For the past two years Ukraine has been going through severe political and military events and has faced numerous economic challenges. In the current publication thereof we will analyze the main trends in Ukraine and discuss its economic environment in terms of doing business and foreign cooperation especially in the sphere of IT outsourcing. We also invite you to follow our further publications devoted to the main CEE IT outsourcing destinations. Ease of doing business index was established by the World Bank to provide a detailed description of the world economies. This is a good option for countries to join international business arena as well as an opportunity to attract foreign investment and enhance local economies. The Ease of Doing Business Index comprises of the following indicators: starting a business, dealing with construction permit, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing insolvency.
Doing business during the war
Currently, the life of Ukrainians is following two frontiers: daily routine and the war in the East of the country. All spheres of the economy were strongly influenced by the ongoing military conflict; therefore, the government of Ukraine has to implement the required reforms during the tough times. According to the World Bank reports, “Ukrainian authorities have carried out key reforms in several areas, including undertaking significant fiscal consolidation, moving to a flexible exchange rate, reforming energy tariffs and social assistance, making public procurement more transparent, simplifying business regulation, and stabilizing and restructuring the banking sector.” To make Ukraine attractive for foreign businessmen and investors, it is necessary to put things in order inside the country. To have a high doing business index a country should have favorable economic conditions and qualitative legislation and regulation that will help to establish successful business with a positive outcome. One more issue in favor of choosing Ukraine is that business registration fees were eliminated and VAT registration time was reduced.
Starting a business in Ukraine may be a controversial idea since the country is currently infamous for its unstable political situation and war with pro-Russian rebels in the eastern regions. However, the World Bank ranks Ukraine 84th amidst the global countries as a rather reliable place for setting up cooperation with. For the past decade, Ukraine established itself as one of top IT outsourcing destinations, first of all owing to its large talent pool and affordable pricing within the industry if compared to much larger both North American and European countries. Doing Business Index is measured by different constituents related to the state’s willingness and readiness to rivet attention as well as leveraging investments from foreign market players. Let’s dwell into the detailed analysis of the Doing Business Index constituents.
Starting a business in Ukraine is a complex procedures that will take up to 20 days according to the local legislation. Foreigners (non-residents) in Ukraine have the right to conduct a business as much as citizens of Ukraine do, but the foreigners have some legal nuances that need to be known before you start to take up the business. The foreigner must obtain an identification number from the State Tax Administration. This procedure takes 3-4 days on average. Afterward, a person considers which type of company to establish – Private Enterprise or LLC. A foreigner in Ukraine has the right to officially work only after obtaining a work permit in Ukraine. This permit is issued within 15 days of submission of documents and is valid for 1 year. But the foreigner-founder of LLC and simultaneously the Chairperson of LLC has no right to obtain a job as the documents for authorization are submitted on behalf of a registered legal entity. In this case, a citizen of Ukraine should be appointed the Chairperson of LLC. This can be your representative or trustee on the basis of additional agreements. One of the main requirements for the non-resident with a foreign passport and all other documents is to have them translated into Ukrainian and such translation should be certified by the local notary.
Dealing with construction permit, getting electricity supply and registering property is necessary in case if a company founder prefers constructing a brand new building not renting or buying available premises. Purchasing land for constructing building carries additional expenses, somehow unnecessary especially if the business owner doesn’t plan to establish full stack production in the area. From that perspective, it is advisable to opt for rent with future purchase of the premises instead. Another option is buying the already existing building since the quality and location of such building can be immediately checked, all the required supply systems have been installed and all the documents arranged. The easier way, isn’t it? Moreover, if an owner still wants to build a new building, Ukraine is the only country that doesn’t require construction plans revision before a building permit issuing. The overall number of procedures to be covered before settling the issues will reach up to 15 and will take up to 300 days
Such aspects as getting credit, protecting minority investors, and resolving insolvency still remain amidst the procedures with rather red tape procedures to go through. The reason is lying behind not difficult time for the economy, but owing to the regulations that still wait to be implemented. The current banking system is friendly and open for crediting businesses, however, the percent rate is discussed individually for each case and highly depends on the bank you address. It is advisable to view several offers before choosing the bank you will involve into your business activity.
Paying taxes and trading across borders procedures were simplified for both foreign and national companies providing IT outsourcing services since new legislation does not require physically signed agreements between the contracting parties and scanned documents and invoices are no longer necessary. Since, global governments prefer solving the cases online, the amendments to the Law on Services Exporting allows to fully shifting to the Internet application for doing business (modern trends in IT outsourcing like cloud services establishment no longer need physical data storage devices, therefore, all the data can be easily transmitted via the Internet).
Considering all the aforementioned indicators, Ukraine has a promising future in attracting foreign businesses. Many components of the Doing Business Index are still to be improved or reformed, however, the existing state of issues allows envisaging even great future for business in general and IT outsourcing sector, namely.