How to Register a Foreign Company Operating in Ukraine Through Representative Offices with Tax Authorities
Ukraine has updated registration rules for foreign companies (organizations). From now on, foreign companies (organizations) are required to register with the State Tax Service of Ukraine if they:
- carry out activities in Ukraine through separate units (that is, through non-commercial or commercial representations), or
- acquire real estate or obtain property rights to real estate in Ukraine, or
- open accounts with banks in Ukraine.
In this article, we are addressing the questions that our clients and business representatives often ask about the registration of foreign companies which are operating in Ukraine through representative offices.
1. The list of documents required to have your company registered with the tax authorities
A registration application form has been introduced (form 1-ОПН). A cover letter and copies of the documents listed below must be submitted with the application form 1-ОПН (the applicants must also show the originals):
- Extract from the commercial register of the country where the company was registered confirming the company’s registration and containing the identification number, address, and the name of the company (or other official documents confirming this information).
- Power of Attorney as proof of the Representative’s authority to act on behalf of the non-resident company in Ukraine. The text of the Power of Attorney must clearly define the scope of the authority delegated to the Representative, the text of the power of attorney must also cover all the rights and obligations of the Head of the taxpayer for all cases determined by the tax laws of Ukraine. As a general rule, a power of attorney issued for the purpose of appointing the Head of the Representative Office and determining their scope of authority, is not suitable for registering a foreign company.
- A document on registration (accreditation) of a representative office in Ukraine, if the foreign company is operating in Ukraine through a representative office.
NB! All documents issued in the country where the company was registered must be properly legalized and submitted along with notarized translations into the Ukrainian language.
2. Representative (Director) of a foreign company in Ukraine: who can be appointed?
Information about the Representative (Director) must be indicated in the application form 1-OПН. In addition, companies must also indicate the person in charge of accounting and tax records. Companies may indicate either the individual who is appointed as Director in accordance with the company’s charter documents, or a Representative who is acting in Ukraine on the basis of a Power of Attorney. It is important that the individual have a tax number in Ukraine. If the individual is a foreigner who does not have a taxpayer registration number in Ukraine, it must first be requested and obtained it from the tax authorities.
Thus, a Representative of a non-resident party in Ukraine may be either a foreigner or a Ukrainian national, but it is required that the Representative have:
- The “Tax Number of the “Taxpayer's Registration Card” and
- The possibility to submit / receive documents in Ukraine in person if the tax authorities approve the registration.
3. Registration of a foreign company is mandatory, regardless of the Representative Office’s status (commercial or non-commercial).
All foreign companies operating through representative offices in Ukraine are required to register with the tax service, regardless of the fact whether the representative office is a commercial one or a non-commercial one.
However, the difference is that a foreign company operating through a non-commercial representative office in Ukraine is not required to register as a payer of the Corporate Income Tax. Only later, if the RO’s begins some activities which comply with the “commercial” status, the company will be obliged to register as a payer of Corporate Income Tax (prior to actually starting these activities).
Hence, before having your company registered with the tax authorities, it is necessary to analyze the activities that your company is about to conduct in in Ukraine, and to enquire the status of the representative office is registered with the tax service.
What if a foreign company conducts preparatory and auxiliary activities in Ukraine, which do not do not conform to those of commercial ROs, but has nevertheless been registered with the tax service as a commercial RO?
Many foreign companies with representative offices in Ukraine face the situation where their representative office has been registered with the tax authorities as a commercial one, whereas in fact, it neither carries out commercial activities nor pays Corporate Income Tax.
Removing the “sign” of payer of Corporate Income Tax related to a representative office is carried out after the company has been registered as a payer of Corporate Income Tax. This problem was also addressed in the General Tax Consultation on registration of non-resident entities with regulatory authorities and the obligations of non-resident payers of Corporate Income Tax in Ukraine, issued by Order # 277 of May 19, 2021.
As for now, the laws do not provide for possibilities to take a RO off the register by filing a “de-registration” application letter; therefore, one can do it as follows:
- Stage I: having the company registered as payer of Corporate Income Tax.
- Stage II: registration of termination of business activities conducted through a representative office. To do this, an authorized representative of the foreign company submits application form 1-OPN, indicating the fact that the economic activities have been terminated. The tax authorities accept the application form and make the decision. As a result of this, all representative offices of a foreign company that used to have the "permanent representative office” status in the Register of non-resident taxpayers shall be removed.
NB! We cannot exclude the possibility that the tax authorities may decide to conduct an audit to investigate if the Representative Office has any legal grounds for paying the Corporate Income Tax, filing tax reports and paying the amounts of the CIT to state budget in accordance with the data in tax declarations.
To sum it up, the activities of foreign companies operating through representative offices in Ukraine must be analyzed thoroughly in each case on an individual basis.
* The information provided in this article is not legal advice; this article has been posted for informational purposes only.