3.3. INVESTING AND RUNNING BUSINESS IN UKRAINE FOR FOREIGN NATIONALS

Participation of foreign investors

Foreign investors, both legal entities and individuals, have a right to buy up to 100% of shares in Ukrainian enterprises. In fact, no restrictions are imposed on the form of investment in Ukraine. Contributions to statutory capital of a Ukrainian company can be made in money or in kind, i.e. as tangible or intangible assets. However, licensing and administrative authorities can restrict investors' access to certain sectors. It is prohibited to make foreign investment in production of weapons, explosives and other spheres of national interest. There also exist limitations in respect to foreigners investing in such Ukrainian sectors as insurance, telecommunications, banking and others.

Legal aspects of investing

The Law “On foreign investment treatment“ of March 19 1996 provides rather minimal incentives and guarantees to all kinds of foreign investment. The Law defines "a foreign investment" as assets contributed by foreign investors to investment objects in compliance with Ukrainian legislation with aim of making profit or achieving a social task. A Ukrainian company with foreign investments is defined as a company where at least 10% (and up to 100%) of the paid-in capital belongs to a foreign entity. Foreign investments must be registered with local authorities. Incentives and guarantees provided by the Law do not apply to unregistered foreign investments.

The forms of investment

The Law permits various forms of foreign investments, including:

– establishment of a joint venture;

– acquisition of shares in an existing company;

– acquisition of moveable and real property;

– creation of a new company fully owned by foreign investors;

– acquisition of property rights via purchase of securities;

– acquisition of rights to use land and develop natural resources.

Foreign investors are authorised to contribute investments in the form of:

– foreign currency;

– Ukraine's national currency, when reinvesting into the original object of investment or into new companies;

– any moveable or real property and related property rights;

– shares, debentures, other securities and corporate rights;

– money claims and other contractual claims guaranteed by first-class banking institutions and valued in foreign currency;

– any intellectual property rights including copyrights, production prototypes, trademarks, know-how and the like (when the convertible-currency value of such rights is confirmed in compliance with the law of investor's home country);

– rights to carry on certain types of business, including rights to exploit natural resources and conduct mining in accordance with the law and contracts (if the value of such contracts in foreign currency is confirmed and appraised according to legislation of investor's home country).

Foreign investments can be made via exchange of fixed assets for shares in statutory capital of a Ukrainian-registered company. Upon agreement of both parties, the value of such fixed assets must be appraised in convertible foreign currency and in Ukraine's national currency on the basis of world or Ukrainian market rates using the official exchange rate set by the National Bank of Ukraine. It is much easier to transfer monetary investment in foreign currency than to contribute property because the latter demands special procedures to be performed by the foreign investor. Notably, foreign investments made in-kind are exempt from VAT and import duty pursuant to the effective legislation of Ukraine. If an investment is repatriated in the course of three years after it was added to balance sheet of a Ukrainian company, all due import duties and charges must be paid.

Protection of foreign investments

Pursuant to the foreign investment legislation of Ukraine, foreign investments cannot be normally expropriated except in the event of the national emergency, such as rescue and evacuation operations during disasters, accidents and epidemics. If such expropriation does occur, foreign investors have a right to compensation from the state authorities.

Labour conditions

Obtaining a work permit

All foreign nationals who intend to work in Ukraine must obtain a work permit in compliance with Ukrainian legislation. The Republican Employment Centre with the Ministry of Labour of Ukraine issues work permits.

As a rule, a work permit is issued for up to one year with possible subsequent renewal. However, the total time of unbroken employment in Ukraine may not exceed four years. It should be noted that severe penalties are applied to those working without work permits, e.g. a foreign national working without a proper permit may be immediately deported from the country at the expense of his employer.

Getting a visa

As usual, the required visa can be obtained in Ukrainian consular department situated in the investor's home country. Consular departments of Ukraine located abroad expect an invitation in order to issue visas to individuals. Visa must be obtained before arrival to Ukraine.

There are different types of visas depending on the aim of visit to Ukraine, namely:

Diplomatic visas are issued to diplomats, employees of diplomatic corps and consular departments and their families; members of government, parliament, international organisations, and prominent politicians arriving with diplomatic missions.

Visas for officials are issued to representatives of military organisations invited by respective ministries, as well as to representatives of foreign authorities, industrial, commercial and financial institutions and organisations arriving upon invitation of corresponding authorities of Ukraine.

Business visas are applied to founders of joint ventures, representatives of head offices or non-resident companies who arrive to Ukraine to supervise execution of specific contracts, as well as to consultants of foreign companies.

Immigration visas are issued to foreign nationals who arrive to Ukraine with aim of getting a job or to become permanent residents of Ukraine.

As a rule, the mentioned categories of foreign nationals obtain visas expiring in 6 months to 1 year. A multi-entry visa provides an opportunity of limitless trips in and out of Ukraine until expiry.

Pursuant to Regulation of the Cabinet of Ministers of Ukraine (dated 5 May 2000), citizens of EU member-states, Canada, the USA and Japan register visas to Ukraine without any invitations.

[12.12.2000]

Official date the site was started

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