Q: How do I Register as an Independent Contractor (Private Entrepreneur) in Ukraine?
The first step to a successful freelancing career in Ukraine is to register as a Private Entrepreneur (Independent Contractor).
Ukraine’s emerging free-market economy has been experiencing growth, and with that expansion has come the rise of Ukrainian freelancing. Many people are choosing to do freelance work — setting their hours and being their own bosses. This article outlines the basic and easy steps you can take to be independent and self-employed as a freelancer in Ukraine. However, the information here should not be used in place of legal or financial counsel.
Self-Employment and Freelancing in Ukraine
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To officially do any business in Ukraine, you need to go through a registration process, and self-employment is one of the options to go about this legally. As of now, the Ukrainian government has not kept its legislation up to date with the growing freelance labor market, meaning that some shady businesses get through unregistered and unregulated.
However, you should follow the general legislative provisions in implementing freelance activity to stay safe and legal. Even though it’s not always enforced or formalized, the following are the basic steps for registering freelance activities according to current legislation.
Private Entrepreneur Registration
Private Entrepreneurship is the simplest form of self-employment and frequently used by freelancers. To register as a PE, you must meet the following requirements:
- Be a natural person (not a legal entity)
- Be 18+ years old (exception: you can become a PE at age 16 with parental/guardian consent)
- Have a Ukrainian tax ID number (TIN)
- If you are not from Ukraine and need a TIN, you will need a translated version of your passport for a non-resident business founder (private individual)
How to Register as a Private Entrepreneur
You can register as a private entrepreneur via:
- Executive committees of municipal city councils
- Public legal entities
You will be able to process your registration via the Register. You just have to fill out and present the documents through email, in person, or by using certain e-services that use your electronic signature.
What to Submit to Become a Private Entrepreneur
When registering, you will need to submit certain documents and info:
- A copy of your passport
- Ukrainian tax number
- Finished PE registration application form
- Your address
- Info on your type of business activities
- If you are a foreigner, your Ukrainian mailing address (residential or not)
- If you are under 16, a notarial consent letter from parents/guardians
Taxes as a Freelancing Private Entrepreneur
Lucky for you, tax registration occurs automatically after you register as a private entrepreneur with the state. No further action is required there on your part. But, if you are planning on being a VAT-payer, you definitely will need to file a VAT-payer application to the tax authorities (unless, of course, you filed something like this while applying to be a PE with the Companies Register).
You will have to pick between specific tax regimes:
- The Standard Tax Regime: Normal taxes and rates apply to your business income
- If you are a foreigner and a tax resident in Ukraine, you can benefit from this Regime.
- The Simplified Tax Regime: The PE (you) pays one Unified Tax (instead of different tax types like in the Standard Regime).
- This system is not automatic — it requires that you register as a Unified Tax Payer with the tax authorities
- The advantage here is that the Unified Tax rate is lower than in the Standard Regime, but it does require certain conditions to be met (ex: income each year cannot exceed 5 million UAH).
Value-Added Tax (VAT)
You must register as a VAT payer if the “aggregate amount from transactions relating to the supply of goods/services, which are subject to VAT, accrued (paid) to such entity during the last 12 calendar months exceeds UAH 300,000 (excluding the value-added tax).” (Alvara.com)
Voluntary registration is also an option. Here, a legal entity may choose to register as a VAT payer if at least 50% of their goods and services produced are supplied to other parties that are VAT payers.
If You Are Hiring a Freelancer
If you are hiring a freelancer, there are some things you should know. When hiring a salaried employee, the company assumes 40% tax overhead on top of the employee’s salary, but when hiring a freelancer, the salary tax burden is closer to 5%.
Now You’re Set!
Those are the basics behind private entrepreneurship in Ukraine. Regardless of your choice of freelancing career, the info here can help you succeed and get started. As a self-employed person, you will gain the freedom and flexibility you desire to enjoy your time to the fullest. Don’t be afraid to dive in!
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Updated: January 7, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.