The possibility of an individual registering his or her business activity can actually, on the basis of a physical entity’s status, and, moreover to obtain additionally status of single tax payer, be considered a great “privilege” in a democratic society. This is because in such conditions such an individual is free of charges to provide for the existence of such a legal entity’s attributes: administrative staff, office, complicated accounting, etc. These possibilities can be regarded as bigger “privileges” for individuals who are not citizens of the state, where they expect to act in such manner and Ukraine provides such possibilities for its non-citizens.

It’s interesting that such a question was enlightened as far back as in the Letter “About the order of registration as a physical entity by foreigners, refugees, immigrants and stateless persons” from 12 July 2007 No. 5119 (hereinafter — Letter of the State Committee on Entrepreneurship) by the now non-existent State Committee on Regulatory Policy and Entrepreneurship, and in that period this possibility was envisaged. Let’s explore further.

The initial point of Ukrainian legislation, that designates the possibility of a non-citizen of Ukraine registering its physical entity is clause 177.12 of Article 177 of Tax Code of Ukraine of 2 October 2010 No. 2755-IV (hereinafter — TCU), whereby foreigners and stateless persons who are registered as physical entities according to Ukrainian legislation are residents, and clause 177.11 of Article 177 of TCU broaden them. There’s no necessity to analyze clause 177.11 of Article 177 of TCU, which regulates the procedure for a physical entity to file a tax return. Alternatively, it would be better to analyze the maintenance of requirements by foreigners for their possibility to register as an entrepreneur.

According to item 14.1.213 clause 14.1 Article 14 of TCU the sufficient condition for designation a person as a resident is, amongst other things, his/her registration as self-employed. Therefore, item 14.1.226 clause 14.1 Article 14 of TCU states that an individual acquires self-employed status, regardless of its status as a physical entity. On that basis, paragraph 2 clause 178.4 Article 178 of TCU stipulates that foreigners and stateless persons who are registered in a supervisory body, are residents and in annual tax return beside their incomes from independent professional activity they have to disclose other incomes from Ukrainian and foreign sources.

Thus, as the possibility of Ukrainian non-citizens in obtaining physical entity’s status has been defined, we’ll take a look at the way of ensuring this aim.

According to Article 26 of the Constitution of Ukraine foreigners and stateless persons that stay in Ukraine on a legal basis, enjoy the same rights and freedoms and are under the same obligations, as Ukrainian citizens — excluding the provisions of the Constitution of Ukraine, its laws or international agreements. There is no exception made in the Constitution of Ukraine and its legislation, so a foreigner can carry out business activity subject to one condition, that he or she stays on Ukrainian territory legally.

The definition of the legal stay of a foreigner and stateless person on Ukrainian territory is envisaged in The Law of Ukraine On Freedom of Movement and Free Choice of the Place of Residence in Ukraine of 11 December 2003 No. 1382-IV (hereinafter — the Law On Freedom of Movement). According to Article 5 of the law, the legal grounds for foreigners and stateless persons to stay on Ukrainian territory are grounds foreseen under The Law of Ukraine On the Legal Position of Foreigners and Stateless Persons from 22 September 2011 No. 3773-VI (hereinafter — Law On Foreigners).

Therefore, as establishes item 7 clause 1 Article 1 of the Law of Foreigners, the legal basis of their staying is determined as aggregation of pursuant circumstances:

— their entrance into Ukraine in line with a certain formalized procedure as per Ukrainian legislation or international agreements;

— their permanent or temporary living/staying on Ukrainian territory.

The first circumstance exists by his or her legal crossing of the Ukrainian state border, the second — when he/she has the following documents: permanent residence permit, valid visa, temporary residence permit, as foreseen in items 8-10 clause 1 Article 1 of The Law On Foreigners.

Thus, by duly crossing the Ukrainian’s state border and legalization of stay (obtaining appropriate residence permits, visas), a foreigner or stateless person is able to initiate the procedure of state registration under the Law of Ukraine On State Registration of Legal Entities, Physical Entities and Public Organizations of 15 May 2003 No. 755-IV (hereinafter — Law On State Registration).

But after review of this law’s provisions it could be obvious that it doesn’t constitute a separate, special procedure of their state registration as physical entities. So, in general, item 1 clause 1 article 18 of the Law On State Registration sets out that for the state registration of a physical entity an appropriate application has to be filed to the state registrar (the applicant should also file a separate simplified notice in the taxpayer’s system) and nothing more which could be relevant to foreigners or stateless persons.

However, to get direction on further actions by these subjects in the procedure of their state registration as physical entities, it would be useful to analyze items 3-5 clause 4 Article 9 of The Law On State Registration, that establishes that the Unified register contains these statements:

— identification number of personal taxpayer card (item 3 clause 4);

— the state of citizenship (item 4 clause 4 that, basically, confirms once again the possibility of registration of foreigners as physical entities) and

— location (place of residence or other address where the physical entity in question can be reached by means of communication) (item 5 clause 4).

Everything is clear with state citizenship and confirmation of the location of the foreigner or stateless person, but receipt of their identification number for their personal taxpayer card requires that a separate procedure be passed.

Such procedure is foreseen in item 2 clause 1 Title III of the Order of the Ministry of Finance of Ukraine On the Statement of Provision about Registration of Individuals in the State Register of Individuals — Taxpayers of 29 September 2017 No. 822. For foreigners and stateless persons to obtain the taxpayer card the following data for the authorization document must be provided:

— the foreigner’s passport document;

— permanent residence permit;

— temporary residence permit;

— refugee’s certificate;

— the certificate of an individual who needs additional protection.

So, a foreigner or stateless person who has confirmed their location (residence), consequently, legalized their staying on the territory of Ukraine and obtained the tax-payer card — meets all the necessary criteria for their state registration.

Having duly gone through this registration, such a physical entity could initiate the procedure for obtaining the single tax payer’s status at the appropriate rate of taxation foreseen in clause 291.4 Article 291 of TCU by filing a notice on application for the simplified tax system (if such notice wasn’t filed earlier to the state registrar during state registration of a physical entity under the provision of item 2 clause 1 Article 18 of The Law On State Registration). We won’t go into this procedure as it has technical details.

The possibility of a foreigner or stateless person, that is a physical entity, remaining under the simplified tax payer system is neither a new nor controversial question. At the appropriate time, the former State Tax Service of Ukraine recognized in its Letter On Application of the Simplified Tax System, Accountancy and Reports by Foreigners of 11 January 2012 No. 718/7/17-1217 the legal possibility of such. At present, one possible example of such “state recognition” is the Letter of the General Department of the State Fiscal Service in Chernihiv Region On Review of Application [relatively to registration of the single tax payer] of 10 August 2016 No. 702/ла/25-01-13-01-15 where the state body informs that foreigners and stateless persons who are registered as physical entities can choose the simplified tax system if they meet the aggregate of criteria, that are foreseen in Chapter 1 Title XIV of TCU. In this letter the fiscal body additionally refers to the information resource of the State Fiscal Service, where the same conclusion is contained in category 107.03.

So, based on the above-mentioned it would be reasonable to conclude that:

— the situation regarding the registration of foreigners and stateless persons as physical entities has not changed since the time of appearance of the Letter of the State Committee on Entrepreneurship;

— the fiscal appetites of the Ukrainian legislation aren’t limited exclusively by their activity as citizens. In fact, by giving foreigners and stateless persons the possibility of registration as a physical entity, they automatically become residents of Ukraine with receipt of the due obligation for appropriate payment of taxes and levies.

On the other hand, praise is due to legislators for giving them the possibility of being part of the simplified tax system. In fact, Ukraine could include this as part of its investment attractiveness. The first circumstance exists by his or her legal crossing of the Ukrainian state border, the second — when he/she has the following documents: permanent residence permit, valid visa, temporary residence permit, as foreseen in items 8-10 clause 1 Article 1 of The Law On Foreigners.

Source: The Ukrainian Journal of Business Law,