Cabinet of Ministers simplifies the registration of foreign representative offices. Will it affect IT industry

On October 24, the Cabinet of Ministers of Ukraine adopted a decree “On Certain Issues of Registration of Representative Offices of Foreign Economic Entities.”

The document, developed by the Ministry of Justice of Ukraine, simplifies the registration of representative offices for foreign companies in Ukraine.

What changed:

  • The cost of registering a representative office in Ukraine was reduced from $2,500 to 1 subsistence income for able-bodied people. In 2019, it is UAH 1,921.
  • The registration period reduced from 60 to 20 working days.
  • For companies that are residents of the aggressor state, registration of a representative office in Ukraine will cost 30 living wages (UAH 57,630) and the procedure will take up to 60 business days from the date of submission of documents.

Will it affect the IT industry

At the request of AIN.UA, representatives of the association IT Ukraine commented on the changes.

According to Kostiantyn Vasiuk, Executive Director of IT Ukraine, this is a positive change, but it needs to be supported by other solutions:

Reducing the registration period for foreign representative offices along with an improvement in Ukraine’s position in the Doing business ranking by 7 positions is certainly a positive signal for foreign investors.

However, this is a trend that needs to be supported by a number of further steps. Thus, the insufficient level of protection of private investment, compared to, say, Israel, is still not in favor of Ukraine.

And possible hasty changes in the simplified tax system are perceived by potential investors as a factor of destabilization. Choosing a recipient for their capital, investors are likely to pay attention to a country with a stable predictable economy and transparent rules of the game. At the same time, the fee for the registration of representative offices is not decisive.

According to Dmytro Ovcharenko, CEO of Alcor and Vice President of Legal Affairs IT Ukraine, few companies choose this method of doing business:

Indeed, the government has simplified the procedure for registering foreign representative offices. But you should not expect an instant and tangible result since this is not the most common form of IT companies entering the Ukrainian market. It is used only in 10-15% of cases.

Representative offices are registered predominantly by large companies, such as Google.

Whereas working with small and medium-sized foreign companies brings the country the remaining 90% of exports in the form of more than $ 5 billion of export revenue (last year statistics).

Given the industry’s annual growth at the rate of 20–25%, it is important to maintain the current tax environment for SPDs (self-employed persons) without turbulence. This will help maintain the growth of Budget revenues in 2020.