Ukraine

The status of a representative office of a foreign company directly affects the taxation of the activities carried out by such a representative office in Ukraine. According to the provisions of the Tax Code of Ukraine, a permanent establishment is a fixed place of business through which the business activity of a non-resident is wholly or partially carried out in Ukraine. Such a place of business may, in particular, consist of a branch, office, factory, workshop, warehouse or premises used for the delivery of goods, server, etc. At the same time, in practice, disputes often arise regarding the qualification of a representative office: whether it performs only non-commercial functions, or actually carries out business activity in Ukraine and, accordingly, should be recognized as a permanent establishment. In this article, we will consider the current approaches of court practice to certain issues regarding the recognition / non-recognition of a non-resident’s representative office as having the status of a permanent establishment. Preparatory and auxiliary activities of a representative office Both domestic and international legislation provides that one of the cases when the business activity of a non-resident carried out through its representative office in Ukraine does not fall under the definition of a “permanent establishment” is when such representative office carries out activities of a preparatory or auxiliary nature. In particular, in the resolution dated February 15, 2024, in case No. 640/35881/21, the Supreme Court noted that when distinguishing core activities from preparatory and/or auxiliary ones, it is necessary to take into account that: preparatory or auxiliary activities must be carried out for the benefit of the non-resident, and not for third parties; core activities are usually perceived as activities that are substantial and significant based on the commercial goals and objectives of the organization; preparatory activity precedes the commencement of the non-resident’s core activity in the territory of Ukraine; auxiliary activity supports the process of conducting the core business activity by the non-resident and is carried out simultaneously with the core activity, but does not qualify as one. At the same time, auxiliary activity may be conducted either on a temporary or on a permanent basis. Thus, in this case, the Supreme Court concluded that, by their nature, the actions of the representative office related to the registration of medicinal products in Ukraine, as well as their subsequent promotion for sale, are of a preparatory and auxiliary nature, since such activities are intended to ensure the possibility of marketing the respective medicinal product in the territory of Ukraine. However, these operations do not necessarily lead to the generation of income in the territory of Ukraine. In the resolution of the Sixth Administrative Court of Appeal dated December 04, 2024, in case No. 640/13698/22, the issue of preparatory and auxiliary activities of a representative office was also examined, in particular taking into account the criterion of receiving / not receiving income from a certain activity of the representative office. The court noted that the activity of a representative office, which does not generate any income for the parent company, cannot, under any circumstances, constitute a significant part of the overall business activity of the enterprise, and therefore has an exclusively auxiliary nature. Duration of a representative office’s activity and expenses for its maintenance Tax authorities often refer to the long duration of a representative office’s activity on the territory of Ukraine, as well as to the significant amount of expenses incurred by the parent company for its maintenance, as circumstances which, in their opinion, indicate that such a representative office meets the criteria of a permanent establishment. At the same time, in the resolution of the Supreme Court dated February 15, 2024, in case No. 640/35881/21, it was concluded that international legislation does not establish specific timeframes after which a representative office acquires the status of a permanent establishment. As a general rule, in order to qualify as a permanent establishment, the activity must be regular, stable, and stationary – that is, carried out at a specific location and with a certain degree of permanence. However, in the opinion of the Supreme Court, the amount of expenses incurred by a non-resident to maintain a representative office may, under certain conditions, be considered a factor supporting the conclusion that such a representative office should be granted the status of a permanent establishment. At the same time, in order to determine whether such expenses are indeed significant, it is necessary to compare the amount of funding allocated to the representative office with the overall amount of funds received by the non-resident from its business activity, also taking into account the specifics of the business sector, market conditions, and other relevant factors in their entirety. A similar approach was also outlined in the resolution of the Sixth Administrative Court of Appeal dated May 05, 2025, in case No. 320/44103/23, which stated that the duration of the representative office’s presence at a specific location, the number of personnel, and the amount of fixed assets available cannot serve as grounds for granting such representative office the status of a permanent establishment, if its activities are limited to purely preparatory and/or auxiliary functions. Identity of activities and the conclusion of contracts on behalf of the parent company Disputes regarding the recognition of a permanent establishment of a foreign company in Ukraine often arise based on the existence of powers of attorney issued to certain individuals by such company, authorizing them to perform a wide range of functions. Tax authorities, as a rule, take into account not the actual actions performed under the power of attorney, but the content of such power of attorney itself. Thus, in the resolution dated July 04, 2024, in case No. 160/11095/23, the Supreme Court identified the following features of a permanent establishment, which may be applied either simultaneously or separately: the representative office carries out activities that are wholly or partially identical to the core activity of the non-resident; a person (other than an agent with an independent status) acts on behalf of the company and uses authority in the contracting state to conclude contracts on its behalf. In order to avoid recognition of identity between the activities of the parent company and those of the representative office, the latter’s activities must differ from the statutory functions of the parent company. Regarding the second feature, it is worth noting that the prevailing position remains that issuing a power of attorney with broad powers (including authority to conclude any contracts related to the non-resident’s activity) is not sufficient grounds for concluding that the representative is performing the functions of a permanent establishment. Conclusions regarding the performance of permanent establishment functions must be based directly on the analysis of the actual actions performed by such representative, rather than on the content of the power of attorney (resolution of the Supreme Court dated December 21, 2022, in case No. 200/7051/20-а, resolution of the Second Administrative Court of Appeal dated October 10, 2024, in case No. 440/18088/23, resolution of the Third Administrative Court of Appeal dated January 09, 2024, in case No. 160/9196/23). Engaging in investment activity Court practice sometimes reflects the view that the purchase and sale of corporate rights and other investment activities carried out by a non-resident’s representative office are not considered grounds for recognizing the representative office as a permanent establishment, even if such activities correspond to the activities of the parent company. However, in a recent resolution of the Supreme Court dated March 20, 2025, in case No. 280/4264/21, it was concluded that, according to the provisions of international and domestic legislation, investment activity is one of the types of business activity. In particular, for professional investors, such activity may constitute core business activity and a source of independent income. Therefore, in the opinion of the Supreme Court, it is important to distinguish whether the representative office is conducting investment activity as an independent (core) type of business activity, or whether it has an auxiliary nature related to supporting or developing the core activity. Thus, considering that in this case the representatives of the foreign company were carrying out investment activity (primarily concluding contracts for the purchase and sale of shares in Ukrainian companies) on behalf of the foreign company, and such activity was also identical to the core activity of that company, the representative office was recognized as a permanent establishment. Conclusion In conclusion, it should be noted that the determination of the status of a non-resident’s representative office in Ukraine is of significant importance for tax consequences and, in practice, often presents challenges. In general, as the analysis of court practice shows, courts go beyond a formal analysis and focus on the actual substance of the representative office’s activity. Therefore, foreign businesses should take the above-mentioned approaches into account when planning their activities in Ukraine in order to minimize the risks of tax disputes, additional tax assessments, and other negative consequences. Authors: Viktoriia Bublichenko, Partner, Head of Tax, Restructuring, Claims and Recoveries practice at GOLAW, Attorney at law Tetiana Fedorenko, Senior Associate at Tax, Restructuring, Claims and Recoveries practice at GOLAW, Attorney at law Anna Kostsova, Paralegal at Tax, Restructuring, Claims and Recoveries practice at GOLAW

Ilyashev & Partners Advises ESTDEV on Implementation of International Technical Assistance Project in Ukraine Ilyashev & Partners Law Firm has provided legal support to the Estonian Centre for International Development (ESTDEV) in the registration of an international technical assistance (ITA) project in Ukraine. As part of its engagement, Ilyashev & Partners advised ESTDEV on legal and tax compliance matters related to the implementation of the project. International technical assistance from ESTDEV is aimed at the construction of a modern family-type orphanage in the Zhytomyr region, where up to eight children can be raised. The project aims to provide a comfortable place to live for orphans and children deprived of parental care under guardianship. ESTDEV will fully finance the construction of the house and all necessary works, including: design, construction of essential utilities, purchase of furniture and equipment, bomb shelter and landscaping. The cost of the project is EUR 700,000 and it is expected to be completed by December 2025. The firm has played a key role in preparing documentation and successfully registering the ITA project with the Secretariat of the Cabinet of Ministers of Ukraine. Additionally, the firm provided guidance to ESTDEV on the application of tax exemptions, in accordance with the Agreement between the Cabinet of Ministers of Ukraine and the Government of the Republic of Estonia on Technical and Financial Cooperation, as well as Ukrainian tax legislation. The project was led by Oleksandr Fefelov, Partner, Head of Antitrust and Competition Practice, and Ivan Maryniuk, Head of Tax Law Practice at Ilyashev & Partners. ESTDEV is a state foundation established to advance Estonia’s international development cooperation objectives. The organization aims to increase Estonia’s contribution to global security and sustainable development through strategic partnerships and targeted investments.      

On 19 June 2025, the Verkhovna Rada of Ukraine enacted Draft Law № 7508 – a major revision to the country`s Public-Private Partnership (PPP) framework. This reform is aimed at accelerating private investment in post-conflict reconstruction and the development of strategic sectors of the economy, including the defense industry. What has changed? Special regime for recovery projects: A simplified procedure for preparing PPP projects will apply to the reconstruction of war-damaged infrastructure in key sectors such as healthcare, transport, energy, and education. The regime will be determined by the Government of Ukraine and remain in effect during martial law and for 7 years thereafter. Defense sector inclusion: The new law enables, for the first time, joint PPP projects between state and private defense companies. This legal breakthrough allows private investment in Ukraine’s military-industrial sector to support modernization and innovation. It also expands PPP opportunities across reconstruction, infrastructure, and broader economic development. Digitalization of PPP procedures: The new law introduces a two-tier electronic trading system for PPP projects. The entire PPP process – from publishing announcements to disclosing signed agreements – will be conducted online, ensuring transparency and alignment with EU practices. Enhanced investor protections: The new law introduces strengthened guarantees for private partners and creditors, including protection of rights, contractual stability, and non-discriminatory treatment throughout the lifecycle of PPP projects. Legislative changes will not affect the terms of already signed agreements. Expanded list of public partners: Under the new law, state-owned companies such as Ukrzaliznytsia and Ukrenergo can now initiate PPP projects directly, without excessive bureaucracy. This will enable them to attract private investment for the restoration of critical infrastructure, including train stations and power grids. Streamlined process for smaller PPP initiatives: For projects valued under € 38 million that involve only private financing, design, and construction of municipal facilities, the updated law allows decisions to proceed based solely on a concept note – eliminating the need for a full feasibility study. This fast-track approach will enable local communities to swiftly engage private partners in building essential infrastructure, from local roads to social facilities. What this means for businesses The updated PPP legislation creates a significantly more accessible and investor-friendly environment for businesses looking to participate in Ukraine`s recovery and long-term development. With simplified entry points for smaller projects, digitalized procedures, and expanded rights for state-owned enterprises to initiate partnerships, businesses across different sectors – from infrastructure and utilities to defense and social services – can now engage in PPPs with greater speed and certainty. Legal guarantees of contractual stability and non-discriminatory treatment further enhance the attractiveness of such ventures. At Koziakov and Partners, we are ready to support businesses at every stage of their PPP journey – from legal due diligence and regulatory compliance to strategic structuring and risk mitigation. With deep experience in public infrastructure and investment projects, we are committed to helping our clients unlock the full potential of the new PPP opportunities in Ukraine.

Following the Russian full-scale invasion in 2022, Ukraine remains a vital forum for international legal work. Foreign companies continue to invest across a broad range of sectors in Ukraine, driven by evolving economic conditions, state priorities, and global trends in infrastructure, defence, finance, and IT. Foreign clients are increasingly engaging with Ukrainian counterparties, and as a result, the volume of cross-border disputes has grown rapidly. Most disputes stem from disrupted supply chains, force majeure claims, or investment losses. As Ukraine continues legal reforms and strengthens its judiciary, it is vital to understand the procedural and strategic landscape of arising disputes. For international law firms engaged in assisting clients in Ukraine, navigating disputes with Ukrainian counterparties or in Ukraine requires a nuanced understanding of three critical aspects: jurisdiction, dispute resolution strategy, and enforcement mechanisms. A well-calibrated approach to these factors is crucial for effectively protecting clients’ interests in an evolving legal and geopolitical environment. Jurisdictional Considerations Ukrainian law allows parties to select dispute resolution forums: the parties are free to refer disputes arising out of their contracts to local courts, foreign courts, or international arbitration, if such a dispute is not attributed to the exclusive jurisdiction of Ukrainian courts. As a rule, in the absence of an arbitration clause in a contract, Ukrainian courts have jurisdiction over disputes where the debtor is domiciled or has a place of business or assets in Ukraine. This principle ensures access to justice for both domestic and foreign claimants when the opposing party has a tangible presence within the country. In addition to general jurisdiction, Ukrainian law provides for the exclusive jurisdiction in certain categories of disputes. These include claims related to real estate located in Ukraine, corporate disputes involving Ukrainian legal entities, bankruptcy and insolvency proceedings, public procurement disputes, cases involving Ukrainian public authorities. In these cases, only Ukrainian courts are competent to hear the case, regardless of any alternative dispute resolution clauses agreed in contracts. If the subject of a contract is not attributed to the exclusive jurisdiction of Ukrainian courts, parties are free to include an arbitration agreement referring resolution of disputes arising from the contract to arbitration. In this case, if either party attempts to resort to the national court, the latter will most definitely refuse to consider the dispute given the valid arbitration agreement. Another tricky issue may be a hybrid dispute resolution clause offering the parties flexibility in choosing an authority to consider disputes arising out of or in connection with the contract. Such ambiguity may result in duplication of arbitration and litigation proceedings, multiple challenges of jurisdiction, and further challenges of an arbitral award or a court decision. Practical Tip: “Specify exclusive jurisdiction clearly; hybrid clauses may create procedural risks in Ukraine.” Litigation in Ukrainian Courts Since the onset of the full-scale Russian invasion in 2022, Ukraine’s judiciary has faced unprecedented challenges. Nonetheless, the court system has demonstrated remarkable resilience and adaptability in the face of new reality. During the announced martial law and active hostilities in several regions, Ukrainian courts continue to function, even in territories that have been recently de-occupied and are close to the front-line. The courts offer handling court hearings via video-conferences for the security of the parties. Ukraine’s judicial system operates on a three-tier structure, comprising local courts, courts of appeal, and courts of cassation. Business-related disputes fall under the jurisdiction of commercial courts, which possess specialized competence in matters of corporate, contractual, and trade law. In parallel, administrative courts serve as a venue to challenge actions or decisions by Ukrainian public authorities, such as tax, customs, or licensing bodies. For foreign companies and international law firms, litigation in Ukraine offers significant advantages, especially when Ukrainian counterparties or assets in Ukraine are involved. Our law firm provides tailored litigation strategies for foreign clients navigating Ukrainian courts. Ukraine’s courts recognize the principle of international cooperation, and Ukraine’s court decisions can be enforced in other jurisdictions under applicable international treaties or reciprocity principles. In litigation proceedings brought before the Ukrainian courts, foreign companies benefit from equal procedural rights with Ukrainian entities, as guaranteed under domestic legislation. This parity fosters an environment conducive to fair judicial treatment: The Commercial Procedure Code sets relatively short timelines for case hearings and decisions. According to the President of the Commercial Cassation Court, the average timeframe for handling a commercial dispute from filing to final cassation decision is approximately eight months. Ukrainian courts have the authority to grant interim measures, such as asset freezes or injunctions, providing vital protection during the litigation process. These remedies can be crucial in preserving the claimant’s position in urgent or high-value disputes. Court judgments are enforceable, with enforcement carried out either by the State Enforcement Service or licensed private enforcement officers, offering flexibility and broader reach. In practice, courts are increasingly open to remote hearings, especially in light of martial law and digitalization reforms, which have improved access to justice across regions. Despite the growing reliability of Ukrainian litigation, foreign businesses should remain aware of several practical and systemic challenges: Judicial delays persist, particularly in complex or politically sensitive cases. Heavy caseloads and staff shortages in some regions contribute to slower proceedings. Procedural abuses, such as intentional delays, non-appearance of parties, or tactical filings, are not uncommon and may prolong dispute resolution. Enforcement obstacles remain, especially when debtors engage in asset dissipation, concealment, or exploit procedural loopholes to avoid compliance. Procedural formalities, including translation of documents into the Ukrainian language, apostille/consular legalization, and notarization of documents, can pose administrative and cost burdens for foreign litigants. A lack of case law consistency, particularly among regional courts, may lead to unpredictable outcomes, even in seemingly straightforward matters. Damages awards in Ukrainian courts are often conservative compared to those granted in common law jurisdictions. While successful parties may seek recovery of legal costs, reimbursement is frequently partial, and foreign companies may not recover the full amount of their litigation expenses. While litigation in Ukrainian courts offers a viable and increasingly modernized forum for dispute resolution, foreign companies should assess the specific context of the dispute, including the location of assets, governing law, and urgency of interim relief, before proceeding. In many cases, Ukrainian litigation remains an effective mechanism, particularly when paired with proactive enforcement strategies and sound legal representation. Case Snapshot Ilyashev & Partners successfully represented a foreign bank in a series of high-profile legal proceedings, including litigation and arbitration proceedings in Ukraine. The firm played a key role in complex multi-jurisdictional asset recovery efforts related to the embezzlement case against former chairman. The team provided full legal support in arbitration proceedings and Ukrainian commercial and civil courts, including obtaining interim measures, enforcement of foreign judgements, arbitral awards and coordination with international legal proceedings. International Arbitration in Ukraine As was mentioned above, Ukrainian courts have a pro-arbitration approach and respect the parties’ choice of a dispute resolution clause if validly included in the main contract. The arbitration legislation in Ukraine is represented by the Law of Ukraine “On International Commercial Arbitration”, the Civil Procedure Code of Ukraine, and the Commercial Procedural Code of Ukraine. Ukrainian courts enforce foreign arbitral awards, uphold valid arbitration clauses, and stay proceedings in favour of arbitration. While enforcing international arbitration awards, Ukrainian courts do not interfere with the merits of the case and consider the enforceability of the award itself and whether there are grounds for refusal under Article V of the New York Convention. The ICAC at the Ukrainian Chamber of Commerce and Industry and the Ukrainian Maritime Arbitration Commission (the UMAC) are the primary and most reputable arbitral institutions in Ukraine, established under the Law of Ukraine “On International Commercial Arbitration”. The other most preferred forums for arbitration include ICC, SCC, LCIA, VIAC, and ICSID. Ukrainian court practice is increasingly aligned with global arbitration standards, and the Ukrainian legislation is being regularly amended to meet the practical needs in international arbitration. Case snapshot Ilyashev & Partners Law Firm successfully defended the interests of a foreign company that is part of one of the French largest retail chains in a commercial fraud case considered by the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC at the UCCI). Recognition and Enforcement of Foreign Judgments and Awards Ukraine is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and the European Convention on International Commercial Arbitration 1961, and has a supportive arbitration legal framework. Ukrainian law also permits the recognition and enforcement of foreign court judgments and international arbitral awards, subject to specific legal conditions. These include the principle of reciprocity (in the absence of multilateral and bilateral treaties), proper notification of the parties to the proceedings, and compliance with Ukrainian public policy standards. Applications for recognition are reviewed by Ukrainian courts in separate proceedings, which may involve a detailed assessment of formal criteria. Ukraine operates a dual enforcement system: once a domestic or recognized foreign judgment or award becomes enforceable, it may be executed either through the State Enforcement Service or licensed private enforcement officers. The emergence of private enforcement since 2017 has added flexibility, competition, and efficiency to the enforcement process, particularly in high-value or time-sensitive matters. One of the landmark developments in Ukrainian legal practice was achieved by Ilyashev & Partners, as one of the first law firms in Ukraine to successfully secure recognition of English court orders and judgments in Ukraine. These cases helped shape a positive judicial precedent and contributed to the evolving enforcement landscape, particularly in common law-related matters. However, despite recent amendments to Ukrainian legislation to facilitate the recognition and enforcement of foreign arbitral awards and court judgments, practical enforcement challenges remain. In particular, the enforcement proceedings may be affected by the fraudulent action of debtors attempting to conceal assets, initiate delaying tactics, or use procedural loopholes. Therefore, careful pre-enforcement asset analysis and strategic planning may be a key to effective debt recovery. Asset Tracing and Interim Measures Freezing orders and tracing assets in support of arbitration or litigation proceedings in Ukraine are legally feasible and procedurally well-established. Ukrainian courts may grant interim measures, such as asset seizures or freezing bank accounts, both prior to the filing of a claim, at the stage of the ongoing proceeding or after a final decision is issued. Prompt actions and precision are crucial in this case, especially in high-value disputes at stake. Quite often, however, the allocation of the assets to be seized under the interim measures granted by the court is the responsibility of the creditor’s legal counsel. Ukrainian legal counsels and state authorities have a wide range of instruments to effectively trace the debtor’s assets and to procure their preservation till the final resolution of the dispute. Normally, state registers, open sources, and independent analytical systems are used to allocate concealed assets. Local counsel coordinate access to property, corporate, and bank registries, and engage enforcement officers to secure assets. Courts require evidence of urgency and risk of dissipation to grant protective orders. Working with Ukrainian Counsel In cross-border disputes involving Ukrainian parties or assets, partnering with competent local counsel is not optional; it is essential for a positive outcome of the case. Whether the dispute proceeds before Ukrainian courts or relates to enforcement or interim measures, Ukrainian lawyers ensure compliance with domestic procedural rules, manage court filings, organize translation and legalization of the documents, and appear in person on the client’s behalf. Foreign law firms benefit from the deep familiarity a local counsel has with current court practice, procedural formalities and nuances, regional enforcement patterns, especially in complex commercial or high-value disputes. Ukrainian legal counsel can also ease and facilitate the preparation and analysis of documentary evidence. To ensure effective cooperation, a foreign client should prioritize: Early conflict checks – the Ukrainian legal market is relatively concentrated, especially in high-stakes matters, so the availability of local legal counsel should be verified as early as possible. Clear communication protocols – agree in advance on working languages, communication tools (email, secure cloud), and internal escalation chains. Defined response times and deadlines – court-driven timelines in Ukraine can be short, especially in interim relief proceedings, so coordination must be efficient. Project management – consider assigning a single point of contact within each team; this avoids duplication and streamlines document review and approvals. While many Ukrainian law firms operate at international standards, differences in document formatting, client onboarding (e.g., KYC/AML compliance), and billing should be harmonized at the outset. Ukrainian lawyers are typically highly responsive and well-adapted to working with multinational clients, particularly those active in arbitration or investment disputes. Ukraine provides an arbitration-friendly dispute resolution landscape that is procedurally sophisticated and increasingly transparent. With well-drafted contracts, strategic planning, and reliable local legal counsel, foreign law firms can effectively guide their clients through disputes involving Ukrainian elements. Authors: Marina Riashchenko, Attorney at Law, Counsel at Ilyashev & Partners Law Firm Vyacheslav Sytyi, Attorney at Law, Counsel at Ilyashev & Partners Law Firm Ilyashev & Partners Law Firm provides comprehensive legal support to foreign law firms and international companies involved in disputes in Ukraine. Our expertise covers cross-border litigation, enforcement of foreign judgments, international arbitration, asset tracing, and interim measures in Ukraine. Find out more at Ilyashev & Partners Law Firm or reach out to the authors for further insights: Marina Riashchenko and Vyacheslav Sytyi.