Employer Of Record in Ukraine

Ukraine Country Facts

Ukraine is an emerging free market economy with prominent service, industrial, and agricultural markets. It has distinguished itself as a technological hub for Europe but its industrial products are coal, metals, machinery, and chemicals. Its agricultural products are grain, sunflower seeds, and vegetables. Ukraine’s currency is the Hryvnia (UAH) and the major cities are Kyiv, Kharkiv, Donetsk, Odessa, Dnipro, Zaporizhzhya, and Lviv.

Unfortunately, economic growth in this country is affected by regional and political conflicts with Russia. The International Monetary Fund (IMF) has helped stabilize the economy, but economic reforms remain slow. Although there are issues with local and government corruption, Ukraine is working to transition toward a closer tie with the European Union, making the Union a major trading partner. This partnership is boosting Ukraine’s economy and is making it an interesting place to invest. In fact, it is known for having a low-cost well-educated workforce.

Ukraine stands at the heart of Europe and is a good connection to Russia and the Middle east. Furthermore, Ukraine is home to the largest plane in the world—the Antonov An-225.

The Economy

Ukraine was the second most productive country during the Soviet era, behind Russia. Its strength was agriculture and industry. Those strengths have remained the pillars of the Ukrainian economy, with agriculture in the south and the west producing an amazing amount of wheat and manufacturing in the east producing iron and steel. Those products makeup the bulk of Ukrainian exports.

Ukraine is the 5th largest world producer of corn; the 8th largest world producer of wheat; the 3rd largest world producer of potato; and it is the world’s largest producer of sunflower seed.

This country has a strong reputation as a technological leader, in fact it ranked fourth in the world in the number of certified IT professionals. This makes Ukraine a technological growth center for the world. More than 13 research and development centers from global companies have relocated to Ukraine ranking it among the top 25 countries in the world for software development and the 8th most popular tourist destination in Europe.

Small and Medium Businesses

Small and medium businesses (SME) make up about 60% of GDP in Ukraine. The bulk of the impact in this sector are the medium size companies which add 44% of the value-added–the small size contributes about 17%, and the micro enterprises about 5%.

SMEs make up 81.5% of jobs and 37% of tax revenues for Ukraine. Therefore, the government has taken steps to improve the opportunities for small businesses to grow by minimizing the documents required from companies, simplifying tax law, and creating a single information resource for entrepreneurs.

Starting a Business

Any person from any nationality may start a business in Ukraine and the process for starting a business is simple, only taking a few days. Most foreign investors use a limited liability company to start a business.

Although dealing with construction permits and getting electricity remains somewhat of a challenge at times, registering property and getting credit is now easier than ever. The government is currently working to provide a fairer legal environment to help foreign investors; enforcing contracts has become an easy process.

Payroll

The Unified Social Contribution (USC) provides the regulations for payroll.

Employees contribute 22% of their monthly income. For disabled employees, it is 8.41% for the private sector and 5.5% for the public sector. The payroll contribution cap is set at 25 times the average monthly cost of living. For the employer, the Personal Income Tax is 18% and is submitted quarterly. Salaries are typically paid twice a month. Overtime is usually paid at a double rate.

The normal weekly hours worked is 40 hours a week.

Tax advantages

The corporate income tax in Ukraine is 18%. Investors are taxed on their Ukrainian-sourced income. Fright services payments are subject to a 6% tax. There is a 3% rate for insurance activities, 20% for residents who make payments to non-residents for advertising production (this tax will be eliminated for 2022). The standard value added tax is 20%, but only 14% for certain agricultural products and 7% for certain medical products.

Renewable Energy

Renewable energies make up 4% of its domestic power generation. This is a small number, but it is growing at a rapid rate. Many solar power stations have been created and Ukraine now boasts one of the largest solar parks in Europe. Ukraine also uses wind energy. According to the Global wind energy council, 40% of Ukraine is suitable for wind power.

Business Culture

Ukraine has a unique business culture which merges an entrepreneurial impulse with the backdrop of a soviet legacy.

• Be Friendly
  Ukrainians are warm and friendly. They value business relationships, but they can also be firm, direct, and sincere, in their feedback.
• Build Relationships
  Relationships should be developed at both the personal and the corporate level.
• Refrain from Praise
  Praising people in front of others may be seen as manipulative, so it is better to remain dignified, calm, and sometimes quiet until you are asked to speak.
• Firm Handshakes
  When first meeting someone, a firm handshake while looking in the person’s eyes is the most common way to greet that person. Also, it is typical to exchange business cards.

Food Culture

The Ukrainian diet is based on simple peasant dishes. Bread, vegetables, meats, and potatoes make the base of Ukrainian foods.

Ukraine is known as the “Breadbasket of Europe” and provides quality wheat products such as breads and pastries.

They are known for creating the “Varenyky”, which is a dumpling typically filled with potato, cheese, and onions. A favorite drink is the “Horilka”, which is a type of vodka. During the summers, many drink “Kompot”, which is made of fresh fruit.

Population

The national language is Ukrainian, but many also speak Russian, some even speak Romanian, Polish, or Hungarian. The greater population practices Orthodox Christianity; but some follow the Kiev patriarch, while others follow the Moscow patriarch. A smaller number of people are catholic, protestant, Jewish, or Islamic. There are about 44 million Ukrainians who have a high literacy rate of 99.7% and about 70% of people live in Urban areas

Geography

Ukraine is located in Eastern Europe and it borders the black sea. The south of the country has a Mediterranean climate while the north is more continental and the west part of Ukraine receives the most rain. Indeed, Ukraine experiences four distinct seasons. People enjoy going to the black sea or the Carpathian Mountains for vacation.

• Ivano-Frankivsk
  This city located in Ukraine was said by Forbes magazine to be one of the best cities to do business in. This is due to the transparency of local authorities, high levels of business activity, transportation, security, ecology and the perception of the city by locals and attractiveness for migration.
• Lviv
  This city was ranked third in the Ukraine for developing a business. This is due to the economic potential, 7
  local authority support, the talent pool, the smart city development and the general quality of life that can be enjoyed here.
• Kyiv
  Kyiv is the capital of Ukraine, and is pronounced Kiev. It is also the most populous city in Ukraine, which is the second largest country in Europe. This is an important place for industrial, scientific, educational and cultural development.

General Highlights

What you need to know about employing personal in Ukraine:

Laws and Agencies that regulate labor relationships

The Ukrainian government, the Verkhovna Rada governs labor laws. There are several draft laws under consid- eration which outline laws for employers and their employees.

Key Tax and Labor Authorities

Labor Contracts

Annual Taxable Income
Income tax in Ukraine applies to both residents and non-residents. They are taxed at an 18 percent personal income tax rate. In addition, income is subject to temporary military tax at 1.5 percent rate.

Corporate Tax Rates
Ukraine has a standard corporate tax rate of 18%, which they call the CIT. WHT at a rate of 15% applies to most passive income payments to non-residence, unless a double tax treaty is in place.

Public Holidays

The Labor Code provides for public holidays that are observed in Ukraine.

Termination

Probation in Ukraine can last for up to 3 months.