Ukraine

General information

Total area: 603,700 sq. km Population: ~48 million Principal cities: Kyiv (Kiev), Donetsk, Zaporizhzhya (Zaporozhye), Dnipropetrovsk (Dnepropetrovsk), Kharkiv (Kharkov), Lviv (Lvov), Odesa (Odessa) Official language: Ukrainian (although in business Russian is mainly used) Neighbouring states: Russia, Moldova, Belarus, Poland, Romania, Slovakia, Hungary Currency: Hryvnia (UAH)

Ukraine has focused long ago on closer integration with the rest of the world while preserving its traditional links with the countries of the former Soviet Union. Reflecting its importance and size, Ukraine is a member of the United Nations, the IMF, the World Bank, the EBRD, etc.

Investment policy and investment possibilities

•Foreign ownership of most types of business is permitted. •Foreign investments are welcome, especially, those ones involving technology transfer and capital. •Similar regime of investment and business activity is applicable to local and foreign investors. •Protection of foreign investments is available under Ukrainian legislation and international treaties. •As of January 1, 2002 foreign investors can own non-agricultural land in Ukraine. •Special economic zones grant significant tax concessions for investments.

Possible business structures and corresponding regulations

•The corporate and management structure is relatively flexible. •A joint stock company is a legal entity whose capital is divided into a specified number of shares. There are two types of joint stock companies: “open” joint stock company and “closed” joint stock company. Shares of joint stock companies must be registered with the State Commission for Securities and Stock Exchange. •Limited liability companies require less complex structure. A limited liability company does not have shares. Participants in the company own a percentage of the company’s capital. •To establish a presence in Ukraine representative offices are used although they can be engaged in business activities. The representative office does not constitute a legal entity. •A joint venture can take the form of a company which has a distinct legal personality or an un-incorporated entity which does not. •Concessions are allowed in certain fields for the period up to 50 years. •Preliminary approval from the Antimonopoly Committee may be required for certain acquisitions of shares or assets. •There is no ceiling regarding the amount of capital a foreign company invests into a Ukrainian company. •Foreign investments must be registered with the local authorities.

Tax planning

•Ukraine has developed a wide double tax treaty network. •Domestic tax treatment applies to foreign corporations and expatriate personnel. •Dividends, interest and royalties may be freely repatriated. •Withholding tax of 15% applies to dividends, interest and royalties, but domestic tax law is subordinated to international tax treaties. •The principal taxes in Ukraine are corporate profits tax, personal income tax, VAT, payroll taxes, excise tax, land tax, tax on owners of motor vehicles and import duties. There are also other taxes and different local taxes that may be levied by the local authorities.

Investment protection & incentives

•Investment incentives are generally available on an equal basis for both local companies and foreign investors. •In-kind contributions may benefit from certain tax exemptions. Property (except for goods for re-sale) contributed by a foreign investor to the statutory fund of a Ukrainian entity can be imported free of import duty. Exemption from import VAT is available for fixed assets imported into Ukraine as an in-kind contribution to the statutory fund of a Ukrainian legal entity. •Exemption from import duties is available in respect of goods traded with ex-USSR countries. Accounting and financial reporting and banking system

•The banking system consists of the National Bank of Ukraine and commercial banks. The National Bank of Ukraine (NBU) is the country’s central bank that leads a uniform monetary policy and performs bank supervisory functions. •The law On accounting and financial reporting provides for National Regulations (Standards) on Accounting in Ukraine (NR(S)AU) which are intended not to contradict IAS. Overall, standards combine the concepts found in IAS, but with less interpretative guidance.

Exchange control

•Export proceeds in hard currency received by a Ukrainian company usually are subject to a mandatory 50% conversion requirement. •Payments under foreign trade contracts between a resident and a non-resident entity should be in foreign currency only. •Certain transactions between residents and non-residents require a license from the NBU. •Foreign loans must be registered with the NBU. •Payments in foreign currencies between residents of Ukraine are prohibited. •Ukrainian companies usually must receive payment for exported goods, and obtain pre-paid imported goods within the period of 90 days.

According to Goaleurope.com research results Ukrainian offshore outsourcing industry revenue has reached $246 Million in 2006.

In February 2007 Mirasoft Group participated in the research of the Ukrainian outsourcing industry conducted by GOAL (Global Offshore Associates Limited, UK – www.goaleurope.com) among 70 Ukrainian providers. According to the recently published results it is possible to shape the main trends at Ukrainian outsourcing market. More and more software development centres steadily appears in provinces – Lviv, Kharkiv, Dnipropetrovsk, Vinnytsa, Odessa, Donetsk. In 2006 about 50 % of active resources were distributed in provinces. IT outsourcing market in terms of IT professionals has grown in 2006 for 50% in comparison with 2005, now it comprises 7500 people. The majority of IT outsourcing companies in Ukraine is middle- and small-sized: now only 7 companies have over 300 employees, and 21 – over 100.

“The industry benefits from visa-free regime with European Union and North America and geographical proximity to Europe, – the GOAL’s researchers state. – Whilst changes in the government do not affect the outsourcing businesses, its policies such as increase of education budget to 6.5% of GDP play a positive role in the long-term prospects of the software development industry.”

About GOAL: Global Offshore Associates Limited was formed in 2002 to provide small and medium businesses in EU and North America with a reliable access to IT outsourcing, research and innovation from Russia and Eastern Europe. By now, GOAL has enabled IT outsourcing contracts for millions of US dollars, mainly for customers from the USA, mainland Europe and the UK. GOAL’s team creates synergy between managerial, IT, research and PR expertise of its members to provide value to our customers.

About Mirasoft Group: Mirasoft Group is one of the oldest software development companies in Eastern Europe. It provides wide range of IT services (professional development and QA). Mirasoft can contribute at any stage of a project from formulating the software vision and requirements management to implementation, rigorous testing, deployment and support. Besides Mirasoft has own product line – RAD platform Mirapolys, enterprise portal Corvet, ERP system Virtuoso.