Is it Profitable to Invest in Ukraine?

Let’s find out. For almost two years now, the Ukrainian state and people have been demonstrating their strength, resilience, and power to the world. Not only did Ukrainians not stop and manage to withstand a full-scale war, but they also manage to develop, do business, build, improve and move towards the EU, even outpacing the European community in such areas as e-government, EDMS, use of digital signatures, etc.

In particular, according to the Opendatabot Ukrainian business platform, more than 304,000 new individual entrepreneurs and 37,000 new companies were registered in Ukraine in 2023. The most popular sectors were retail and wholesale trade, IT and personal services.

In addition, the laws of Ukraine currently offer wide opportunities for attracting assets to Ukraine.

For example, the recently enacted Law of Ukraine “On State Support of Investment Projects with Significant Investments in Ukraine” dated 17 December 2020 provides for state support to Ukrainian and foreign investors (including those in the realm of construction) providing a total investment exceeding EUR 12 million and high salaries for employees while creating 10+ new vacancies. This includes the possibility of obtaining tax benefits, providing investment projects with adjacent infrastructure, granting the pre-emptive right to use state-owned or municipally owned land plots for investment projects, and securing investor guarantees by entering into a direct agreement with the Government of Ukraine.

In particular, such state support may be provided to investment projects involving the construction, modernisation, technical or technological re-equipment of real estate in the areas of processing industry, mining, waste management, transport, warehousing, postal and courier services, logistics, education, scientific and technical activities, healthcare, art, culture, sports, tourism, as well as in the resort and recreational sector and in the field of electronic communications.

Another example of how investment in Ukraine is facilitated is the tendency to insure all possible risks associated with the war.

As of today, Ukraine has already implemented mechanisms to insure grain corridors. For example, Ukraine and Marsh McLennan, an international insurance broker, have signed an agreement that will facilitate the transportation of grain and agricultural products by ships from the Black Sea. Marsh McLennan is expected to offer up to USD 50 million in ship insurance. The insurance is intended for transport vessels carrying agricultural goods in the face of war risks.

In addition, Ukraine has already adopted the law, which came into force on 1 January 2024, aimed at expanding the capabilities of the Ukrainian Export Credit Agency (ECA) to insure investments in Ukraine (both foreign and domestic investors), including against war risks.

Construction & Architect Activities in Ukraine

Architecture in general and design in particular is a very profitable business. There is always a demand for living space in Ukraine, as well as for comfort, which is particularly relevant in the context of Ukraine’s reconstruction campaign. Architecture companies are ready to offer their clients a wide variety of services – from designing a cosmetic renovation of a single apartment to creating a full project of apartment building or business centre from scratch.

So, below are the reasons that will make you think about starting a business in the construction & architecture niche in Ukraine.

Freedom from bureaucracy

Carrying out construction or architectural activities in Ukraine requires obtaining various permits and licences from the state. For example, a special construction approval is required only for certain complex buildings, e.g. with 5 floors or more (CC2 and CC3 classes in accordance with the classification of all buildings by consequence classes), and the creation of architectural objects is not subject to licensing at all from 2020.

It is also worth noting that in the World Bank’s Doing Business 2020 ranking, Ukraine ranks 20th among 190 countries in terms of the complexity of permitting procedures in the construction sector.

In order to carry out activities in Ukraine related to the creation of architectural objects, a specialist only needs to pass a professional certification in accordance with the procedure provided for in Article 17 of the Law of Ukraine “On Architectural Activities” and obtain a relevant certificate. Herewith there are some types of activities that do not need any certificate at all (for example, designing of projects under the guidance of a certified architect; concepts, sketches, research works; other).

Please note: the project of any architectural object must be developed under the guidance or with the participation of the chief architect/engineer of the project – the head of the state body of urban planning and architecture of the relevant administrative-territorial unit (region, district or settlement of Ukraine).

Ease of starting and running a business (see information above)

Demand

Despite the current situation in Ukraine, Ukrainian cities and towns continue to develop, and not only have construction projects not stopped, but new ones are starting. There is also a tendency of ordinary citizens to order projects and subsequent construction of private country houses.

Launch of Business in Ukraine is Fast and Affordable

Today, Ukraine is a digitised country in many areas. Starting and running your own business is no exception. For example, you can register as a private entrepreneur (one of the possible forms of business operation in Ukraine, we will discuss this below) online using the Diia platform, and it will take no more than 15 minutes to submit an application and carry out registration actions! Moreover, this procedure is absolutely free of charge.

In addition, electronic digital signatures (EDS) are now widely used in Ukraine for business purposes. This means that you can sign any commercial agreement, send business correspondence or even submit documents to a government agency or court without leaving your home using your computer or even smartphone. Obtaining any information about you as an entrepreneur or about your company from state registrars also will take just a few minutes, as Ukraine has a system of obtaining extracts from any state registers online.

Ukrainian legislation grants all foreigners the same rights as Ukrainian citizens to conduct business. That is, a foreigner can also start his or her own business as a private entrepreneur or even set up his or her own company, but such procedures will be somewhat complicated due to the person’s non-residence. Therefore, it can be quite difficult to start a business in Ukraine without qualified legal assistance to a foreigner.

The two most popular business formats are an individual entrepreneur (IE) and a limited liability company (LLC). An individual entrepreneur) is a very simple form of business activity that does not require you to set up a company or other legal entity. An individual entrepreneur carries out his or her business activities independently, but at his or her own risk. An LLC is a type of legal entity established by one or more persons for the purpose of conducting commercial activities and the most common form of a company in Ukraine (90% of legal entities). Both forms have both advantages and disadvantages; you may see a more detailed comparison can be found in the table below.

	IE	LLC
Owner	Directly an entrepreneur	Possibility to operate independently or in cooperation with other co-owners (the number of co-owners is not limited)
Management	Directly an entrepreneur	Shareholders and an executive body (director and directorate) liable for the company’s day-to-day activity. Certain other controlling bodies (like a supervisory council) may be introduced as an option.
Liability	An individual entrepreneur is liable for business-related obligations with all his/her property!	Shareholders are liable for the company’s obligations only within their contributions to the authorised capital, the directors’ fraudulent and other illegal actions may result in their personal liability under civil and criminal laws.
Authorised Capital	None	The presence of a share capital is mandatory, but the legislation does not set its minimum amount (there are exceptions for certain types of activities)
Peculiarity of making a profit	An individual entrepreneur can withdraw funds from his/her bank account at any time	The shareholders must decide to pay dividends from the profits earned by the LLC
Termination of business activity	Termination of an individual entrepreneur’s activities is carried out on the basis of an application within relatively short terms	In order to terminate the LLC’s activities, it is necessary to go through the liquidation procedure, which is usually quite complicated and lengthy

Both an IE and an LLC are entitled to enjoy simplified tax system (subject to certain limitation), e.g. like a 5% tax rate of earnings actually received within an annual revenue limit of 8,04 million UAH (around 200 000 Euro).

However, when choosing an organisational form of doing business, you should take into account many other factors, including the specifics of the business activity you plan to conduct, the desire to involve other partners in the future, the taxation system, etc.

At the same time, even though starting a business in Ukraine is fast and affordable for everyone, if you do not have the necessary knowledge and skills, this procedure can become more complicated and time-consuming.

For example, it should be borne in mind that certain types of business activities in Ukraine are subject to special state control and require special permits to conduct them.

For example, if you are planning to build multi-storey buildings, it will not be enough just to set up and register a legal entity. The fact is that the construction of multi-storey buildings in Ukraine is one of the activities subject to special state control, and to carry out such activities, you need to obtain a license (we describe this in more detail below). Please note that it will be quite difficult to obtain such a license without the assistance of experienced lawyers.

There are also a few nuances when a foreigner establishes a company. For example, the procedure for a foreigner to set up his own company in Ukraine is the same as for a Ukrainian citizen. However, to start doing business directly and independently as a director of the company after its registration, such a foreigner needs to obtain a special work permit, which may also delay the process of starting a business.

 

For more than 15 years, the team of Syrota Dzis Melnyk & Partners provides a so-called “turnkey company incorporation” service, i.e. comprehensive support and assistance in planning, starting, registering and running a business in Ukraine as well as related issues (obtainment of a work permit and an electronic signature for a foreigner director, accounting services and tax advisory). We would be happy to advise you with regards to this matter in more details.