at  https://regulation.gov.ua/. We are grateful to the Ministry of Justice for their work on the elimination of this barrier and look forward to fruitful cooperation on other initiatives,” the IT and Telecom Sector Head at the Better Regulation Delivery Office Oleksandr Kubrakov said.

“The possibility to freely cooperate with foreigners on a contractual basis is a long-awaited victory for the Ukrainian IT industry. This will encourage the sharing of experience in this sector and promote the development of specialists, which, as a result, will create additional conditions for the development of information technologies in our country. This opportunity will make Ukraine more open to foreign human capital and increase revenues to the state budget in the form of taxes,” the President of IT Ukraine Association, Managing Director of GlobalLogic Ukraine Ihor Byeda said.

 

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