General Introduction

Ukraine is one of the largest by population (approximately 42 million) and the largest by its territory in Europe. The territory of Ukraine covers the land area of 603,500 sq kilometers. The coastline is 2,783 kilometers. Ukraine has borders with the Russian Federation to the east, Belarus to the north, Poland, Slovakia, Hungary, Moldova and Romania to the west. Two Seas – the Black Sea and the Sea of Azov on the south of the country.

Legal system

Ukraine is a presidential-parliamentary republic. The country follows a civil law system and various laws are codified. The sole body of legislative power in Ukraine belongs to the unicameral parliament (Verkhovna Rada of Ukraine). The president of Ukraine is the head of state, and the government is lead by the prime minister. The Сonstitution of Ukraine is the main source of law in the legislative hierarchy. Ratified intranational treaties are an integral part of the national legislation.

Ukraine is one of the founding members of the UN and a member of different other organizations, such as the IMF, IBRD, OSCE, IFC, EBRD, MIGA, EIB, BSTDB, and the Council of Europe. Ukraine also signed the association agreement with EU and closely cooperates with NATO.

In relation to commercial matters the following codes are significant: Civil Code of Ukraine (“Civil Code”), Commercial Code, Law of Ukraine on Companies (“Company Law”; not valid with respect to limited and additional liability companies), Law of Ukraine on Limited and Additional Liability Companies (“LLC Law”), Law of Ukraine on Joint Stock Companies (“JSC Law”), Law of Ukraine on the State Registration of Legal Entities, Private Entrepreneurs and Public Organizations and the Tax Code.


The most successful areas of the Ukrainian economy are the IT sector, agricultural sector, chemical production, and pharmaceuticals. The country is among the top 5 global exporters of some agricultural product.

In 2020, the country climbed five more places in the World Bank’s Ease of Doing Business ratings, to 64 out of 190 countries, and the bank rates of Ukraine are the second among the countries of the world in the last 10 years regarding the speed and depth in the improvement of the business climate. Between 2015-2019, Ukraine witnessed foreign direct investment flows of $16 billion, resulting in the construction of over 100 manufacturing plants, representing tens of thousands of new high-added-value jobs. These include a $200 million state-of-the-art seed processing facility by Bayer from Germany, a $150 million grain terminal by Cargill from the US, a second $16 million manufacturing site by US-based Jabil, and the arrival of such global brands as General Electric, Ryanair, HEAD, IKEA, H&M, Decathlon, and many others.

Rules of conducting economic activity in Ukraine by foreigners

In most cases foreigners have the same rights to conduct business as the citizens of Ukraine.

Main forms of business activity in Ukraine:

  • General partnership
  • Limited partnership
  • Additional liability company
  • Limited liability company
  • Joint stock company (private or public)

Limited liability companies as well as joint stock companies are the most commonly used forms. For the most type of business activities limited liability company is the most preferred option. It is easy to establish (within 6-24 hours), no requirements relating to the authorized capital, number of participants is not limited, and participants are not responsible for the company.

A foreign company can also set up a representative office in Ukraine, which means registration of a branch in Ukraine without establishing legal entity.

It is also allowed to run the business for individuals (applies to foreigners as well) after the registration of private entrepreneurship activity.

Legal entities have a right to appoint a foreign national to the company’s governmental bodies after receiving the work permit.

Certain activities require license or permits. The list of such activities are determined by the Law of Ukraine “On licensing of types of economic activity” and “On the Permit System in the Field of Economic Activity”.


(a) corporate taxation

Generally, legal entities in Ukraine are subject to a corporate tax (CIT) of 18 %.

Legal entities as well as individuals as private entrepreneurs may choose the so-called simplified taxation system and pay one unified tax. Under this tax set-up, tax payers pay one tax to replace taxes such as personal income tax, VAT, and property tax if they meet certain requirements.

Business entities that apply a simplified taxation system are divided into three groups. Private entrepreneurs may choose all three groups, whereas the companies may only choose the third option.

Group 1: This group is for individuals who earn up to 1 million UAH a year but do not have employees. The members of this group may be involved in retail, or they may offer personal services.

Group 2: These individuals earn up to 5 million UAH a year and have between 1 to 10 employees. Members of this group may only do business with clients who are also under the simplified tax.

Group 3: This group allows to have unlimited number of employees and determines the level of annual income which may not exceed 7 000 000 UAH. The majority of activities are available, however there some exceptions and certain businesses will require switching to general taxation system. The tax rate is 5 % if it includes VAT and 3 % if VAT is paid extra.

The basic VAT rate is 20 %.

(b) salary

Salaries, wages, and any other remuneration for employment under an employment contract are subject to income tax at a rate of 18 %. The tax is withheld by the employer. Additionally, also applies 1,5 % of military tax on personal income.

(c) social security contributions

Employers are required to make a single social security contribution on behalf of their employees (Section 4 of the Law of Ukraine on the Collection and Accounting of a Single Contribution for Mandatory State Social Security, that is, the “Social Security Law”). The single social security contribution is payable at the expense of the employer at a rate of 22 % calculated from the salary.

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Andriy Fedchyshyn attorney at law