This guide was made to help you understand freelancing in Ukraine, so you can have the information you need to put your best foot forward as an independent contractor.
Who is an independent contractor/freelancer?
To start off right, we should define who an independent contractor/freelancer is. This is someone who is self-employed and offers expert services to clients on a contract basis. A freelancer does not receive certain benefits from a company and files taxes independently. He or she is in control of their work method and schedule, and is not limited to one client.
Getting started as an independent contractor / freelancer in Ukraine
In Ukraine, the most common path to freelancing is sole proprietorship. A sole proprietor in Ukraine is called an individual entrepreneur or FOP. This business form is most preferred because:
- It is the least complicated
- There is no compulsory starting capital
- The tax system is simplified with the quickest registration process
- Clients are legally allowed to pay you in cash, unlike other forms of business
- Unlike companies, it is possible to use the income for own needs and transfer funds from entrepreneur`s account to a private one, withdraw cash
The good news is that one can become a FOP from the age of 16. However, if you are not 18 years and above, you will need your parents’ or guardians’ consent. The journey to becoming a freelancer in Ukraine requires the following:
- A copy of your Passport
- Application form
- Ukrainian tax number
- Your parents’ or guardians’ notarial written consent (if you are not yet 18 years)
- Ukrainian Address or Ukrainian mailing address (in case you are a foreign national an apartment lease is sufficient)
- Code for business activity
With all the requirements in place, keep these points in mind for a successful registration:
Submit the application to the state registrar, either in person or by mail. You can also register online, for which an electronic digital signature is necessary.
You have the option to submit the application yourself or have someone do so on your behalf. For the latter, a notarized power of attorney needs to be issued.
If all goes according to plan, you will be registered by state registrar. Notaries in Ukraine fulfils this function as well. State registration services can be received via the centers of administrative services and entrepreneurship registration is free of charge. Notaries charge extra fee for this but in some cases it worth it as you get personalized service.
To get your TIN
We’ve pointed out that the tax number is important for the registration of a private entrepreneur. A natural person non-resident or foreign national can get the TIN by submitting the documentation below:
If you are residing in Ukraine
- A copy of your passport. You will also need to have proof of your legal stay in Ukraine, i.e. a visa or entry stamp. In most cases legal stay means the period within 90 days from the country entry or according to the visa terms.
- Notarized Ukrainian translation of your passport
If you are not residing in Ukraine
- Power of attorney validated by a notary (make sure that power of attorney contains specified authorization “to represent the Principal before relevant bodies of State Fiscal Service of Ukraine regarding issuance and obtaining of document (it`s duplicate) that confirms registration of individual in State register of physical persons – tax payers” otherwise it will be rejected)
- A copy of your passport
- Notarized Ukrainian translation of your passport
You then submit the documents to the state fiscal service of Ukraine
Taxes for independent contractors in Ukraine
In Ukraine, the two major tax rates are:
- An 18% tax rate on the profit you earn.
- 5% tax rate on the revenue you earn (applies only for entrepreneurs after registration)
Also Remember: non tax residents of Ukraine may receive income on the territory of Ukraine via representative on the basis of the agreement. Taxation in each case depends on the existing international treaties between Ukraine and country of residence of the foreign individual. Other circumstances may also apply and require personalized approach. The above mentioned does not apply to FOP.
The types of tax systems are
The simplified tax system
This is the preferred system for private entrepreneurs. Under this tax set-up, self-employed individuals pay one tax to replace taxes such as personal income tax, VAT, and property tax. The advantages of this system are lower tax rates and an easier accounting process. But take note: according to contactukraine.com, the tax rate one is subject to depends on which of the three groups one falls into:
Group 1: This group is for people who earn up to 1million UAH a year but do not have employees under them. The members of this group can be involved in retail or they can offer personal services.
Group 2: These individuals earn up to 5million UAH a year and have between 1 to10 employees under them. Members of this group can run restaurants, be engage in IT and production However they may only offer services to clients who are also under the simplified tax or to individuals.
Group 3: The last group earn up to 7million UAH a year and have any amount of employee under them. This group can be involved in almost any business activity, excluding the prohibited ones.
Note: The information on groups for simplified tax system is gotten from contactukraine.com
The general tax system
This tax system involves the person paying various kinds of taxes at the normal tax rate. The tax rate under this system is 18%.
Also Remember: Filing of tax return is due April 1st.
How to open a bank account in Ukraine
You have to decide if you want to use a private or state bank. Next, you should choose what type of bank account you want to open.
Types of bank accounts
Money can be withdrawn from this account at any time. Moreover, with this account, you can use either an ATM and bank manager to carry out transactions.
You can also withdraw money from a current account at any time, but transactions can only be performed with the bank manager or via online banking
You cannot touch the money in this account before the agreed upon time is over. Deposit accounts are good for capital accumulation.
This account is for investing activities in Ukraine.
After deciding on the bank and bank account, you need to provide certain documentation. These vary across banks, but generally they are:
- Your original passport with proof that your stay in Ukraine is legal (such proof can be a visa or entry-exit stamp).
- Tax number (not required for regular current account)
- Proof of residency or temporary stay in Ukraine (written confirmation from the hotel in most cases should be sufficient for temporary stay)
- Opening of the bank account as a FOP is a different procedure and different type of the account. It will require state registration of the entrepreneurship. Managing of these accounts may vary depending on the bank.
- Money from your card account can only be withdrawn in the hryvnia, Ukraine's national currency. However, if a foreigner transferred US dollars to their Ukrainian bank account, they can withdraw the money in the dollars with assistance from the bank cashier.
- Be aware of the fees a bank charges, and the privileges it offers, as they differs from bank to bank.
- You could also be charged for non-cash bank transfer between personal accounts
- Depositing funds to accounts opened in Ukraine contains certain restrictions. It may require confirmation of the sources in case money come from abroad and there may be certain limitations to receive money from third parties. The above mentioned does not apply to FOP accounts.
Note. This content was generated by RemotePass team and reviewed by a certified tax advisor Andriy Fedchyshyn/Onstan in Ukraine