The entrepreneur running a foreigner has a permanent residence permit. Do I need to obtain a permit for its employment and at what rate to keep personal income tax (dual or not)?

Referring to the order of registration of foreigners and persons without citizenship permit in Ukraine, approved by the Cabinet of Ministers of 01.11.1999, № 2028 (Next-order number 2028). On the basis of claim 1 Order number 2028 permit is necessary to make out a foreigner, a stateless person (hereinafter — the foreigner) who intends to engage in employment in Ukraine *. In addition, the effect of the Order number 2028 also applies to foreigners who directed the foreign employer to Ukraine to perform a scope of work or services on the basis of contracts concluded between Ukrainian and foreign business entities. It should be noted that the requirement to obtain a work permit, in general, apply to all foreign nationals, including citizens of the CIS countries. In addition, in accordance with paragraph 2 of the Order number 2028 to employ foreigners can only payers of insurance premiums to the Fund of obligatory state social insurance of Ukraine against unemployment, registered in the local employment centers.

However, in item 6 of the Procedure number 2028 states that a work permit do not need foreigners who permanently reside in Ukraine, as well as in other cases stipulated by the law and international treaties of Ukraine. Referring to Art. 8 of the Law of Ukraine «On Legal Status of Foreigners» from 02.04.94, the number 3929, which also states that as citizens of Ukraine have the right to work only those foreigners who permanently reside in Ukraine. Permanently residing in Ukraine on the basis of Art. 1 of the Law of Ukraine «On Immigration» from 07.06.2001, № 2491-III are considered foreigners granted in due course permit for permanent residence in Ukraine. It also confirms the Ministry of Labour in his letter dated 24.03.2006, the number DTS-12-1556/0/6-06, expressly clarifies that foreign nationals who have been granted permanent residence in Ukraine may be employed without authorization on employment. 

It should be noted also that the current legislation does not provide authorization for employment in Ukraine by foreign entrepreneurs, individuals, as well as foreigners who have established their relationship with their employers on the basis of civil law agreements (contracts). You should also pay attention to the fact that the use of the labor of foreigners or stateless persons without a work permit (if needed any), public service employment on the basis of Art. 8.3 Law of Ukraine «On Employment» from 03.01.91, № 803-XII may impose on the employer a fine of Rs 850. for every «foreigner». Thus, under paragraph 13 of the Order number 2028 alien recruited without a work permit, shall be expelled from the bodies of internal affairs of Ukraine in the manner specified by Cabinet of Ministers «On the Rules of entry of foreigners in Ukraine, their departure from Ukraine and transit through its territory «from 29.12.95, № 1074.

On the basis of paragraph 7.3 of the Law of Ukraine «On taxation of personal income» from 22.05.2003g. Number 889-IV (hereinafter — the Law number 889) the rate of personal income tax for non-residents is double the size of «normal» rate (ie 30%) of all revenues accrued for the benefit of non-residents — individuals as wages. Will the foreign employee having a permanent residence permit, be deemed for the purposes of personal income tax a non-resident? In accordance with clause 1.20.2. The law number 889 non-resident — is an individual who is not a resident of Ukraine. Resident, in turn, on the basis of paragraph 1.20.1 of the Law number 889 — is an individual who has a residence in Ukraine. If you can not identify the resident status of an individual, using the preceding provisions of this subparagraph, an individual is considered a resident if he is a citizen of Ukraine.

Thus, an alien who has received a permanent residence permit will be deemed to be resident on the grounds that resides on the territory of Ukraine. At the same time, we note that foreigners who have been granted permanent residence in the employment relationship is almost indistinguishable from its status as a citizen of Ukraine. ** Even if the fact of the presence of an alien place of permanent residence abroad (for example, the availability of houses, apartments, etc.) in order to prove residency can refer to Section 1.20.1 of the Law number 889, arguing that the personal, human, economic , educational and other interests, and, as a rule, the family of such employee are in Ukraine. Which confirms the status of the resident.

The position of such employee is nearly identical to the taxation status of citizen of Ukraine, its income in the form of wages will be taxed at the «ordinary» rate established by section 7.1 of the Law number 889, that is, — 15%. Revenues foreigner and scrip withheld personal income tax will be reflected in the amount of income tax calculations and amounts withheld from them in the form of tax 1DF on a common basis. As contributions to payroll and payroll deduction for pension and other types of social insurance for the employee — an alien who has a permanent residence permit shall be calculated in a general way. Salaries and fees mentioned in the «funds» are recognized for pension and other social security as well as for the «regular» workers.

Published in 2008

* However, on the condition that the country (region) of the missing workers, who are able to perform this type of work, or there is a sufficient rationale for the employment of foreign experts, or unless otherwise provided for by international agreements of Ukraine.

** In addition to working in positions which can work the citizens of Ukraine, for example, in the state. Service