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Overall, a term of the employment contract is void if it makes the employee's position less advantageous compared to the Ukrainian labour laws. Is a written contract of employment required? If so, what main terms must be included in it? An employment contract must, as a general rule, be made in writing, although an employment contract is not mandatory except in certain circumstances.
An employment relationship must only be documented, and in practice this is often done by the employee signing an employment application and the employer acting by issuing an employment order. This means that it is generally not necessary to have a written employment contract as a separate document. The essential terms needed to have a binding employment contract include:.
Title of the position. The mandatory provisions of the employment laws apply to the employment relationship. A collective agreement that has been put in place at an enterprise or organisation applies to all employees of that enterprise or organisation irrespective of their trade union membership. Foreign nationals must obtain a work permit to be employed in Ukraine. A residency permit is also required and is obtained after the foreign national has obtained their work permit. A work permit is necessary both for a direct employment of a foreign national by a Ukrainian employer and for secondment to a Ukrainian employer of a foreign employee.
Work permits and residency permits are generally issued for one year and can be renewed. A work permit is issued within seven business days from the date of the application. The new law introduces a special category of foreign employees that will include highly-paid professionals that is, those with a monthly remuneration of more than about EUR5, , shareholders or beneficiaries of companies established in Ukraine and IT professionals.
Work permits for such special category of foreign employees can be issued for up to three years. Under the new law, the cost of obtaining a work permit for a period of one to three years and the cost of its renewal is six times the tax-free allowance or about EUR, as of September A residency permit is issued within 15 business days from the date of the application.
The fee for a residency permit is nominal. Employees in Ukraine are not legally entitled to management representation.
There is no obligation to consult employees in relation to corporate transactions. There is a special procedure for redundancies see Question 15 but it only relates to notification of the employee s. How is the termination of individual employment contracts regulated? The general rule is that an employee can be dismissed only for a justified cause, in the circumstances set out in the law, such as a material breach of the employee's duties see below.
A notable exception to that rule is the statutory right of shareholders to dismiss a company officer at will and at any time. A dismissed officer is entitled to a severance payment of at least six times his average monthly remuneration.
Organisational changes at the enterprise, such as liquidation or bankruptcy. Insufficient qualification or state of health that precludes the employee from performing the work. Systematic failure to fulfil work duties without a valid reason. Absence from work without a valid reason including for over three hours during a working day.
Absence from work for over four consecutive months as the result of a temporary disability except due to a maternity leave or where the law allows absence for a longer period due to certain diseases. If it is a work-related injury or disease, the employee retains their job until rehabilitation or until a permanent disability is confirmed.
Reinstatement of an employee previously performing the work. Recruitment or mobilisation of the employer. Being unable to fulfil employment duties during the probation period, when the employee can be dismissed at any time. In the event of unjustified dismissal, the employee is entitled to reinstatement and compensation for the entire time of absence from work, and can also seek damages for pain and suffering. Are redundancies and mass layoffs regulated? In case of redundancy, the employer must give at least a two months' notice to the employee.
If the employee is a member of a trade union, prior approval from the trade union is required for the employee to be laid off, and the layoff must be within three months from the date of the approval. There is a statutory severance payment of one average monthly salary for non-officers. The employment contract may provide for a larger severance payment. In case of collective redundancy, the employer must inform the local employment centre or state employment agency of the proposed collective redundancy at least two months in advance.
The trade union must also be consulted. Certain categories of employees such as pregnant women cannot be laid off. Tax Taxes on employment.
In what circumstances is an employee taxed in your jurisdiction and what criteria are used? Ukraine recognises the concept of tax residence. Individuals are taxed in Ukraine if they are either:. A Ukrainian tax resident deriving income from both sources in Ukraine and sources in other countries. A non-Ukrainian tax resident deriving income from sources in Ukraine. Individuals qualify as a tax resident of Ukraine if they meet at least one of the following criteria:. A permanent home in Ukraine. A permanent home in another country but with close personal and economic ties centre of vital interests in Ukraine.
If it is impossible to determine residence using these criteria, physical presence in Ukraine is used, that is, whether the person is present in Ukraine at least days cumulatively during a calendar year. If not, the citizenship criteria is used, that is, whether the person is a national of Ukraine. In addition, whether the individual's family members have permanent home in Ukraine, or whether the individual carries on business activities in Ukraine, may also be taken into account. What income tax and social security contributions must be paid by the employee and the employer during the employment relationship?
Tax resident employees Taxes and contributions include:. A temporary military contribution at 1. The employer acts as a tax agent for the employee in respect of employment income. It remits payroll taxes on the employment income, and files quarterly tax returns. Non-tax resident employees The rates of tax and other contributions for a non-Ukrainian tax resident employee are the same as for tax resident employees.
See above, Tax resident employees for tax payment and filing requirements. From 1 December , the cap will increase to about EUR1, The unified social contribution is paid by the employer on the date of the salary payment. When is a business vehicle subject to tax in your jurisdiction? Tax resident business Ukraine recognises the concept of tax residence for business vehicles. A business vehicle is considered a tax resident of Ukraine if it is incorporated in Ukraine and operates under Ukrainian laws. Non-tax resident business A non-resident business vehicle is subject to tax in Ukraine if that business vehicle either:.
Has a permanent establishment in Ukraine such as a registered branch or a representative office. Has no permanent establishment in Ukraine but receives income from sources in Ukraine. What are the main taxes that potentially apply to a business vehicle subject to tax in your jurisdiction including tax rates? Ukrainian tax residents are taxed on their worldwide income. Non-Ukrainian tax residents are taxed only on income derived from sources in Ukraine through a permanent establishment or otherwise. Withholding tax is generally charged on Ukrainian income of a foreign company that is not attributable to its permanent establishment in Ukraine.
See Question 20 in relation to withholding tax on interest, dividends and royalties paid to foreign companies. Taxpayers are typically free to choose a reporting period for corporate income tax such as quarterly or annually. Import and export transactions and international transportations are also subject to VAT.
There is also a real estate tax on residential and non-residential property of up to 1. Certain buildings are exempt from real estate tax for example, industrial buildings such as production facilities and industrial warehouses. Real estate taxes are paid monthly or yearly, depending on the type of the tax. Excise Certain goods, such as spirits, tobacco products, fuel, electricity and cars, are subject to excise duty in Ukraine, paid mostly by producers, retailers and importers of the goods. The rate varies by type of goods and is primarily paid per item.
For example, an excise for wine can be up to The excise duty is generally payable at the time of the sale of the goods, and reports are filed monthly. Environmental tax Environmental tax is paid for:. Air and water pollution. Creation and storage of radioactive waste. It is calculated depending on the type of pollution and waste produced, and is paid on a quarterly basis. Dividends, interest and IP royalties. How are the following taxed:. Dividends paid to foreign corporate shareholders? Dividends received from foreign companies? Interest paid to foreign corporate shareholders? Intellectual property IP royalties paid to foreign corporate shareholders?
Groups, affiliates and related parties. Are there any thin capitalisation rules restrictions on loans from foreign affiliates? Currently, there are no thin capitalisation restrictions as such. However, if a resident receives a loan from a foreign affiliate and the debt-to-equity ratio of the borrower exceeds 3. Must the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your jurisdiction controlled foreign company rules?
Currently, there are no controlled foreign company rules. A draft law on prevention of tax base erosion and profit shifting has been prepared but has not been passed or come into effect. Are there any transfer pricing rules? The Ukrainian transfer pricing rules, which were first introduced in , apply to the following types of transactions controlled transactions:. Cross-border sales of goods involving non-resident agents. Transactions by Ukrainian taxpayers with non-residents registered in low-tax jurisdictions or jurisdictions with no treaty on exchange of information with Ukraine the list of these jurisdictions is approved by the Cabinet of Ministers of Ukraine.
Transactions by Ukrainian taxpayers with non-residents that:. Taxable income from a controlled transaction must equal its arm's-length value. The following transfer pricing methods are used to determine compliance with the arm's-length principle:. Comparable uncontrolled price method the primary method used. How are imports and exports taxed? Imports and exports of goods and services are subject to VAT in Ukraine. Is there a wide network of double tax treaties?
Ukraine has a large tax treaty network with most treaties following the Organisation for Economic Co-operation and Development model. Double tax treaties are in place with more than 85 countries, including:. Are restrictive agreements and practices regulated by competition law? Is unilateral or single-firm conduct regulated by competition law? The competition laws apply equally to Ukrainian entities and foreign entities doing business in Ukraine.
There is no criminal liability in Ukraine for violations of the competition laws. Restrictive agreements and practices Any agreements and other arrangements between undertakings that could prevent, eliminate or restrict competition are considered to be anti-competitive concerted practices and are generally prohibited. The following are examples of anti-competitive concerted practices:. Allocation of markets by territory, products, customers or suppliers, including exclusive dealing. Full immunity against fines can be available to the first applicant under the leniency procedure. The AMC is expected to adopt a Vertical Block Exemption Regulation later this year to provide guidance for the assessment of anti-competitive effects of vertical agreements based on Regulation of the European Commission No.
This regulation contains a:. List of hardcore and other restrictions not covered by the block exemption. Unlike the equivalent EU regulation, this regulation provides for an ex ante control of vertical restraints. Unilateral conduct Conduct by one or more undertakings that amounts to abuse of a dominant market position is prohibited. Similarly, a rebuttable presumption of a collective market dominance applies if either:. For example, the following behaviour can amount to abuse of dominance:.
Charging excessive prices, imposing a pricing constraint or price discrimination. Tying imposing terms and conditions that have no connection with the subject of the contract. Hindering market access for other companies or ousting them from the market. Unfair competition is another type of prohibited unilateral conduct under the Ukrainian competition law rules. This can take the form of spreading false, inaccurate or misleading information that may influence a customer's decision to buy a particular product or service to create an unjustified competitive advantage for a particular supplier.
Are mergers and acquisitions subject to merger control? The following types of transactions qualify as a concentration that can be subject to merger control:. Acquiring, directly or indirectly, control over an undertaking or a part of it. The same thresholds apply to foreign-to-foreign transactions, and there are no foreign exemptions in Ukraine. Therefore, a transaction between non-Ukrainian entities with no subsidiaries in Ukraine can still require clearance in Ukraine. Outline the main IP rights in your jurisdiction. Patents Definition and legal requirements. Products and methods processes can be patented in Ukraine as inventions or utility models respectively.
For an invention to be patented, it must have novelty and an inventive step, and be capable of being applied industrially. A utility model must be new and capable of being applied industrially. The official websites of both http: A patent or other IP right can be enforced by its owner or by a licensee with the right to prohibit the use of the right under the terms of the licence. Prohibitions on the performance of certain actions. Remedies that can be ordered by the court include:. Prohibition of the infringing activities. A patent for an invention is protected for 20 years.
The protection can be extended by five years for patents in respect of medicines. A patent for a utility model is protected for ten years. Trade marks Definition and legal requirements. A trade mark can consist of any words other than those prohibited by law , letters, numerals, patterns, colours, or a combination of verbal and graphic elements. It can be registered with the Ministry of Economic Development and Trade of Ukraine, unless registration would be against public order or principles of humanism and morality, and unless one of the grounds to refuse registration applies.
A trade mark application is rejected if, in particular, the trade mark: Depicts or imitates national coats of arms or flags, official country names, or names of international organisations. Is misleading as to the underlying product or service. Is confusingly similar to earlier registered trade marks. At the moment, a trade mark can be invalidated if it has not been used for three years since its registration. Ukraine has an obligation under the EU-Ukraine Association Agreement to extend this period to five years.
A person that uses an unregistered trade mark does not have the right to prohibit others from using that trade mark without his or her consent. But that person can file objections to someone else's registration application for that trade mark, and seek invalidation of the registration certificate in court. Length of protection and renewability. A trade mark is protected for ten years. The protection can be renewed indefinitely for ten years at a time.
An industrial design is a result of artistic activity of an individual in the area of designing. It must be new in order to be registered. A design is generally considered new if no identical design has been made available to the public. Under the Association Agreement, Ukraine will provide exemption to this rule for the disclosure by the designer during the month period preceding the date of filing of the registration application. An industrial design is protected for ten years. Although at the moment the protection can be extended only by up to five years, Ukraine has an obligation under the Association Agreement to ensure protection together with any renewals for 25 years in total.
Unregistered designs Definition and legal requirements. At present, legal protection is generally available only for registered designs. An unregistered design may be protected as information constituting a trade secret to which confidentiality obligations apply. At the same time, under the Association Agreement, Ukraine has agreed to give the same rights for an unregistered design that was disclosed to the public, as for a registered design if certain conditions are met. The owner of an unregistered design may be entitled to claim damages in the event of an unauthorised disclosure, particularly where such disclosure constitutes unfair competition.
In addition, the law recognises an enforceable right of a previous, good-faith user of a design that is subsequently registered by another person to continue using that design free of charge. However, that previous user does not have the right to prohibit others from using the design without his consent.
Transactions by Ukrainian taxpayers with non-residents registered in low-tax jurisdictions or jurisdictions with no treaty on exchange of information with Ukraine the list of these jurisdictions is approved by the Cabinet of Ministers of Ukraine. If the number of participants exceeds the limited liability company is subjected to transformation into a public joint stock company. What are the key recent developments affecting doing business in your jurisdiction? Organisational changes at the enterprise, such as liquidation or bankruptcy. At the moment, a trade mark can be invalidated if it has not been used for three years since its registration.
An unregistered design that forms part of a trade secret is protected for the duration of any applicable confidentiality obligations. Copyright Definition and legal requirements. Copyright is a set of rights of an individual with regards to a work of art, literature or science. There is no express general originality requirement under Ukrainian law at the moment. However, Ukraine has an obligation under the Association Agreement to introduce such a requirement in relation to photographs and software.
Copyright covers only the expression of ideas and concepts. The Association Agreement requires Ukrainian law to recognise that the employer exclusively owns proprietary rights to any software created by an employee during the performance of their duties or as a result of following the instructions of the employer unless the employment contract says otherwise. Protection is awarded from the moment of creation of the work and does not require registration or other formalities. During an enforcement procedure, a copyright owner can request remedies including:.
Prohibition of infringing actions and cessation of the infringement. As of April , Ukraine has a notice and take down system that is similar to the US Digital Millennium Copyright Act in relation to online infringement of copyright. Proprietary rights are protected for 70 years after the death of the author some exceptions apply.
Moral rights such as recognition of authorship are protected indefinitely. Under the Association Agreement, the length of protection of the proprietary rights will be reduced to 30 years for critical and scientific publications.
Other Related rights, geographical indications, varieties of plants, breeds of animals, topologies of integrated circuits and trade secrets are also protected as IP rights in Ukraine. There are no advantages to this type of legal form of business in Ukraine. However, due to the lack of legislative regulation for this organizational form, it is not very popular, although many people still choose this form of business.
In fact, a private company is governed by the Commercial Code of Ukraine only, where one may find only one article. Thus, in accordance with Article of the Commercial Code of Ukraine, a private company is an enterprise that operates on the basis of private ownership by one or more citizens, foreigners, stateless persons, and its their work or hired work.
A private enterprise is also an enterprise that functions on the basis of private ownership of the entity. It is also a legal entity. Its internal organization, the relationship between the owners, and the minimum amount of the statute capital is not regulated by legislation. All these issues are regulated by the owners in their statute. On the one hand, this may be considered an advantage in establishing a private company as it does not set clear limits in the organization of a private company.
On the other hand, the lack of legal regulations may also be a disadvantage. In any case, it is better to put everything in writing in the statute to avoid disputes in the future. Joint stock company According to Article 3 of the Law of Ukraine on Joint Stock Companies a joint stock company is an economic entity, the statute capital of which is divided into a certain number of shares of equal face value.
Corporate rights are certified by shares. The characteristic features of a joint stock company are the following: Through the issuance and sale of shares they form their statute capital and augment it if necessary. The individuals and legal entities that have purchased shares in joint stock companies are registered in the register and acquire the status of shareholders.
The accounting of shares happens only in a non-paper form in the national securities depositories. Joint stock companies are not liable for the obligations of the shareholders. The shares in closed joint stock companies are distributed only among the founders, and shares in public joint stock companies may be bought freely on the stock market.
The shareholders of a private joint stock company have preferences in acquisition of shares that are sold by other shareholders of this company on the terms offered to a third party, proportionally to their shares. There must not be more than shareholders in a private joint stock company, for a public joint stock company the maximum number of members is not limited. In addition to registration in the public register as a legal entity, one must enroll the issuance of shares, get an ISIN code, and settle a contract with the securities depository for keeping the register of shareholders.
The General Meeting is the supreme body of a joint stock company. For deciding each of the issues in a public company one voting share gives one vote to a shareholder. The public company executive body is accountable to the General Meeting and organizes the implementation of their decisions. The decisions of the General Meetings are made in the form of a protocol. There are no advantages to this type of business in Ukraine. Usually such a legal form is chosen by large companies that plan to raise a significant amount of foreign capital: The number of the joint stock companies in Ukraine has sharply decreased during the last 4 years, mainly due to the large volume of reports and other associated costs; many joint stock companies were liquidated or have been transformed into limited liability companies.
The individual entrepreneur Any individual has the right to engage in any business that is not prohibited by law. If an individual wants to conduct business it must be registered in accordance with the law. In order to register, a person must submit to the public register a standard application form, a copy of the tax identification number and a receipt confirming payment of state registration today the registration fee is UAH The period of receiving a tax identification number is 5—10 days.
To register for residence the foreigner must be the owner of property or rent accommodation. It should also be understood that it is reasonable to register as individual entrepreneur if a non-resident has a permission to stay and a place of temporary or permanent residence in Ukraine. Subscribe in a reader. The Most Common Form for Starting a Business in Ukraine In this article we will discuss the most common form of starting business in Ukraine, according to current legislation of Ukraine, which provides a number of legal forms for the establishment of the enterprise.
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