Any foreign citizen who is registered as a private entrepreneur (PE) can be a single taxpayer. The State Tax Service (STS) provided the requested explanations. Before that, only some territorial STS subdivisions made similar conclusions. Previously, foreigners could safely register as private entrepreneurs only under the general taxation system.
This step is consistent with paragraph 4 of the Decree of the President of Ukraine No. 420/2020 “On some measures to attract entrepreneurs, highly qualified specialists who are citizens of the Republic of Belarus”.
Why is it important for the IT industry?
The Ukrainian IT industry is extremely interested in foreign IT specialists. The form of cooperation with private entrepreneurs is the main model of activities within the sector. This year, the government approved immigration quotas, under which highly-skilled specialists can apply for a permanent residence permit. However, it is difficult to use the quota mechanism in practice, as foreigners did not have the opportunity to be a single taxpayer when applying for immigration documents. The immigration procedure is a lengthy process: applications for an immigration permit is considered within a year, and then obtaining a relevant certificate takes up to 15 working days.
From now on, foreign IT specialists who decide to immigrate to Ukraine under quotas will be able to legally work as private entrepreneurs and belong to the single taxpayers of group III while waiting for an immigration permit and a permanent residence card.
The STS provided the relevant explanations in response to a request sent by the Better Regulation Delivery Office (BRDO) and the IT Ukraine Association and supported by the Ministry of Digital Transformation.
Currently, the Ministry of Digital Transformation, BRDO, and the IT Ukraine Association appeal to the Ministry of Finance to provide a clear conclusion with this regard in the form of general tax advice.
The only problematic issue is a period of legal stay. After applying for an immigration permit, the period of stay of foreigners in Ukraine can be extended up to 180 days from the last entry into Ukraine.
“The opportunity for foreigners to work in the IT industry as private entrepreneurs under the simplified taxation system is a competitive advantage of Ukraine. The only thing we need to do is to establish a rapid quota use process for foreigners, and we can move from brain drain to brain gain in the IT sector,” Ihor Samokhodsky, BRDO’s IT&Telecom Sector Head, said.
Until 2020, the only opportunity for foreigners to work in IT in Ukraine was to be employed legally. To do this, employers had to obtain a permit for the employment of foreigners and stateless persons, and foreign specialists had to obtain a temporary residence permit. And only then a foreign specialist could register as a private entrepreneur under the simplified taxation system while still being registered as a salaried employee.
Since 2020, the immigration mechanism has become available, allowing IT specialists to work as private entrepreneurs without additional restrictions. Moreover, from October 2020, an “extra departure” from Ukraine is not required for foreigners to obtain a temporary residence permit in Ukraine.