Maryna Chamara, Lawyer. Assistant Attorney at Law.

On 6 October 2022, the Verkhovna Rada of Ukraine adopted a law on amendments to the Tax Code of Ukraine and some other legislative acts of Ukraine regarding the peculiarities of taxation of business activities of electronic residents (hereinafter Law No. 5270). To put it simply, the Law on e-Residency has been adopted.

Law No. 5270 provides for the possibility to open a business in Ukraine in a simplified manner for a foreigner who has received the status of e-Resident and to carry out business activities online – that is, without the need to have an office in the territory of Ukraine or to have a place of physical registration.

For example, the standard “tax address of the taxpayer” for an e-Resident is exclusively an e-mail, all the correspondence with tax authorities is online, and all the payments are cashless.

The requirements for an e-Resident are defined in Law No. 5270 itself. Yes, the future e-Resident must meet the following criteria:

  • a foreigner who has reached the age of 18;
  • he/she is not a tax resident of Ukraine or a foreigner who has the right to permanent residence in Ukraine;
  • he/she received appropriate qualified electronic trust services;
  • the information about him/her is entered in the “e-Resident” information system;
  • he/she does not receive income with a source of origin from Ukraine for goods, works, services (except for passive income);
  • he/she is a citizen (subject), resident or person whose place of permanent residence (stay, registration) is the states (jurisdictions) included in the List of states whose citizens or residents can acquire the status of electronic resident (e-Resident). The mentioned list is determined by the Cabinet of Ministers of Ukraine.

Among the advantages of e-Residency are: for foreigners – a reduction in taxation of income from entrepreneurial activity (payers of the single tax of the third group) and a simplified procedure for access to administrative services, for Ukraine – formation of a positive business climate by attracting more investments.

So, to become an e-Resident in Ukraine:

  1. A foreigner must register on the Diia web portal and pass a financial and security check;
  2. If the first item is fulfilled, the foreigner becomes a payer of the single tax of group 3 and receives an electronic digital signature. Registration of e-Residents as third group single tax payers is carried out by the controlling authority within two working days from the date of receipt from the state registrar of information on the registration of an e-Resident as an individual entrepreneur in accordance with the procedure established by the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations”.
  3. Opening an account in any bank of the e-Resident’s choice, which will be a tax agent for a foreigner.
  4. Carrying out economic activity within the limits of the individual entrepreneur of the 3rd group. At the same time, the e-Resident pays taxes on income taxed at the rate of 5 percent of the amount of credited funds, or on income taxed at the rate of 15 percent of the amount of credited funds (if the corresponding limit is exceeded).

Maryna Chamara draws attention to what fields of expertise can be represented by e-Residents:

In the wording of Law No. 5270 before the first reading, a clear list of types of economic activity that could be carried out by an e-Resident was defined, namely: in the field of information technologies, in particular software, programming, etc. 

However, this norm did not reach the second reading. Therefore, we are waiting for the text of the law signed by the President of Ukraine. However, we can already conclude that Ukraine strives to attract as many foreign specialists as possible, not limited only to the IT speciality. This means that not only foreign IT specialists, but also Internet marketing and sales specialists, web designers, project managers, etc. will be able to carry out business activities on the territory of Ukraine. This will help attract more investments and optimize the tax system as a whole.

Currently, Ukraine has established a fairly simple procedure for registration as an e-Resident, although, of course, certain points require revisions. Therefore, immediately after the entry into force of the law, we advise foreign specialists to take advantage of the opportunity to start their business in Ukraine.

Марина Чамара
Legal Adviser. Assistant Attorney at Law