Webinar "Choosing a Country to Open an R&D Center: What to Pay Attention To"

On October 16, a webinar titled “Choosing a Country to Open an R&D Center: What to Pay Attention to” took place, organised by the IT Ukraine Association jointly with Asters Law Firm.

 

The speaker, Oksana Petrus, Counsel, Head of IT at Asters, discussed several important topics related to the selection of a country for opening an R&D centre.

 

Before establishing an R&D centre, it is crucial to clearly define the main objective of this step, ensuring it aligns with the overall business development strategy. For instance, objectives may include attracting new talent from the local market, mitigating business risks in Ukraine due to the ongoing war, securing investments, or relocating a Ukrainian team abroad. The clearly defined goal will inform subsequent steps related to country selection, business development, process establishment, and legal planning.

 

Key Discussion Points:

• Assessment of Investment Climate To analyse the developmental dynamics of a country, one can utilise various international rankings such as the Doing Business Report, Global Competitiveness Report, Index of Economic Freedom, FDI Confidence Index, World Investment Report, Economic Freedom of the World, Country Risk Ratings, and Global Investment Competitiveness Report.

• Evaluation of Legal System, Labour, and Tax Legislation It is essential to conduct a comprehensive study of the stability of legislation and access to justice. Additionally, attention should be given to the peculiarities of corporate structuring, tax regulations, employment rules, migration policies, protection of intellectual property rights and data, currency restrictions, and regulatory features.

 

When assessing primary employment models, factors such as the following must be considered:

• Employees: Requirements of labour legislation (e.g., possible terms of employment contracts, rules for termination, etc.) and the company’s tax obligations.
• Contractors (Self-Employed): Risks associated with hidden employment relationships and permanent representation for the company in the host country of the specialist.

 

The characteristics of the host country and local talent market must also be considered. For example, senior candidates in Romania often prefer working under a self-employed model, while junior and mid-level candidates favour permanent employment. It is crucial to check migration requirements when choosing a cooperation model with Ukrainian citizens abroad or other foreigners, as not all countries permit foreigners (including Ukrainian citizens under temporary protection) to register as self-employed or obtain residency permits based on entrepreneurial activities.

 

When calculating budgets, it is essential to account for all potential payments beyond salaries: from paid vacation days and overtime pay to severance compensation (which in some Latin American countries can reach a year’s salary) and extravagant payments (e.g., in Mexico, a mandatory distribution of 10% of company profits among all employees).

 

Additionally, when selecting a country for establishing an R&D centre, attention should be paid to other sometimes less obvious but significant factors impacting business operations, such as cultural and linguistic nuances, the political situation in the country, as well as logistical and infrastructural capabilities.

 

In practice, opening a company in a new jurisdiction can entail many unknowns and hidden challenges, even after thorough analysis. Therefore, it is advisable to navigate this process with the guidance of experienced experts.