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What is the procedure for incorporation and registration of the permanent Representative Office of a non-resident in Ukraine?

How can a non-resident establish and run a Permanent Representative Office in Ukraine ?

1. What is a Non-Resident’s Permanent Representative Office under the Law of Ukraine ?

According to the Law of Ukraine, any foreign business entities (registered abroad but carry out its foreign business activity in Ukraine) shall be entitled to establish their Representative Offices in Ukraine.

Under Clause 1.17 of Article 1 of the Law of Ukraine On The Profit Taxation of Enterprises, a Non-Resident’s Permanent Representative Office in Ukraine ( hereinafter Representative Office) shall be a permanent place of operation intended for doing his full or partial business activity in Ukraine. Generally, among the Permanent Representative Offices could be any administrative office, affiliated company, office, plant, factory, workshop, oil or gas well, open-cast mine, as well as any areas of exploration or mining operations.

A Representative Office is not a legal entity, so it shall act on behalf of the foreign business entity.

The current legislation of Ukraine doesn't require an approval of any special Regulation on a Representative Office. Under Article 31 of the Civil Code USSR, a Representative Office shall carry out its business activity by a power of attorney granted by the foreign legal entity in favour of the Head of the Representative Office.

By means of Representative Offices foreign business entities may carry out any foreign economic activities regulated by Article 4 of the Law of Ukraine On the Foreign Economic Activity.

2. Establishment of a Representative Office

For establishment of a Representative Office the authorized person of a foreign entity shall do the following:

o Take a decision on establishing of a Representative Office and draw it up in accordance with the statute or the legal entity’s legislation;

o appoint the Head of the Representative Office;

o give him a power-of-attorney.

3. Registration of a Representative Office

According to Clause 2.5 of Article 2 of Law of Ukraine On The Profit Taxation of Enterprises, before starting a business, a Representative Office should be registered as a profit taxpayer in the local Tax Administration (see also Instruction On Registration of Representative Offices as Permanent Profit Taxpayers approved by the Resolution N 293 of the State Tax Administration dated the 17th August 1997).

The registration of the Representative Office as a profit taxpayer shall be carried out on the ground of the following documents:

- application on registration of the Permanent Representative Office as a profit taxpayer in accordance with established form;

- extract from the trade (banking) register of that country where the Non-Resident’s Main Office is registered;

- banking certificate with officially opened non-resident’s account;

- power of attorney for representation in Ukraine, drawn up under the Law of the country where the Non-Resident’s Main Office is officially registered.

Pointed documents, except the application, shall be notarized at the place of their granting, duly legalized at the Consulates of Ukraine representing Ukraine, if the otherwise doesn't stipulate by the international treaties, and it shall be translated in Ukrainian and certified by a seal of a qualified translator.

On registration of the Representative Office as a profit taxpayer, the Permanent Representative Office shall enter into the list of the Permanent Representative Offices, get registration number and a proper certificate on registration of the Permanent Representative Office as a profit taxpayer. It must be notified, that, under Article 212 of the Criminal Code, running any business without the mentioned registration certificate shall be qualified as tax evasion and stipulate for the criminal responsibility.

Taking into consideration, that a Representative Office doesn't have the status of the legal entity, the registration as VAT payer is not compulsory. However the State Tax Administration permits the voluntary registration of the Representative Office as a VAT payer.

A Representative Office shall be registered with the Statistical agencies and get (ID) code after registration in the State Tax Administration only. A representative Office shall be entered into the Unified State Register of entities of Ukraine in accordance with the Provision ON THE UNIFIED STATE REGISTER of entities of Ukraine (approved by the Resolution N 118 of the Cabinet of Ministry of Ukraine dated the 22nd of January 1996).

Under Clause 22.20 of Article 22 of the Law of Ukraine On The Profit Taxation of Enterprises, the registration of a Representative Office in the Ministry of Economics shall not be compulsory. Nevertheless, Article 5 of the Law of Ukraine On the Foreign Economic Activity, where such registration is prescribed, is also in force. Therefore the Ministry of economics continues registration of Representative Offices. So that, the problem on registration or non-registration shall be directly solved by the Representative Office itself, depending on money availabilities, (the cost of the registration equals to 2500 US dollars) and necessity to prove the Ministry of Economics and, perhaps, the other authorities, that such registration is optional.

Under Clause 4.2 of the Instruction On Opening and Using of National and Foreign Currency Accounts, approved by the Resolution N 527 of the National Bank of Ukraine dated the 18th December 1998, a Representative Office shall open an account of "П" type in a bank of Ukraine.

It is also must be stressed, that any Representative Office of foreign companies can open banking accounts of "H" type.

However, such account cannot be opened for the non-resident’s permanent Representative Office in Ukraine. It could be opened for those Representative Offices which don't carry out any business activity in Ukraine and Representative Offices of Foreign banks only.

A Representative Office shall be entitled to use a seal. Permission for making a seal shall be granted under the Instruction On licensing of opening graving shops as well as making seals and stamps for Ministries, central executive authorities, business entities and natural persons and on licensing procedure of making seal and stamp orders, dated the 11th January 1999, approved by the Resolution N 17 of the Ministry of Internal Affairs dated the 11th January 1999.

It must be stressed, that a non-resident establishing a Representative Office shall issue the power-of-attorney for obtaining a license for making a seal. In the event when the Representative Office is going to hire foreigners including chief, it is necessary to obtain an alien's labour permit for foreigners and stateless citizens.

In accordance with the current legislation, a Representative office shall get registered with the following Funds:

- the Fund of the Compulsory State Social Insurance against unemployment;

- the Fund of the Social Insurance against temporal disability;

- the Fund of the Social Insurance against factory accidents and occupational diseases.

The registration of a Representative Office as a payer of the fee for Pension Fund is not compulsory, although it should be possible.

• Statement to be submitted by a Representative Office

Under the current legislation of Ukraine, a Representative Office is a payer of taxes and other compulsory fees. Under the abovementioned, a Representative Office shall be obliged to submit a statement to the State Tax Administration, Social funds and Statistical agencies of Ukraine in accordance with the law.

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