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The full-scale invasion since February 2022 has dramatically altered Ukraine\u2019s business environment<\/a>.\u00a0Martial law and related policies have introduced new restrictions and incentives, creating a unique landscape for companies.<\/p>\n Businesses have to navigate foreign currency controls, tax hikes and breaks, labour mobilisation and safety requirements, all while the government tries to support economic activity. With a focus on taxation, Vyacheslav Petrashenko<\/strong>, a senior lawyer <\/strong>at <\/strong>BDO in Ukraine<\/strong><\/a>,<\/strong> outlines the key changes and covers other crucial aspects such ascurrency regulations, special regimes and labour issues that businesses face during the war.<\/p>\n Martial law in Ukraine has been in effect since 24 February 2022<\/strong>, imposed as a specific legal regime and extended quarterly. This wartime regime has wide-ranging implications for businesses:<\/p>\n Tax policy has been one of the main tools used to support the economy during wartime, resulting in several important changes. While some taxes were increased to raise funds for defence, others were reduced or waived to encourage business operations. Below are the key taxation changes and current rules:<\/p>\n Wartime taxation in Ukraine has involved a combination of increased contributions for defence<\/strong>\u00a0(such as the 5% military tax) and\u00a0targeted relief measures to support businesses<\/strong>\u00a0(such as temporary low turnover taxes and VAT exemptions). Keeping track of the latest tax legislation is critical, as the government frequently adjusts policies in response to shifting economic pressures and military needs.<\/p>\n One of the most innovative developments is\u00a0Diia.City<\/strong><\/a>, a special legal and tax regime launched in 2022 to boost the growth of Ukraine\u2019s IT sector. Despite the war (or rather, especially because of it), Ukraine continues to promote IT and high-tech sectors via this program.\u00a0Diia.City offers IT companies and tech startups a favourable tax and regulatory environment, <\/strong>guaranteed by law for 25 years<\/strong>.<\/p>\n Benefits of Diia.City:<\/strong><\/p>\n Example:<\/strong>\u00a0A tech company with 10 employees and annual revenue of $200,000 could pay around $21,000 in total taxes per year under Diia.City, roughly half of what the standard regime would impose. This includes zero tax on reinvested profits (assuming profit is kept in the business), low 5% income tax for employees and minimal social contributions. These savings help explain why over 500 companies, including software developers, R&D centers, and even defence-tech firms, have joined Diia.City<\/a> despite the ongoing war.<\/p>\n Human resources management has become a critical challenge during wartime.\u00a0With a large segment of the workforce eligible for military service, companies have to plan for potential disruptions and adapt to evolving labour regulations:<\/p>\n Companies apply through the relevant Ministry (for IT companies, this is the Ministry of Digital Transformation that handles it efficiently online). Once approved, the status is valid for 12 months and can be renewed. This mechanism has been a lifeline for many IT firms, manufacturers and logistics companies, allowing them to keep operations running with retained key staff. See more here about how to obtain Critical Enterprise Status<\/a>.<\/p>\n In summary,\u00a0companies that can meet critical status or otherwise adapt to wartime conditions have better chances of maintaining productivity. In contrast, those unable to shield their key staff from mobilisation often face greater operational strain. The legal adjustments around labour aim to strike a delicate balance between national security imperatives and the need to keep the economy functioning.<\/p>\n Remarkably, Ukraine continues to welcome new businesses amid ongoing war. The basic\u00a0procedure for starting a business remains straightforward\u00a0(and some steps have been streamlined under martial law):<\/p>\n 1) Choose an organizational form.<\/strong>Select a legal structure. Common options include:<\/p>\n Each form has its own registration and reporting requirements.<\/p>\n 2) Choose a name.<\/strong>Select a unique name for the company that meets Ukrainian legal guidelines (no duplicates or prohibited terms). It\u2019s strongly recommended to check name availability in the Unified State Register of Legal Entities to avoid conflicts.<\/p>\n 3) Register the company.<\/strong>Submit the incorporation documents to the state registrar. This includes charter documents, information on founders and identification of the\u00a0Ultimate Beneficial Owners (UBOs)<\/strong>.\u00a0Disclosure of UBOs is mandatory<\/strong>: Ukraine requires transparency to ensure no sanctioned individuals (e.g., russian or belarusian owners) hide behind shell companies. Company registration has been partially digitized and under martial law, authorities have made efforts to expedite processing to support economic activity. Once approved, the company is officially listed in the Unified State Register<\/strong>.<\/p>\n 4) Open a bank account.<\/strong>Open a corporate bank account with a Ukrainian bank. As part of standard due diligence, banks will verify the company\u2019s registration details \u00a0and UBO information. Given currency controls, companies often open both local currency (UAH) and foreign currency accounts to manage different transactions.<\/p>\n 5) Obtain licenses and permits. <\/strong>Determine whether your business operates in a regulated industry.\u00a0Sectors such as finance, energy, education, healthcare, manufacturing, construction or communications require special licenses or permits to operate<\/strong>. Under martial law, the government has streamlined some licensing procedures and temporarily suspended certain inspections to reduce hurdles for businesses. For example, an IT company may not need any license, whereas a pharmaceutical importer would require multiple permits. Ensuring compliance from the start avoids penalties later on.<\/p>\n 6) Hire employees.<\/strong>Start building your team in compliance with labour laws. The standard approach is to use employment contracts, which clearly define the rights and responsibilities of both employer and employee. Alternatively, company may use\u00a0civil law contracts for contractors or freelancers<\/strong>\u00a0(project-based employees). If your company is in City<\/strong>, you have the option of\u00a0gig contracts<\/strong>, providing even more flexibility in hiring tech talent. When hiring foreign nationals, remember\u00a0a work permit is generally required<\/strong>\u00a0(unless the individual has permanent residency or is assigned to a foreign representative office). The martial law regime has eased many bureaucratic processes: business registration and work permits are handled relatively quickly to attract investment even in these environment.<\/p>\n Despite the war, thousands of new businesses have been registered in Ukraine since 2022.\u00a0The country\u2019s entrepreneurial spirit remains strong, supported by government efforts to keep the startup ecosystem alive. Whether it\u2019s a local startup or a foreign investor setting up a branch, follow these steps and consult legal advisors closely (especially on evolving wartime regulations) are essential for a smooth launch.<\/p>\n Operating under wartime conditions requires companies to stay vigilant about compliance beyond just taxes and incorporation. Here are additional considerations:<\/p>\n Conducting business in Ukraine during wartime is undoubtedly challenging.\u00a0Martial law has introduced unprecedented controls over finance and labour, but also unprecedented support in terms of tax relief and special regimes<\/strong>. Companies that understand and adapt to these changes, \u2014 by leveraging incentives like Diia.City, obtaining critical status if eligible and rigorously complying with evolving rules, \u2014 have not only managed to survive, but in some cases even thrive. The situation continues to change and resilience and knowledge are key. With the war ongoing, agility and awareness are essential for any enterprise operating in Ukraine. The government\u2019s message to investors is clear:\u00a0we will do what it takes to defend the country, and also what it takes to keep the economy open for business.<\/em><\/p>\n If you need assistance with any aspect of doing business in Ukraine, BDO in Ukraine\u2019s<\/a> experts in tax, legal, accounting and business advisory are always ready to help. Submit your request using this Online Form<\/strong><\/a>.<\/p>\n <\/p>","protected":false},"excerpt":{"rendered":" The full-scale invasion since February 2022 has dramatically altered Ukraine\u2019s business environment.\u00a0Martial law and related policies have introduced new restrictions and incentives, creating a unique landscape for companies. Businesses have to navigate foreign currency controls, tax hikes and breaks, labour mobilisation and safety requirements, all while the government tries to support economic activity. With a […]<\/p>\n","protected":false},"author":4489,"featured_media":657767,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false},"categories":[24,23],"tags":[],"yoast_head":"\nMartial law and its impact on business<\/strong><\/h4>\n
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Taxation changes during the war<\/strong><\/h4>\n
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Special IT Regime: Diia.City<\/strong><\/h4>\n
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Labor challenges and mobilisation rules<\/strong><\/h4>\n
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Steps to start a business in Ukraine during wartime<\/strong><\/h4>\n
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Compliance and other considerations<\/strong><\/h4>\n
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