Ukraine Introduces E-residency for Foreigners
On 26 October 2022, the President signed a Law on the peculiarities of taxation of business activity of electronic residents (the "Law"). The e-residency will be launched on 1 April 2023.
What opportunities does e-residency create for foreigners?
E-residency allows foreigners to conduct Ukraine-based business as individual entrepreneurs with their counterparties from outside of Ukraine.
E-residency also allows foreigners to register their business remotely, open bank accounts, carry out communications with regulatory authorities in electronic form and pay individual income tax at 5% rate subject to compliance with certain financial thresholds.
Who can become an e-resident?
To be eligible for obtaining the e-resident status, a foreigner should:
(a) reach the age of 18;
(b) be a citizen/resident or permanent resident of a country included in a special list to be adopted by the Ministry of Digital Transformation of Ukraine;
(c) not have a permanent residence permit in Ukraine;
(d) not be a tax resident of Ukraine; and
(e) not receive income from activities in Ukraine (except for passive income, such as dividends or interest).
How to obtain the e-resident status?
The first steps in obtaining the e-resident status are as follows: (1) submitting an application through the information system "E-resident", (2) passing the identification procedures, and (3) obtaining an electronic signature.
The Government should determine the detailed procedure for obtaining and cancellation of the e-resident status. As of the date of publication, such procedure has not been adopted yet.
How can e-residents start their business in Ukraine?
After foreigners obtain their e-resident status, they should take the following steps via the information system "E-resident":
(a) submit an application for registration as an individual entrepreneur; and
(b) open a current account in the bank that is available for selection in the information system.
Are there any restrictions on e-resident's business activity?
First of all, e-residents can carry out activities exclusively in favour of non-residents of Ukraine.
Also, during the year, e-residents should meet the following criteria:
(a) e-resident does not employ the citizens or residents of Ukraine;
(b) e-resident does not receive income from activities in Ukraine (except for passive income, such as dividends); and
(c) e-resident's annual income does not exceed the established limit (as of the date of publication approximately EUR 212,800).
What taxes does the e-resident pay?
The e-resident will automatically be subject to the simplified taxation system (third group) and pay a single tax in the following amount:
(a) 5% of income; and
(b) 15% of the excess income over the established limit.
Should e-residents pay their taxes on their own?
E-residents do not have to self-assess their income tax, file tax returns and pay taxes by themselves. The servicing bank where e-resident has an account will be a tax agent and will pay taxes from the amount of funds received into the e-resident's current account and will submit the relevant returns on behalf of each e-resident.
Follow our updates to find out about the adoption and entry into force of this and other laws.
Source: official webportal of the Verkhovna Rada of Ukraine
Our experts: Yevheniy Deyneko, Andriy Olenyuk, Yuliia Kylchynska, Olha Horodniuk, Yuliia Sharabar.
How we can help you:
- advising on eligibility for obtaining e-resident status;
- advising on obtaining the e-resident status;
- advising on compliance with Ukrainian legislation, in particular, during martial law;
- preparation of commercial agreements for various businesses.
- support in appealing decisions, actions or omissions in the field of state registration; and
- execution of powers of attorney in Ukraine and abroad for various registration actions.
