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Foreign Companies and Their Representative Offices: Did You Get Yourselves Registered?

Accountor Ukraine informs: Laws # 466 and # 1117 have undoubtedly made significant changes in the procedure for representative offices registration that everyone had been used to. The legislators explains that the tax reforms are aimed at shifting the focus towards implementing the steps of the BEPS Action Plan and countering tax evasion by multinational companies. Let us take a closer look at what exactly has been implemented to date, and what to expect next.

Since  January 1, 2021, non-residents who Have not been registered with regulatory authorities, but who have been carrying out economic activities through separate units, including: permanent representative offices, non-residents purchasing real estate or obtaining property rights to real estate in Ukraine, or opening accounts at Ukrainian banks, or the ones buying an investment asset from another non-resident that does not have a permanent representative office in Ukraine are required to register with the regulatory authorities until May 19 this year.

A non-resident company planning to start business activities through a representative office must register with regulatory authorities prior to commencement of the relevant activities. Failure to meet this requirement may be regarded by regulatory authorities as tax evasion and as proof that the non-resident company is generating income and hiding it from taxation.

In our opinion, the situation is more or less clear for new representative offices, whereas the ones that have been around for a while need to determine whether they meet the criteria for “permanent representative offices”.


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The definition of a “permanent representative office” has undergone some changes. From now on, it is a permanent place of business through which the economic activities of a non-resident company are fully or partially carried out in Ukraine, e.g:

  • control place
  • branch
  • office
  • factory
  • workshop
  • installation or structure for the exploration of natural resources
  • mine, oil/gas well, quarry or any other place of extraction of natural resources
  • warehouse or premises used for the delivery of goods, server, etc.

Besides, the definition of a permanent representative office includes the following:

  •  construction site, construction object or assembly object, or supervisory activities related to such an object, if the total duration of works associated with the site, object or activity (within the same project or related projects) carried out by a non-resident through employees or other personnel hired by the non-resident for such purpose exceeds 12 months;
  • services provided by a non-resident (except for outstaffing services), including consultancy services rendered through employees hired by the non-resident for this purpose, if such activities were carried out (as one project or as a project related to the main one) in Ukraine for the period or periods, the total duration of which is more than 183 days in any twelve-month period;
  •  individuals who (either based on a contract, other kind of agreement, or ipso facto) have and exercise the authority to negotiate the essential terms of transactions, as a result of which the non-resident concludes agreements (contracts) without significantly changing these terms, and/or who have/exercise the authority to conclude agreements (contracts) on behalf of the non-resident in the event that the specified activity is carried out by the individuals on behalf of, at the expense of and / or in favor of only one non-resident and or related non-resident persons;
  • individuals who (either based on a contract, other kind of agreement, or ipso facto) have and exercise the authority to hold (store) stocks (goods) belonging to a non-resident, wherefrom goods are supplied on behalf of the non-resident, with the exception for residents holding of a temporary warehouse or a customs warehouse.


In addition to conducting business activities, the regulatory authorities pay special attention to natural persons who represent non-residents in Ukraine, and highlight the following factors as proof that the representative office is “permanent’:  

  • mandatory instructions provided by a non-resident (including the ones sent by means of electronic communication or on electronic media), and their implementation by a natural person in Ukraine;
  • a natural person using the corporate e-mail of a non-resident and/or their related parties for communication with the non-resident and / or with third parties who the non-resident has already concluded or will conclude contracts or other agreements with;

- an individual exercising the right to own or dispose of stocks (goods) or other assets of a non-resident in Ukraine, or of their significant share upon the non-resident’s instructions;

- an individual renting premises on their own behalf to store property acquired at the expense of a non-resident or belonging to a non-resident or third parties on the condition that the property is to be handed over to third parties at the instruction of the non-resident.


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The laws prescribe that maintaining a permanent place of business on the condition that activities (or their combination) carried out for a non-resident are preparatory or auxiliary in nature does not create a permanent representative office. These might be such activities as:

  • using buildings or structures solely for the purpose of storing, displaying goods or products belonging to a non-resident;
  • storing stocks (goods or products) belonging to a non-resident solely for the purpose of storage/demonstration;
  • storage of stocks (goods or products) belonging to a non-resident solely for the purpose of them being processed by another enterprise;
  • maintaining a stable place of business solely for the purpose of purchasing goods or merchandise or of collecting information for a non-resident;
  • natural persons being under supervision of an individual in accordance with outstaffing services agreements;
  • maintaining of a permanent place of business for other purposes.

      We also believe that based on the above, there are some conditions indicating that a

      non-resident does not have a permanent representative office:

  •  a non-resident carries out their activities through a resident intermediary;
  •  a resident provides the non-resident with agency, trust, commission and other intermediary services for the sale or purchase of goods (works, services) at the expense, in the interests and / or in favor of a non-resident whereas these services are carried out within the framework of the main (usual) activities of the resident and on usual terms;
  • the resident intermediary does NOT act solely or almost exclusively at the expense, interest and / in favor of one or more non-residents who are related persons.

If the representative office meets the criteria for permanent establishments, the next step will be preparing a package of documents for the regulatory authorities that are directly involved in registering non-residents.

It should be noted that the legislators also imposed liability for non-residents conducting activities through separate divisions, including through permanent representative offices without registering with tax authorities, i.e. penalties in the amount of UAH 100,000.

Given the new rules for non-residents, companies ponder what to expect from the regulatory authorities after the deadlines for the registration of the relevant non-residents are over. According to the laws, non-residents carrying out business activities on the territory of Ukraine who should have registered but have not met these requirements, and their separate divisions, including the registered permanent representative offices, may be obliged to undergo tax audits from July 1, 2021.

Based on the results of the audit, the regulatory authorities will be able to:

  • register the non-resident based on the audit report, if the inspection findings confirm that the non-resident in question has been conducting economic activities through a permanent representative office in Ukraine;

- take measures to deregister a separate subdivision, incl. a permanent representative office or a non-resident, if the audit confirms that the non-resident's activities in Ukraine have been terminated, and that there have been left no objects of taxation or objects related to taxation belonging to the non-resident in Ukraine, and that a separate subdivision or permanent representative office of the non-resident has fulfilled their taxpayer duties.

Moreover, according to the law, the regulatory authorities have the right to seize property if the results of the inspection show that a non-resident has started or has been carrying out economic activities through a permanent representative office in Ukraine having not registered with tax authorities.

 Thus, it is becoming more and more difficult for non-residents to avoid registration with regulatory authorities. What consequences will the registration have?  Accountor Ukraine will be covering this topic in the upcoming articles. Follow us to learn more. We are always at your service!