Employing a foreigner in Ukraine whose main place of work is out of Ukraine is uncommon but can be beneficial for certain business models. The requirements, legal and tax consequences of such employment are discussed in this material below.
Since 2022, employment service authorities have widely canceled permits for foreigners whose salaries were unpaid by Ukrainian employers and for whom no taxes were paid. The consequences of such cancellation for a foreigner could be the automatic cancellation of his residence permit in Ukraine, and for the employer - the impossibility for 1 year to obtain or extend employment permits for any other foreigners.
The legislation allows the use of foreigners’ work in Ukraine only after receiving a special permit from the State Employment Service.
Standard employment of a foreigner takes place on the basis of the conclusion of an employment contract between such a foreigner and a Ukrainian employer with all the employer's derivative obligations - notification of the start of the employee's work, payment of wages, payment of taxes and social contributions, etc.
At the same time, the legislator foresees a separate category of foreign workers who perform work on the territory of Ukraine, but do not conclude an employment contract with a Ukrainian employer. This category of foreigners is the so-called "seconded foreign workers".
A key feature of seconded foreign workers in Ukraine is that their employment contract is concluded with a foreign, not a Ukrainian, employer. The basis for using the labor of seconded foreigners in Ukraine is a contract under which a foreign employer sends an employee to a Ukrainian company to perform a certain amount of work on the territory of Ukraine.
In this scenario, the Ukrainian employer is not required to enter into an employment contract with the foreign worker. However, the employer must still obtain a work permit for the foreign worker from the State Employment Service. This permit is issued for the duration of the contract between the foreign employer and the Ukrainian company, but for no longer than three years. Meanwhile, other employment permits for foreign nationals are generally issued for a maximum term of two years.
The official fee for issuing a permit for a period of up to three years in 2024 is UAH 30 280 (10 subsistence minimums for the able-bodied population as of January 1 of the year in which the documents are submitted).
According to the general rule of international private law in Ukraine, the labor relations of seconded foreign workers who have an employment contract with a foreign company are not regulated by the law of Ukraine, unless otherwise established by an international agreement.
Based on the general rule, the Ukrainian employer does not have the obligation to inform the supervisory authorities about the start of work of such an employee, to pay the salary, since it is paid by a foreign company, and also to obtain a tax payer card for the foreigner.
Since the Ukrainian employer does not pay the seconded foreign worker a salary, he does not have the obligation to pay tax on the employee's income and social contribution.
At the same time, we emphasize that in cases of using the labor of seconded foreign workers, non-payment of social contributions by Ukrainian employers for such workers **cannot** be grounds for annulment of the work permit of the State Employment Service in accordance with clause 10, part 2 of Article 42-10 of the Law of Ukraine "On Employment of the Population".
On September 3, 2024, the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Regarding Regulation of Activities of Separate Subdivisions of a Legal Entity Formed in Accordance with the Legislation of a Foreign State" No. 3257-IX of July 14, 2023 (hereinafter referred to as the Law) will come into force.
The main novelties of the Law include the transfer of powers to register representative offices from the Ministry of Economy to the Ministry of Justice namely through state registrars. This, in turn, means that information about the representative offices of foreign companies will be publicly available in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Organizations (hereinafter - UDR). Prior to the entry into force of the Law, the Cabinet of Ministers of Ukraine should settle the issue of transferring information about already registered representative offices to the UDR.
Among the novelties in regulating the activities of representative offices, it should also be noted that foreign representative offices will have to disclose the ownership structure and submit information about the ultimate beneficial owner according to the procedure established by law. At the same time, it should be mentioned that the limitation of the period of validity of an extract from the trade or court register, etc. in relation to the parent company is limited to one month.
In addition, the law adds a requirement that representatives for submitting documents for the initial registration of representative offices can only be specially identified subjects of primary financial monitoring who conduct their activities individually.
The law shortens the terms of registration of representative offices from sixty to five working days, and also regulates the procedure for the liquidation of representative offices. As for the latter, the procedure for liquidation of representative offices mostly duplicates the provisions on terminating legal entities of Ukraine with the appointment of a liquidation commission, establishing the procedure and deadlines for creditors to declare their claims, etc.
The official fee for the registration of the representative office will be 1 subsistence minimum for able-bodied persons, which in 2024 amounts to 3.028,00 hryvnias.
In this article, we set out up-to-date information on the rules for
disclosing the ownership structure of companies in Ukraine in 2023.
Recently, the [Law of Ukraine "On Amendments to Certain Laws of Ukraine
on Improving the Regulation of Ultimate Beneficial Ownership and
Ownership Structure of Legal Entities"](https://zakon.rada.gov.ua/laws/show/2571-20#Text) came into force, which
introduced a number of amendments to the relevant laws governing the
procedure for disclosing information about beneficiary owners. We talk
about the main of them later in the article, but first of all, we would
like to give the definition of the beneficial owner in accordance with
the current legislation of Ukraine.
**The ultimate beneficial owner** (hereinafter referred to as the UBO) of
a legal entity is any individual who exercises a decisive influence on
the activities of a legal entity (including through a chain of
control/ownership).
At the same time, the law distinguishes two types of decisive influence
on the activities of a legal entity, namely:
- **direct decisive influence** is the possession by an individual of a
share in the amount of at least 25% of the authorized capital or
voting rights, and
- **indirect decisive influence** is at least the possession by an
individual of a share in the amount of at least 25% of the
authorized capital or voting rights through related individuals or
legal entities, or the exercise of decisive influence by exercising
the right to control and dispose of the company's assets, the right
to receive company income, the right to decisively influence the
formation of the composition of management bodies, the conclusion of
agreements that make it possible to determine the basic conditions
of the company's business, as well as the adoption of binding
decisions that have a decisive impact on the activities of the
company.
At the same time, it should be noted that an individual who formally
owns 25% of the authorized capital, but is actually a nominal owner or
intermediary in respect of such a right, is not considered a UBO.
So, having determined who the ultimate beneficial owner is and what are
the main characteristics of its influence on the activities of a legal
entity, we proceed to consider the main changes that have occurred in
the procedure for disclosing the UBO and ownership structure since
December 2022.
**Annual confirmation of UBO information is canceled**
Previously, the law required to confirm information about the UBO
annually within 14 calendar days from the date of state registration of
a legal entity. According to the [explanations of the Ministry of
Justice, this rule should have worked just from 2023](https://minjust.gov.ua/files/general/2023/02/28/20230228161434-84.pdf), but this Article
is currently excluded from the law. It means that annual confirmation of
information about the UBO is currently not required.
**The documents on UBO disclosure are submitted only when certain
registration actions are performed**
Previously, information about the UBO was submitted when almost all
registration actions were performed. However, today this list has been
reduced to only three of them, namely, documents on the disclosure of
the ownership structure and the beneficiary owners are submitted in the
case of:
\- registration of the establishment of a legal entity;
\- registration of inclusion of the information about the legal entity
to the state register, if the legal entity was registered before July 1,
2014;
\- registration of changes of the beneficiaries, information on them,
and changes of ownership structure.
At the same time, the list of documents required by law to disclose the
ultimate beneficiary remained the same, namely, a scheme of the
ownership structure is submitted, a document confirming the registration
of a non-resident legal entity in the country of its location (for legal
entities in which the founder is a non-resident legal entity), as well
as an identity document of the ultimate beneficiary.
**Notifications of changes in information about the beneficiary or
ownership structure are submitted within 30 working days**
In case of changes in the information on the UBO or changes in the
ownership structure, the legal entity must submit the relevant
supporting documents to the state registrar **within 30 working days from
the date of the changes**. At the same time, in case of inaccuracies in
the information about beneficiaries already submitted to the registrar,
it is necessary to correct these inaccuracies by submitting the relevant
documents to the registrar **within 3 working days from the date of
detection of the inaccuracy.**
**The document certifying the identity of the beneficiary and his
citizenship must be certified no earlier than 90 days before the date of
submission of the document for state registration**
Previously, the law did not establish such a requirement for the UBO
passport, but currently, state registrars will check compliance with the
term of certification of this document. In addition, we would like to
emphasize that according to the recent [clarifications of the Ministry of
Justice in February 2023](https://minjust.gov.ua/files/general/2023/02/28/20230228161434-84.pdf), the current requirement concerns the date of
certification of *a copy* of the UBO passport, and not the date of its
legalization or certification of the translation into Ukrainian, which
specifically concerns beneficiaries who are non-residents. What is also
new is that the state register now should contain information about all
citizenships of the UBO, if the last has several of them.
**The law expanded the list of entities that may not disclose information
about beneficiaries**
Such entities are, in particular, political parties, trade unions,
creative unions, employers' organizations, bar associations and
offices, organizations that carry out professional self-government in
the field of notary, state bodies, local governments, their
associations, public companies, state and communal enterprises, chambers
of commerce and industry, state pension funds, housing and construction
cooperatives, dacha (dacha-building) cooperatives, horticultural and
garage cooperatives (garage-building) cooperatives (societies),
associations of co-owners of an apartment building, etc.
**The liability for non-compliance with the rules of disclosure of
information about beneficiaries is increased**
In general, it is possible to divide the types of statutory liability
for non-compliance with the rules of UBO disclosure by **the subjects**,
namely:
- **liability of a legal entity** - for failure to submit, late
submission, or submission of knowingly false information about the
beneficiary or his absence, the law provides a fine of 1000 - 20 000
of a tax-free minimum income of citizens (as of 2023 it is 17 000 --
340 000 UAH).
> At the same time, those legal entities that sent a request to their
> founders to provide up-to-date information about the beneficiaries,
> but did not receive a response to such a request, are exempt from the
> provided liability. The founders of legal entities that have received
> a request to update the information on beneficiaries are obliged to
> respond to such a request within 5 working days from the date of its
> receipt. Within the same period, the founders are obliged to notify
> the legal entity of any changes in information about the UBO or
> changes in the ownership structure;
- **liability of the founders of a legal entity that are residents of
Ukraine** -- for failure to submit a response to the request of a
legal entity with the requirement to provide information on the
beneficiary owner, a fine of 1000 - 20 000 of a tax-free minimum
income of citizens (as of 2023 it is 17 000 -- 340 000 UAH) is
provided by the law.
- **liability of the director of a legal entity** -- for failure to
submit or late submission of information about the UBO,
administrative liability of the director is provided in accordance
with the Code of Ukraine on Administrative Offenses in the form of a
fine of 1000 -- 3000 of a tax-free minimum income of citizens (as of
2023 17 000 -- 51 000 UAH).
At the same time, according to the Law of Ukraine ["On Protection of the
Interests of Reporting Entities and Other Documents during the Period of
Martial Law or the State of War"](https://zakon.rada.gov.ua/laws/show/2115-20#Text), which entered into force in March
2022, the application *of administrative responsibility* during martial
law and 3 months from the date of its end will not be carried out. If it
is clear with the administrative fine for the director provided by the
Code of Ukraine on Administrative Offences, then whether the liability
provided by the relevant laws (we are talking about fines of 17 000 --
340 000 UAH, which is mentioned above in the article) will be applied is
not clear yet. Therefore, we are waiting for additional clarifications
from the Ministry of Justice on this issue.
**Finally, the most interesting thing is in what time frame it is
necessary to disclose information about beneficiaries under the new
rules**
The final and transitional provisions of [the Law of Ukraine "On
Prevention and Counteraction to Legalization (Laundering) of Proceeds
from Crime, Terrorist Financing and Financing of Proliferation of
Weapons of Mass Destruction"](https://zakon.rada.gov.ua/laws/show/361-20#Text) define the period for notification of
beneficiaries under the new rules, namely legal entities registered
before the entry into force of regulations that approve the methodology
for disclosing information about beneficiaries, as well as provisions on
the content and structure of ownership (except for entities, which have
already disclosed the ownership structure earlier and those who are
exempted from the obligation to disclose beneficiaries) submit documents
regarding the UBO during:
- **6 months** from the date of approval of the normative act on the
methodology of disclosure of information on UBO and provisions on
the content and structure of ownership, but **not earlier than 90
days from the date of the end of martial law.**
The rule mentioned above applies to those legal entities that have not
yet submitted information about the UBO and ownership structure to the
state registrar earlier.
The legal entities that have already disclosed information about the UBO
and submitted the ownership structure for registration, but found
inaccuracies in the previously submitted information in connection with
the approval of the regulatory document, which will approve the
methodology for disclosing information about the UBO, must re-submit the
updated information within 6 months from the date of entry into force of
this regulatory document. As of today, the mentioned regulatory
document, which approves the methodology for determining the ownership
structure, has not yet been published.
At the same time, we emphasize that in case of changes in information
about the UBO or changes in the ownership structure, the rules on
notifying the registrar within 30 days, which are described above in the
article, apply.