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Establish a Subsidiary in Ukraine

Establish a Subsidiary in Ukraine

Subsidiaries in Ukraine are forms of business with foreign capital considered legal entities and able to take their own management decisions and perform in a different sector than the investing foreign company. Opening a subsidiary is one of the two ways, the other being in the form of a branch, in which a foreign company can enter the Ukrainian market. The subsidiary’s significant degree of independence from the parent company abroad often makes it the more convenient choice, compared to the more limited option of opening a branch.

The subsidiary can be used in any industry and the incorporation procedure can be handled by our team of company formation experts in Ukraine. If you want to open a subsidiary in Ukraine, we can help you with the pre- and the post-registration phases.

 Quick Facts  
  Applicable legislation (home country/foreign country)

Ukrainian laws

Best Used For Performing much of the same activities as the foreign company, however, also adding diferent business purposes if needed.

Minimum share capital 

 No minimum capital for the LLC
Time frame for the incorporation 

1 week

Management (Local/Foreign) Local
Legal representative required 

No minimum capital for the LLC

Local bank account

Yes

Independence from the parent company Fully independent
Liability of the parent company Liable only to the extend of its shareholding in the Ukrainian legal entity operating as subsidiary.
Corporate tax rate 18%
 Possibility of hiring local staff (YES/NO) Yes 

The main characteristics of subsidiaries in Ukraine

The most advantageous forms of business in Ukraine, adopted by the foreign companies are the limited liability companies, private or public.

A private limited liability is incorporated by a single shareholder and capital of such company is divided into parts with a size that is regulated by the Articles of Association. The liability of each member is depending on the size of his parts in the company. At registration, the subsidiary must appoint a manager or a board of managers. The general meeting of the shareholders is taking the important decisions.

The joint stock companies in Ukraine may be open or closed. The open joint stock is characterized by its transferable shares, registered at the Stock Market. The stocks of the closed joint stock companies are transferable only among the members. Also, a closed joint stock company cannot have more than 100 members. A closed joint stock may be transformed in an open joint stock only if the general meeting of the shareholders is taking this decision and the company’s charter is changed. The capital of the joint stock company is divided into shares and the member’s liabilities depends on the number of own shares.

A limited liability company has a governing body, and the decisions are made within the General meetings of shareholders. In most cases, companies will have a single governing or executive body, and this will be the company director. An optional supervisory board is used in larger companies and the company’s articles of association can provide information on the powers of the supervisory board as well as its general competence and how it regulates the company’s activities.

Ukrainian subsidiary incorporation steps

The Ukrainian subsidiary is incorporated as a local private or public limited liability company and the general steps are largely the same for these two business forms. The notable difference shave to do with the different minimum share capital that is deposited for the public type, as well as its the more complex management structure that will be mentioned in the Articles of Association.

Below, our team of company formation agents lists the main steps that are required when opening a corporation in the country.

  1. The process of incorporation of a subsidiary in Ukraine starts with the notarization of the articles of association and the decision of opening a subsidiary.
  2. A bank account must be opened and the minimum chare capital must be deposited. A bank certificate should be provided. Also, a registration tax must be paid at the bank.
  3. The notarized documents, along with the certificate of deposit and the registration fee must be deposited at the United State Register of Legal Entities.
  4. The subsidiary incorporated in Ukraine must also pay taxes and VAT so the registration at the State Tax Service must be performed.

In case of a subsidiary, a foreign company will be a shareholder it will be included in the documents presenting the ownership structure. Information on the foreign company that acts as a shareholder in the Ukrainian subsidiary will be presented for registration.

The process of registration of a subsidiary in this country takes around 7 days, if all the documents are in order.

Once it is registered, the subsidiary will need to apply for special permits and licenses, according to the particular industry in which it activates. Once such example is in case of pharmaceutical companies that need to obtain a license from the Medicines and Drug Control.

Subsidiary taxation in Ukraine

The subsidiary is a locally registered company and it is considered a resident for taxation purposes, a characteristic that makes it subject to the full spectrum of taxation in the country. By contrast, a branch in Ukraine is only taxed on the income it derives from its business operations in the country, as it is merely an extension of a foreign corporation.

The following taxes are relevant in case of a subsidiary in Ukraine:

  • Corporate income tax: the standard value is 18%, there is no reduced tax; both branches and subsidiaries are taxed at the same rate;
  • Withholding tax: there is no dividend withholding tax, however, an interest withholding tax applies in case of interest;
  • Value-added tax: the standard rate is 20% and two other reduced rates of 7% and 14% apply, with certain types of goods and services being subject to a 0% rate;
  • Other taxes: a 22% social security contribution applies to an employee’s salary; this is a unified contribution.

Subsidiaries observe the Ukrainian rules for corporate compliance and reporting. The corporate income tax return is filed within 40 days of the end of the quarterly reporting period and 60 days of the annual reporting period. Value added tax returns are filed monthly, within 20 days of the last calendar day for which the report is submitted. Quarterly returns are submitted within 40 calendar days of the last calendar day of each of the reporting quarters. Penalties apply in case of late payments or when the amount is underpaid.

Our team of company formation agents can give you complete details about taxation and reporting.

A particular issue ion which our team can advise is the avoidance of double taxation, as it is stipulated in the EU Parent-Subsidiary Directive.

Company formation in Ukraine may seem challenging because of the language barrier. This is why working with a local team of experts such as our own is advisable in case of foreign companies that wish to establish their presence on the market via a subsidiary.

Contact us if you want to set up a subsidiary in Ukraine and are in need of a local partner. Our English-speaking team is ready to assist you throughout the incorporation process, when applying for special permits and licenses, when hiring employees, as well as with many other issues related to company formation and management in Ukraine.