Registration of private entrepreneurship for foreigners simplified

Registration of private entrepreneurship for foreigners simplified

Thanks to the joint work of the representatives of the members of the financial and legal committee of the IT Ukraine Association, experts of the Office of Effective Regulation (BRDO) and the Ministry of Justice of Ukraine, explanations were issued regarding the definition of "Place of residence/location of a private entrepreneur". From now on, for registering as a private entrepreneur (PE) foreigners do not need a residence permit, and the address that can be confirmed by other documents - for example, a real estate lease agreement located in Ukraine. This significantly simplifies the cooperation of Ukrainian companies with foreign citizens as PE. 

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 analog of incentive schemes in other countries. Another factor that has a positive impact not only on the IT-industry but also on other industries is the conditions for the free movement of specialists between countries and a clear mechanism for establishing a legal business for foreigners in Ukraine. But by this time there were restrictions in our country, which greatly complicated the cooperation of Ukrainian companies with foreigners as PE. 

In order for an enterprise to have the opportunity to enter into agreements with a foreign PE (for example, a software developer from another country), two conditions are required: the foreigner must be legally in Ukraine and be registered as a PE in Ukraine. 

It seems all is simple. But both points create significant restrictions. 

First, under the lawful grounds for staying in Ukraine is meant, including the availability of a temporary residence permit, which cannot be obtained if the foreigner wants to work without a job at a Ukrainian enterprise or when working on a model of a sole proprietorship, without a long-term residence in Ukraine. 

Secondly, in order to open a private limited company in Ukraine, a citizen of another country must apply for the state registration of an individual by an entrepreneur, which contains the column "Place of residence/location of a private entrepreneur". And this column caused difficulties – registrars interpreted this provision as a duty of a foreigner to have a registered place of residence in the sense of the Law "On Freedom of Movement and Free Choice of Residence in Ukraine", which in turn required the presence of a temporary residence permit. That is, foreigners were not able to open a PE in Ukraine without obtaining a residence permit.  

The impossibility for a foreigner to register as an entrepreneur without a residence permit was discovered by us during a comprehensive analysis of the software development market. This barrier is described in detail in the Green Paper prepared as a result of this analysis and is available at https://regulation.gov.ua.  We are grateful to the Ministry of Justice for work on the abolition of this barrier and we look forward to fruitful cooperation on other initiatives

Oleksander Kubrakov, Executive Director of the IT Ukraine Association, head of the IT and Telecom sector of BRDO

For Ukrainian IT-industry, the opportunity to freely cooperate with foreigners on a contractual basis is a long-awaited victory. This will revive the exchange of experience in the industry, will promote the development of specialists, which collectively creates additional conditions for the development of information technology in our country. This opportunity will make Ukraine more open to foreign human capital, increase revenue in the state budget in the form of taxes

Ihor Bida, President of the IT Ukraine Association, Managing Director of GlobalLogic Ukraine