How to Accept Overseas Payments as a Contractor in Ukraine?
Ukraine is a go-to destination for overseas companies looking for skilled tech talent. In fact, many companies consider Ukraine as a starting point when building a global team. If you want to work as an independent contractor for a foreign company, this guide is for you. It will give you an overview of what it means to be an independent contractor, its tax implications, and how you can receive overseas payments.
Who is an independent contractor?
An independent contractor is a self-employed person who offers services to clients on a freelance basis. They have complete control over their work schedule and are not bound to any one client.
Since an independent contractor is not on the payroll of any company, they do not receive any employee benefits. Also, they have to file their taxes independently.
Independent contractors in Ukraine
In Ukraine, most independent contractors register as sole proprietors. This is the most preferred business form because:
- There isn’t any mandatory startup capital.
- The tax system is simplified and has the quickest registration process.
- It is the least complicated.
- Clients are legally allowed to pay independent contractors in cash.
- Unlike with companies, it is possible to use business income for personal needs and withdraw cash.
Sole proprietors are called individual entrepreneurs or FOP in Ukraine.
How to register your sole proprietorship? Documents and other requirements
You will require the following to start as a sole proprietor:
- Passport copy
- Filled up application form
- Ukrainian tax number
- Your parents’ or guardians’ written consent (if you are over 16 years but below 18 years)
- Ukrainian mailing address
- Business activity code
Where to register your sole proprietorship?
Once the documents are ready, you must submit the application to the State Register, which is the Register of Legal Entities, Individual Entrepreneurs, and Public Organizations of Ukraine. You can do it in person, via mail, or online. Remember that you need an electronic digital signature for online registration.
In case somebody else is submitting the application on your behalf, you will need a notarized power of attorney.
Registration as a sole proprietor is free of charge. But if you use the services of a notary, you will have to pay their fees.
Any of the following authorities may execute the registration at the place of your residence:
- Executive committees of municipal city councils
- Public legal entities
If you have filled out the application form accurately, you should usually not have any trouble being registered as a sole proprietor in the State Register. Once you are successfully registered, you will get online access to your registration information.
Following your registration, the State Register will notify the tax authorities, and you will be automatically registered with tax authorities under the Standard Tax Scheme.
Taxes for independent contractors in Ukraine
In Ukraine, there are two major tax rates:
- 18% tax on your profit.
- 5% tax on the revenue you earn (applies only to independent contractors after registration)
The types of tax systems are:
1. Simplified tax system
Under this system, self-employed professionals pay only one tax instead of multiple taxes such as personal income tax, VAT, and property tax. Its main advantages are lower tax rates and easier accounting. This is usually the preferred system for independent contractors.
The tax rate will depend on which of these three groups you come under:
Group 1: Individuals earning up to UAH 1 million/year without any employees working for them. Members of this group can be involved in retail or personal services.
Group 2: Individuals earning up to UAH 5 million/year with 1 to 10 employees working for them. Members of this group can run restaurants, work in IT, and production. However, members may only offer services to clients using the simplified tax system.
Group 3: Individuals earning up to UAH 7 million/year with any number of employees. Members of this group can be involved in any business activity except those prohibited.
2. General tax system
This tax system involves self-employed professionals paying various taxes at the standard tax rate of 18%.
The due date for filing tax returns is April 1.
How to accept payments in Ukraine from overseas clients?
Independent contractors in Ukraine usually use one of the following payment options:
Check or money order
Checks or money orders are easy for your clients to use but can take a long time to reach you. In some cases, they may even get lost on the way.
Wise International Payment is undoubtedly the least expensive method to receive money in Ukraine. It accepts credit and debit cards, and you will receive the transfer within two days of your client’s payment. It is simple, involves low risk, and offers a competitive exchange rate.
Wise will charge your client a flat fee rate of $6.13 and 2.31% on the amount being sent to you. It also has a low remittance cost of $0.51.
Keep in mind if your client uses Wise Batch Payment to pay you, you will not be able to track the transaction status.
Western Union is another popular method for receiving payments in Ukraine. Usually, payments go through within minutes to a few days. Also, Western Union agents are present throughout the country, making cash pickups convenient.
Your client may be inclined towards paying you through this service as it offers a price estimator tool that can help them calculate remittance fees beforehand.
Ria is an easy-to-use payment method that transfers funds within three days and offers good customer service.
It is safe for all money transfers and provides one month of free debit card transfers. Your client will be charged $5 when paying you using a bank account. If they pay via a credit card, they will be charged about $35.
Remember that Ria does an extensive security check which sometimes takes up to one month. So if you want a quick transfer, Ria may not be the right choice for you.
Remitly is a safe and cost-effective way to receive payments in Ukraine. The transfer service deposits the pay within 3 to 5 days, whereas its express version provides instant delivery.
Transfers below $1000 attract a $3.99 fee for your client, while card payments come with a 3% remittance fee.
Xoom is a user-friendly service known for its fast money transfers. Payments are usually delivered within 1 to 2 days.
For your clients, Xoom provides fee-free transfers over $1000 while using banks as the sending medium. Its remittance cost is also relatively low.
Azimo offers one-hour delivery in over 80 countries. The company uses encryption technology and has an anti-fraud policy, which has won the trust of over a million customers.
The remittance cost for your client will depend on the amount they are sending you. However, the company claims to charge 90% less remittance fees than other services.
Paysend is another popular method for receiving money throughout Ukraine, particularly since the payment will reach you within minutes.
With Paysend, the amount your client sends you will be directly transferred to your MasterCard. And using the service will cost your client only €1.5 per transaction.
We hope this post helps you in determining the best way for you to receive payments from your overseas clients. In case you would prefer to work for a reputed company instead of dealing with the constant uncertainty of a freelance career, look no further.
At Starkflow, we work as an employer of record (EOR) and can help you get a remote job at reputed companies worldwide. As the EOR and legal employer, we ensure that our employees are happy with the work agreement and have a quick, transparent onboarding. We offer excellent benefits and a reliable employment contract compliant with local regulations. Most importantly, we always pay the agreed monthly salary on time.
Contact us now!