Nowadays Ukrainian employers tend more and more often to employ foreign nationals, especially in cases when there is a need for highly-qualified staff in a new business areas, which are not sufficiently developed in Ukraine or when it is necessary a position to be held only by a foreigner (e.g. Director of a foreign company subsidiary in Ukraine).

In light of that the employers face with some complications and peculiarities connected with employment of foreigners.

First of all, according to the Act of Ukraine "On People Employment" dated 1 March 1991 No.803-XII either foreigner, who wishes to work in Ukraine, is required to have a Work Permit. This document is to be obtained by an employer of such a foreigner. The Work Permit is given to the employer for employment of a particular foreigner to the specific office. The Permit is also needed for the foreigners, who are employed with a foreign company but were assigned to perform a certain amount of work or render services in Ukraine based on the contract made by this foreign company and a Ukrainian one, foreigners, who are referred to the category of internal corporate assignees, as well as foreigners, who render services without commercial presence in Ukraine.

However, there are several categories of foreign nationals, who are not required to have the Work Permit to be employed in Ukraine. Within these categories fall:

  • foreign citizens, who permanently reside in the territory of Ukraine and received a Permanent Residency Permit;
  • foreign citizens employed by an investor under a production-sharing agreement;
  • foreign citizens, who come to Ukraine to work in registered representative offices of foreign companies;
  • foreign citizens, who are not employer in Ukraine but perform works or render services in accordance with private contracts (not labor contracts) made with Ukrainian companies or individuals; and
  • foreign citizens, who are granted a refugee status.

Procedures & Paperwork

Procedure for getting the Work Permit in Ukraine is governed by the Government Resolution No.322 dated 8 April 2009 "On Approval the Procedure for Issue, Renewal and Abolition of Permits for Use of Work if Foreign Citizens and Stateless Persons". Under this Procedure a Work Permit in the name of a foreign citizen can be issued only if one of the following conditions is met:

  1. there are no employees in the country (region), who can perform the relevant work; or
  2. there a good reason for employment of a foreign citizen instead of a Ukrainian national (e.g. unique experience, special education, skills and profession).

In order to obtain a Work Permit an employer is required to lodge with the Regional Employment Centre (City Employment Centre in Kyiv and Sevastopol) the documents as follows:

  • application;
  • 2 color photos of a foreign citizen;
  • justification for employment of the foreign citizen and statement on capability to create for the foreign employees relevant conditions of work and sojourn;
  • authorization from the employer to represent before the Employment Centre (e.g. internal resolution, power of attorney, etc.);
  • certificates issued by the tax authorities and local employment center on absence of arrears in payment of taxes, social security and other obligatory fees;
  • receipt confirming payment of the fee for considering the application;
  • copy of the draft labor contract certified by the employer;
  • statement that the office, to which the foreign citizen will be appointed, does not require to be citizenship citizen of Ukraine or to have access to state secret;
  • non-convictions certificate in Ukraine, if a foreigner resides on the territory of Ukraine;
  • certificate issued by a competent authority in the foreigner's jurisdiction, confirming that the foreigner is not under investigation and does not serve a sentence;
  • copy of the company charter (articles of association) of the employer that is a legal entity;
  • copy of education or qualification certificate of a foreigner;
  • copy of the foreigner's passport that contain identification data.

All the documents, which are issued in the foreign jurisdiction and are not in Ukrainian, must be legalized and translated into Ukrainian.

For consideration of the application the employer is required to pay a fee in the amount of 4 minimum salaries. The amount of minimum salary changes each year and is established by the Act of Ukraine "On State Budget" for a particular year. 2011 State Budget Act of Ukraine prescribes for the following amounts of the minimum salary for 2011:

  • from 1 January 2011 – UAH 941.00 (approximately USD 117);
  • from 1 April 2011 – UAH 960.00 (approximately USD 120);
  • from 1 October 2011 – UAH 985.00 (approximately USD 123); and
  • from 1 December 2011 – UAH 1004.00 (approximately USD 125).

Competent Employment Centre is obligated to consider the documents and decide whether to issue the Work Permit or not within 30 days. However, as a rule, in practice it takes much less time for the Employment Centre to come out with the decision.

Work Permit is valid for 1 year. For foreign citizens, who are internal corporate assignees or render services without commercial presence in Ukraine the validity period can be up to 3 years.

After expiration of the above term the employer must return to the Work Permit to the Employment Centre.

Term of validity of the Work Permit can be extended. For this purpose the employer must apply to the relevant Employment Centre not later than one (1) month before the expiry date. The number of possible extensions is not limited.

Work Permit issued under the law serves as a legal ground for getting by the foreign citizen an employment visa (visa type IM-1), which is required to be in place even for the foreigners from the jurisdictions with visa-free regime (e.g. EU countries).

After the foreign employee comes to Ukraine based on employment visa, the term of his/her sojourn in Ukraine and residency must be registered with the local migration authority and internal affairs department respectively, which is confirmed by the Temporary Residency Permit.

Taxes & Social Security Fees

Taxation rules for foreign employees in Ukraine are set in the Tax Code of Ukraine dated 2 December 2010 No.2756-VI. According to the Tax Code taxation of salary of foreign employees is governed by the same rules as applied to Ukrainian nationals.

The rate of individual income tax in Ukraine is 15%. However, in case the salary of the foreign employee exceeds ten (10) minimum salaries, the rate 17% shall be applied to the difference between the actual salary of the foreign employee and the amount of ten (10) minimum salaries. The rest shall be taxable at the rate of 15%.

It ought to be mentioned that the rate of individual income tax for foreigners has been substantially reduced by the Tax Code. Formerly, the Individual Income Tax Act prescribed the 30% rate for salaries of foreign employees in Ukraine, who had not had Tax Residency Certificate in Ukraine.

Ukrainian employer is deemed to be a tax agent for the foreign employees and is obligated to calculate, withhold and pay their taxes, as well as keep relevant accounting and tax records.

In addition to individual income tax, a single social security fee must also be payable. This fee has been introduced starting from 1 January 2011 and replaced several fees to different social security funds, including the Pension Fund.

Single social security fee is paid by employer and employee. The employer's rate of the fee varies from 36,76% and up to 49,7% of payroll. Particular rate of the single social security fee depends on the class of professional risk. There are 67 classes of professional risk, which are assigned to the employers based on the type of their main economic activity. For instance, the minimum rate of the single social security fee is paid by the employers that provide services.

The rate of single social security fee for employees is 3,6% and is deducted from the employer's salary.

The maximum amount of the single social security fee cannot exceed 15 living wages (approximately USD 1 764).

Liability for Breach of Employment Rules

In case the employer uses labor of a foreign citizen without a Work Permit in place, Employment Centre can impose a fine in the amount of 20 minimum salaries (currently, about USD 2 400) for each working foreigner.

As to the foreign citizens, who work in Ukraine without Work Permits, they can be banished from the country.

Procedure for employment of foreign citizens in Ukraine is not an easy one and Ukrainian employers need to carefully consider all the legal implications to comply with all the formalities and get the foreigner "safely" employed in Ukraine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.