How to Invest in Ukraine for Foreign Investors

Investing in a foreign country requires careful consideration of various factors. For those considering Ukraine, understanding its unique economic landscape is important. This article guides foreign investors through available opportunities, procedural steps for establishing an investment presence, executing transactions, and understanding tax obligations. This information offers a foundational understanding for engaging with the Ukrainian market.

Identifying Investment Opportunities

Ukraine presents a diverse range of investment opportunities across several key sectors, driven by its natural resources, strategic geographic location, and a skilled workforce. Foreign direct investment has seen fluctuations, but the government continues to attract capital, particularly for reconstruction and modernization efforts. Investment opportunities are available in various asset classes, including direct equity, real estate, government bonds, and to a lesser extent, public equities.

The information technology (IT) sector in Ukraine is dynamic, consistently attracting foreign investment. Ukraine is recognized for its large pool of skilled IT professionals and strong position in IT outsourcing and software research and development. The sector has demonstrated resilience and growth, with venture capital and private equity flowing into areas such as DefenseTech, artificial intelligence (AI), FinTech, and blockchain solutions. This growth is supported by a robust ecosystem of IT service companies.

Agriculture and agri-processing represent another significant sector for investment, leveraging Ukraine’s extensive fertile land, including a substantial portion of the world’s chernozem soil. The country’s agricultural sector plays an important role in global food security and has strong export potential, particularly for grains, sunflower oil, and oilseeds. While foreign investors are generally prohibited from owning agricultural land directly until a national referendum is held, opportunities exist in agri-processing, which benefits from government support and incentives. Investments in agricultural machinery, infrastructure like grain elevators and logistics hubs, and advanced farming technologies are areas of interest.

The renewable energy sector is expanding, with Ukraine aiming to develop its potential in solar and wind power. Government policies are creating favorable conditions for this sector, a fast-growing market with investment opportunities. This area is part of broader efforts to modernize Ukraine’s energy infrastructure, with recovery needs and incentives for projects in solar, wind, and energy storage.

Infrastructure development and reconstruction offer long-term investment prospects, particularly given the extensive damage sustained. The estimated reconstruction needs amount to hundreds of billions of dollars, creating opportunities across transportation (roads, railways, maritime, aviation), logistics, and industrial parks. Public-private partnerships (PPPs) are a mechanism for attracting private capital into these projects, with the government promoting investment in modernizing and expanding infrastructure networks.

In the manufacturing sector, opportunities exist in heavy machinery, metallurgy, and automotive production, building on Ukraine’s industrial base and skilled workforce. The country’s strategic location provides access to both European and Commonwealth of Independent States (CIS) markets, making it an attractive hub for manufacturing and export-oriented businesses. Consumer goods present opportunities, supported by a large domestic market.

Real estate investment in Ukraine is permissible for foreigners, covering residential and commercial properties. Major cities like Kyiv, Lviv, and Odesa are targets for real estate investment, with potential for appreciation during post-war recovery. Investors can acquire apartments, houses, offices, and retail spaces for rental income or capital growth. Due diligence is important, including verification of property titles and understanding local zoning laws.

For portfolio investors, Ukrainian domestic government bonds (OVDPs) are accessible. Foreign individual investors can purchase these bonds online through licensed brokers, and there is no income tax on the income generated from them. While the broader public equities market is less developed with limited liquidity, government bonds constitute a large portion of trades on Ukrainian stock exchanges. Investing in these bonds supports Ukraine’s economy and offers potential returns.

Establishing a Legal Investment Presence

Establishing a legal investment presence in Ukraine involves preparatory steps. The choice of legal form is a key decision for foreign investors, with the Limited Liability Company (LLC), known locally as Tovarystvo z Obmezhenoyu Vidpovidalnistyu (TOV), being a common choice due to its flexibility and limited liability. Other options include establishing a representative office or engaging in joint ventures.

To register an LLC, foreign founders must gather specific documentation:
For individual founders: Notarized and apostilled or legalized copies of their passports.
For legal entity founders: An extract from its commercial register, also notarized and apostilled or legalized, to confirm its legal existence and authority.
A power of attorney, notarized and apostilled or legalized, if a representative handles the registration.

Key decisions must be made regarding the new entity:
Selecting a unique company name, checked for availability in the state register.
Determining the legal address of the company in Ukraine, a prerequisite for registration.
Determining the amount of authorized capital (minimum requirements for LLCs are not high).
Identifying the types of economic activities using standardized KVED codes.

The Articles of Association, or Charter, is the foundational document for an LLC, outlining its purpose, structure, and operational rules. This document must be prepared in accordance with Ukrainian law. Appointment of a director or management body is an important step; a foreign national serving as director may need a work permit or other legal basis for their stay and employment in Ukraine.

Once decisions are made and documents prepared, the registration process begins with the state registrar. Submit the completed application forms, Articles of Association, and other required documents. After successful state registration, the company is automatically registered with tax authorities, obtaining a tax identification number, and with statistical bodies. Opening a corporate bank account in Ukraine is a subsequent step for managing the company’s financial operations and receiving investment funds. Official forms for registration are available from state registration offices or through online portals.

Executing Investment Transactions

After a legal investment presence is established in Ukraine, the focus shifts to executing investment transactions. This phase involves financial and legal actions to deploy capital, acquire assets, or engage in market activities.

For direct investments, such as acquiring an business or funding a new project, capital injection is involved. This begins with opening a corporate bank account in Ukraine, possible once the legal entity is registered. Funds are then transferred from abroad to this Ukrainian bank account. Currency exchange procedures convert foreign currency into Ukrainian Hryvnia (UAH) for local operations and investments. For certain foreign investments or profit repatriation, registration with the National Bank of Ukraine (NBU) or other relevant state bodies may be required.

The acquisition of assets, such as real estate or equipment, involves a process. Conduct thorough due diligence on the target asset to verify ownership, legal status, and any encumbrances. Draft a sale and purchase agreement, which often requires notarization under Ukrainian law. Register ownership transfer with relevant state registries, such as the State Register of Real Rights to Immovable Property for real estate. Payments for property in Ukraine must be conducted through a bank.

For portfolio investments, such as purchasing government bonds or public equities, investors must open a brokerage account with a licensed Ukrainian securities broker. Foreign individual investors can buy Ukrainian government bonds online through platforms provided by financial groups for remote registration and execution. After transferring funds to the brokerage account, investors can place buy orders for the desired securities. Settlement procedures follow standard market practices, taking a few business days. Ukrainian custodians hold the securities on behalf of the investor, ensuring record-keeping.

Beyond initial capital deployment, certain investments or ongoing business operations may require permits or licenses. For instance, engaging in financial services, certain manufacturing activities, or construction projects require additional operational licenses from relevant regulatory bodies after company registration. These permits are distinct from initial company registration and depend on the specific business activities. Environmental permits or specialized industry licenses may be required, depending on the sector of investment.

Understanding Tax Obligations

Foreign investors in Ukraine must navigate a tax system including corporate income tax, withholding taxes, capital gains tax, and other levies. Understanding these obligations is important for financial planning and compliance with Ukrainian tax laws.

Corporate income tax (CIT) is applied to the profits of legal entities operating in Ukraine. The standard corporate income tax rate is 18%. Taxable income is calculated based on accounting profits, with adjustments outlined in the Tax Code of Ukraine. Companies file annual tax declarations and make advance or quarterly payments, depending on their income levels.

Withholding tax (WHT) is a consideration for foreign investors receiving income from Ukraine. Dividends paid to non-resident entities are subject to a withholding tax, at 15% unless a double taxation treaty (DTT) provides for a lower rate. Interest payments to non-residents are subject to a 15% withholding tax. Royalties paid to non-residents are also subject to a 15% withholding tax. Ukraine has entered into DTTs with many countries, which can reduce or eliminate these withholding tax rates; investors should ascertain applicable treaty rates.

Capital gains tax (CGT) applies to profits realized from the sale of assets. For non-resident legal entities, capital gains from the sale of shares in Ukrainian companies or other assets located in Ukraine are subject to corporate income tax at the standard rate, unless a DTT specifies otherwise. For individuals, personal income tax rules apply to capital gains. The sale of real estate is subject to taxation, with rates varying depending on ownership duration and the number of sales within a tax year.

Value Added Tax (VAT) is levied on most goods and services supplied in Ukraine and on imported goods. The standard VAT rate is 20%. Companies must register as VAT payers if their taxable supply of goods and services exceeds a certain threshold within a 12-month period. VAT-registered businesses can recover input VAT paid on their purchases, provided conditions are met and proper tax invoices are issued.

Beyond these taxes, foreign investors should be aware of other obligations. Personal income tax (PIT) applies to the income of foreign employees or directors working in Ukraine, with rates varying based on income type and source. Social contributions are mandatory for employers, covering social security, pension, and unemployment insurance for employees. Property tax and land tax apply to entities owning real estate or land in Ukraine, calculated based on assessed property value or land valuation. Compliance involves timely filing of tax declarations and making payments according to established deadlines, typically quarterly or annually, depending on the tax.