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Immigration Opportunities for Foreign Investors in Ukraine
Ukraine is constantly growing and developing country with large number of possibilities for investors in agriculture, real estate, IT.
A number of reforms have been introduced to make the Ukrainian market more attractive and business easier to run.
The main targets for the reforms are corporate legislation, immigration legislation, amendments to laws, governing the business activity in Ukraine, judicial reform aimed at securing the interests of business as well as investors.
On 23 May 2017, the Ukrainian Parliament adopted Law of Ukraine No. 2058-VIII On Amendments to Certain Legislative Acts of Ukraine on Removing Barriers to Attracting Foreign Investments, which significantly changed the procedure for issuing and extending permits for the employment of foreign citizens in Ukraine, and new grounds for investors to get residency permits were added. The basic regulation is specified in Law of Ukraine No. 2491-III On Immigration and Law of Ukraine No. 3773-VI On the Legal Status of Foreign Citizens and Stateless Persons.
Generally, any investor who is seeking for residence in Ukraine has the following opportunities:
create a company in Ukraine and, as a shareholder and/or ultimate beneficiary owner of the newly-created company, get a temporary residence permit valid for three years after being employed by the company;
create a company in Ukraine with authorized capital of at least EUR 100,000, and as a shareholder and/or ultimate beneficiary owner of the newly-created company get a temporary residence permit without employment:
create a representative office in Ukraine (for foreign investor’s legal entities) and all the employees (within the number, indicated in the application letter and the registration certificate) receive temporary residence permits in Ukraine without a work permit;
create a company in Ukraine and make an investment of at least USD 100,000 and apply for a permanent residence permit in Ukraine.
What’s it All About
Creating a company in Ukraine is not a very difficult issue from the legal point of view. At present it takes no more than 2 business days to draft all the necessary documents and register the company. Unfortunately, Ukrainian legislation is still not very flexible in matters related to business organization in Ukraine, internal regulation within companies: there are direct rules that must be obeyed (i.e. requirements of constitutional documents, voting procedures, matters related to the expulsion and existence of shareholders) and may not be modified at the discretion of shareholders. At the same time, information about business entities in Ukraine is open and available via the Internet, so it is quite easy to control and check it. The founder of the company can be a private person or a legal entity, but for the purposes of getting a residence permit it is important if the foreign citizen is the shareholder or ultimate beneficiary owner of the Ukrainian company. For this category of foreign investors new specific rules were adopted, and they can apply for temporary residence in Ukraine for up to 3 years (with the right of extension).
The Ukrainian Government has also provided an additional mechanism for investors to get temporary residence in Ukraine: if the amount of the authorized capital of the legal entity created by the foreign citizen is EUR 100,000 or more he/she can apply directly for temporary residency in Ukraine. Such grounds really secure the interests of investors and shall not require official employment in Ukraine.
For those investors who want to manage their business in Ukraine directly as managers, official employment is required, and a work permit will be necessary.
And now Ukraine is friendlier for business owners: a work permit for them can be issued for a period of three years. We would like to note the decrease in the bureaucratic burden on employers implied by the aforesaid amendments to Ukrainian legislation. The procedure for filing documents was significantly simplified. It is no longer necessary to provide criminal records and medical documents to the State Employment Service. The new procedure for issuing work permits came into effect on 27 September 2017 and is actively applied by The State Employment Service, which issues work permits. Considering the fresh results of the first experience of applying for work permits (and issues related to this) according to the changed order, it is already possible to analyze whether changes to legislation were appropriate and effective.
Creating a representative office of a foreign business entity in Ukraine is also an option for doing business here. A representative office is not recognized as a separate and independent legal entity in Ukraine (but it is considered a tax resident of Ukraine), all foreign citizens, involved in a representative office get a temporary residence in Ukraine without work permits. At the same time, the process of registering a representative office is costly (the state fee is USD 2,500), time consuming (it takes up to 3 months) and requires a lot of documents from the main company, with verification by a notary, apostille and translation into the Ukrainian language.
If a foreign citizen invests a least USD 100,000 as a share in the authorized capital of a Ukrainian company, he/she can apply for permanent residency in Ukraine. Permanent residence has no term of validity and grants a larger scope of rights for the foreign citizen. In contrast to the simplified procedure of getting a temporary residence permit, the procedure for getting permanent residency in Ukraine has not changed. It takes more time due to the fact prior to applying for permanent residence a foreign investor must obtain an immigration permit. The foreign investor should be ready for that, as he will be asked to provide the State Migration Service office with documents evidencing his/her current place of residence, criminal records, medical references, documents evidencing the actual making of investment (in full scope): as the registration of investment was abolished, now it is enough to submit copies of constituent documents of the company and a bank reference, evidencing the transaction.
The permanent residence permit is a document that gives a foreigner the right to stay in Ukraine legally for a long period. It has no validity limits (lasts forever, but the document itself must be replaced in certain cases), and similar to the temporary residence permit it allows a person to stay in Ukraine, leave and enter the territory of Ukraine freely, employment by any company without obtaining a work permit. Therefore, legal status is quite similar to citizenship, but a little reduced as there are no voting rights, no possibility to enjoy the right to own agricultural land, enjoy the visa free regime with EU, etc.
Investing money in the Ukrainian economy is still a risky thing, and there are lots of limitations on the paying out of dividends and the return of investment may be a burdensome bureaucratic procedure. Currency control is still harsh and banks in Ukraine require documents for the verification of transactions in currency, though the National Bank of Ukraine is, as the regulator, constantly simplifying these procedures. Moreover, escrow account services became available from January 2018. They are crucial for just enabled squeeze-out procedures in Ukrainian joint stock companies.
It is worth noting that on 6 February, 2018 Ukrainian MPs voted for the Law On Limited Liability Companies and Companies with Additional Liability that enables opportunities for more flexible internal regulation and management of companies in Ukraine. These new rules will provide shareholders with a larger scope of discretion when drafting constitutional documents, the list of cases for making changes to the constitutional documents is reduced, the shareholders agreement becomes a permitted instrument for internal regulation and, therefore, running a business in Ukraine becomes more secure for investors.