First of all be advised that being a private entrepreneur (also known in Ukraine as “PE” of “FOP” or “ФОП” in Cyrillic) does not provide legal grounds to obtain a temporary residence permit. There are explicit cases when temporary residence is given (you can check on them here) and a FOP is not one of them.
Why then you might need a private entrepreneur status for? There are 2 valid reasons for this:
to do business in Ukraine;
to “work” in Ukraine without getting a work permit.
Now let’s consider each of these cases in details.
Doing business in Ukraine as PE.
We already explained in all details how to incorporate a company in Ukraine for doing business. But there is also another option of running business. A private individual can be registered as a private entrepreneur that is a special legal status for carrying out business without having a company for this purpose.
IMPORTANT: Doing business without being a private entrepreneur or company is prohibited by law, provides for administrative sanctions and impose higher taxes.
The procedure of registering as private entrepreneurs is regulated by the Law of Ukraine “On State Registration of Legal Entities and Private Individuals Entrepreneurs”.
Registration of a FOP is pretty simple and free of any charges provided that you apply via a state registrar office.
HINT: Not all notaries do FOP registrations, yet many do so. Notaries are more expensive, however, they allow you to agree all texts beforehand and to visit them at a pre-scheduled time or even to call them at your place. State registrars are much cheaper but usually you will have to wait your turn in long lines for long hours and from early morning. State registrars also tend to find a reason to reject your documents so you need to visit them again, and maybe – again… If money is more important than time for you, then consider to register your FOP at a state registrar office.
To get registered as FOP, a person should only submit to a state registrar / notary:
registration application of the established form No. 10 which you can download here;
simplified tax form or VAT form if you want to get your FOP registered as a payer of these taxes.
Costs:
at a notary’s office: UAH 1500 OR at a state registrar’s office: none.
Re Application:
The most difficult for you will probably be picking out types of business for your FOP. But do not worry, it is pretty much easy to do, everything you need is understanding of the Ukrainian language or a friend who can help you out there. Then you just visit the following official web-source and choose those types of business you need from the given list. Note only that the list contains categories and sub-categories. A type of business is one that has a 4 digit number.
When filling out your application you will also notice 2 obligatory requisites in a FOP registration application:
the applicant’s place of residence; and
Ukrainian tax ID.
Re Place of residence:
Information about the foreigner’s place of residence in Ukraine is inscribed to his/her temporary/permanent residency certificate (or to some other documents, not very common).
So, a foreigner should have his/her place of residence registered in Ukraine to be able to become a FOP.
Re Ukrainian tax ID:
To obtain a Ukrainian tax ID the following steps are needed:
Foreigner’s passport translated into the Ukrainian language, translation is notarized. Translation and notarization costs depend on the original language and a number of pages and fees of your translator. E.g. one of translation agencies in Kyiv charges UAH 175 for translation and notarization of a US passport, all takes 2 business days.
Personal visit to an office of the State Tax Service to submit an application together with a notarized translation of copy of the passport. The application is provided at the office. Cost – free of charge.
A tax ID is issued within 14 calendar days.
The second personal visit to the office to pick the tax ID up.
Costs:
translator’s fee is UAH 175.
Footnotes:
● Total cost may be approximately as little as UAH 100 and as much as UAH 1700.
Notary and translator fees may vary a little bit as every notary and translator have their own prices, however, the difference will not be significant.
● Registration of a PE can be done at a state registrar office instead of a notary. In this case the registration fee will be zero, however, you will need to stand in long lines and wait for hours until your turn comes.
“Work” as a PE without getting a work permit.
It is not always easy for a foreigner to find a job in Ukraine. This is not only because of a language barrier. Employers are obliged to obtain a work permit for a foreign candidate that is not quite cheap, and also they are obliged to pay foreigners high salaries (read about this here), thus reasonably they do not want to undertake extra financial burden and better look for local candidates.
But there is a way of how to overcome this unfairness – to work as a FOP. In this case, legally, you won’t be an employee but a contractor. So, the employer (client) does not have to pay you a high salary and social taxes out of it. You are free to agree on any contractual payment terms and are obliged to pay your taxes yourself. This is very convenient for an employer and quite easy for you as well.
IMPORTANT: It is highly advised to hire a lawyer for drafting your “employment” contract so that it does not look like a clumsy attempt to avoid of paying taxes.
Contact Legal Ideas law firm to get advice on your personal case.
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