Turkish citizen Erdeniz Ünvan divides his time between Kyiv and Istanbul.
Discouraged by political and economic calamities in Turkey, he and his partner recently decided to open an office of their IT training and consultancy firm in Kyiv and transfer some of their clients, mostly from Middle East, Europe, and Turkey, here.
He was surprised at how quickly he was able to set up a company and get work and residency permits in Ukraine: It took him 34 days, including a week in Istanbul to get an immigration visa.
“I used to work in Europe, and there it takes several months. Ukraine definitely has an advantage,” Ünvan said.
And in a bid to attract even more foreign investment, Ukraine has amended its legislation on the employment of foreigners, with the changes coming into force on Sept. 27.
And for company founders and shareholders like Ünvan, the new law offers a big perk — a work permit valid for up to three years, rather than just one, as at present.
Other special categories of foreigners eligible for an extended work permit are IT and creative professionals, and graduates of the world’s top 100 universities.
And those who invest at least 100,000 euros into a Ukrainian company will enjoy the right to obtain a temporary residence permit without a need to be employed.
However, while lawyers praise the new amendments for simplifying the process of hiring foreigners by reducing bureaucracy, and for granting perks for business owners and investors, they say the changes also impose an additional financial burden on employers hiring foreign workers.
According to the State Migration Service in Ukraine, 81,710 foreigners were registered as staying temporarily in the country in 2016.
Less bureaucracy
The amendments reduce the list of documents required to obtain a work permit in Ukraine by half. In particular, foreigners seeking a job with a Ukrainian company will not have to submit university degree certificates, a medical form, or a police clearance form.
Employers will not need to justify why they are hiring a foreigner and not a Ukrainian worker. Instead, they have to submit a draft employment contract.
Another important improvement is that the employment centers of the State Labour Service of Ukraine will allow applicants to resubmit incorrect or missing documents, instead of having, as now, their application rejected.
“If an authorized body finds a mistake in any document submitted with an application for a work permit, an employer has seven business days to resubmit the correct version. Hitherto applications with any kind of mistakes have been automatically rejected,” Vasyl Cherednichenko, a partner at Kyiv-based EXPATPRO law firm, which specializes in immigration, told the Kyiv Post.
Complications
But while getting work permits has become easier, prolonging them has become more expensive.
It used to be free of charge. But with the new law coming into force, prolonging a permit will cost the same as the initial issuance: Hr 6,496 ($250) for one year, and Hr 9,744 ($375) for three years.
The price is pegged to the official subsistence minimum, and so will go up, because the government plans to increase the official subsistence minimum in December from Hr 1,624 to 1,700 ($65.50).
Moreover, a company must provide evidence that it employs three Ukrainian citizens or has paid Hr 160,000 ($6,168) in corporate income tax before its foreign employees can get their temporary residence permits extended.
Finally, the new law introduces a minimum salary requirement for a foreign worker, which is 5–10 more than Ukrainians have to be paid.
According to the new law that comes into force at the end of September, foreign nationals who work in non-governmental or charity organizations and educational institutions in Ukraine must earn at least Hr 16,000 ($616). Those who work for private companies must be paid at least Hr 32,000 ($1,233).
This requirement doesn’t apply to special categories such as IT and creative professionals and graduates of world’s 100 best universities. Their salary can be as low as the Ukrainian minimum salary of Hr 3,200 ($123).
Still, the sums look generous for Ukraine, where the average monthly salary is Hr 7,000 ($270), according to the State Statistics Service.
“It’s also unclear how the new requirements will apply to foreigners who were hired earlier,” Cherednichenko of EXPATPRO said.
Tax evasion
The Ukrainian government has been fighting the shadow economy for years, particularly the widespread practice of paying salaries off-the-books to avoid taxes.
Anyone who is employed in Ukraine is required to pay an 18 percent individual income tax and a 1.5-percent military tax on their salaries. In addition, every company pays a 22 percent social security, or payroll, tax on each official employee’s salary.
Thus, both employers and employees find it mutually beneficial to declare less than the employee really earns.
“On the one hand, the new legislation allows companies to hire whomever they want. On the other hand, they have to pay foreign employees high salaries, and therefore, more taxes,” says Cherednichenko.
“I think it will be difficult for some businesses like English language schools,” he said.
The manager of a private English-language school in Kyiv told the Kyiv Post on the condition of anonymity that they would not be able to comply with the new salary requirements.
“It’s already hard enough to attract qualified teachers who are native speakers. We’re a private language school, and we can’t offer international-level salaries, let alone pay all taxes on those salaries,” she said.
She disclosed that they had worked with some foreign teachers who didn’t hold work permits and were therefore paid in cash.
“We also have foreigners who are officially employed, but their salaries on paper are lower than the amount they actually receive,” she said.
“It’s not a rare practice in Ukraine.”
