Introduction
On October 26, 2022, President Zelensky signed a law creating an electronic system through which foreign entrepreneurs can apply for residency permits.
Foreigners will be able to obtain an electronic residence (an E-Residence / E-Resident) in Ukraine without having to become Ukrainian tax residents.
It is scheduled to come into effect on April 1, 2023. Under it, foreigners will be able register themselves as private entrepreneurs and pay taxes in Ukraine.
What is E-Residence?
The E-Residency program provides its participants access to a range of services, including the registration and termination of business activities in Ukraine.
The E-Residency status will not grant the right to live or visit Ukraine.
Who is eligible for Ukraine E-Residence?
The E-Residency program is open to people who meet all of the following requirements:
- be a citizen or resident of any country on the list issued by the Ministry of Digital Transformation
- be at least 18 years of age
- not in receipt of Ukrainian-sourced income (except for passive income)
- not be a citizen of Ukraine, hold Ukrainian permanent residency permit or be a tax resident of Ukraine.
To become an E-Resident, applicants must go through the “E-Resident” information system, obtain qualified digital signatures, and pass identification procedures.
Ukraine E-Residence may withdraw from the program at any time by applying for termination.
Ukrainian authorities have the power to revoke an individual's E-Residency if they decide that this person no longer qualifies for the status.
What are the tax implications of being an E-Resident?
To become an E-Resident, in addition to the above conditions, you must:
- be registered as private entrepreneur;
- open a bank account through the “E-Resident” information system with a Ukrainian bank;
- not employ Ukrainian citizens or residents.
E-Residents will pay a flat tax of 5% on their business income. They are not allowed to deduct any expenses from this amount.
The nature of the business activities of the E-Resident is not restricted.
E-Residents must transfer their business income to the Ukrainian bank account they opened as part of the process.
The bank will also operate as the E-Resident’s tax agent and deduct the relevant tax and deal with all other reporting.
E-Residents are not subject to the social security charges in Ukraine.
Double tax relief?
E-Residents should consider whether the Ukrainian taxes deducted in respect of their business income can be credited against taxes they are liable in their country of tax residency.
If you have any queries about Ukraine E-Residence then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article