New Opportunities to Conduct Construction Activities in Ukraine for Foreign Companies
Foreign companies and organisations operating in Ukraine through permanent representative office henceforth will be able to acquire the right to engage in construction activities. This includes, in particular, large construction projects categorized as having medium (CC2) and high (CC3) impact classes under Ukrainian legislation.
This will become possible due to the adoption of Cabinet of Ministers' Resolution "On amendments to Cabinet of Ministers' Resolution No. 314 of March 13, 2022" No. 925 of August 9, 2024 (from now on Resolution No. 925).
Previously, the Cabinet of Ministers' Resolution "Certain Issues of Ensuring the Conduct of Economic Activities under Martial Law" No. 314 dated March 13, 2022 (from now on Resolution No. 314) did not contain any restrictions on the right of foreign companies to engage in construction activities in Ukraine. However, this was not possible in practice due to the lack of a regulated procedure for licensing such activities. This procedure will be implemented from now on.
ACTING LICENSING PROCEDURE
According to the legislation of Ukraine, works on the construction of objects of medium (CC2) and significant (CC3) class of consequences (liability) are subject to mandatory licensing.
Currently, Resolution No. 314 is the only effective normative legal act establishing the licensing procedure for construction activities. This resolution regulates the grant of the right to conduct economic activity in specific regulated fields based on the declarative approach.
Under the declarative approach, the declaration submitted by the declarant replaces the license and entitles the declarant to perform the construction works.
In particular, legal entities may obtain the right to perform construction works by submitting a declaration to the respective licensing authority. With respect to the construction works, the licensing authority is the State Inspectorate of Architecture and Urban Planning of Ukraine (hereinafter the Licensing Authority).
In particular, a declarant submits a declaration in a paper form via the centres for the provision of administrative services. The latter then transfers documents to the Licensing Authority using a single web-portal of public services "Diia” (hereinafter the Web-portal).
The declaration should contain standard information, in particular:
- information about the legal entity (organizational form, name, Ukrainian registration number, registered address, phone number, e-mail address, full name of the director);
- information about the actual address of economic activity;
- the name of the type of economic activity (i.e., the Regulated Construction Works);
- the name of the authorization document to replace which the declaration is submitted (i.e., the license for performing the сonstruction works);
- an acknowledgment that the legal entity is familiar with the requirements that the law envisages for the licensed activity and that the legal entity is obliged to comply with such requirements.
The licensing authority forms and maintains the register of the submitted declarations, including all the information submitted by the declarant according to the list outlined above.
Please note that the declarative approach is temporary and shall apply only during martial law.
After the adoption of Resolution No. 925, the licensing procedure was improved, as foreign companies, through their permanent representative office, will now be able to acquire the right to engage in construction activities.
WHAT WAS THE PROBLEM FOR FOREIGN COMPANIES
The right to carry out economic activity in construction can be acquired by business entities.
Representative offices are not legal entities according to Ukrainian law. They are endowed with the property of the legal entity that created them and operate based on regulations approved by that entity. However, they are not recognized as independent business entities, as a business entity must undergo state registration as a legal entity or an individual entrepreneur.
Therefore, representative offices currently could not obtain the right to carry out economic activity in construction under existing legislation. A foreign company cannot directly exercise this right either, as according to Resolution No. 314, the information that must be included in the declaration for conducting economic activity for a legal entity consists of a Ukrainian registration number, which a foreign legal entity simply does not have.
Thus, the legislator has effectively not provided the right to conduct economic activity in construction due to the absence of a regulated licensing procedure for such activities.
ACCEPTED CHANGES
Resolution No. 925 has addressed the existing gaps and granted foreign companies and organizations operating in Ukraine through a permanent representative office the right to carry out construction activities.
The procedure itself largely remains unchanged and corresponds to the one mentioned earlier. However, from now on, the possibility of submitting declarations and the requirements for such a declaration are established at the legislative level and are practically feasible.
Thus, according to the adopted amendments, non-residents (foreign companies, organizations) that operate in Ukraine exclusively through permanent representative offices may acquire the right to engage in economic activities related to the construction of objects classified as medium (CC2) and high (CC3) consequence objects, based on the free submission of a declaration to the licensing authority (that is, to the Licensing Authority).
The following information should be included in the declaration:
1. Information about the non-resident (foreign company, organization) operating in Ukraine exclusively through a permanent representative office:
- country of origin, legal form, full and abbreviated name (if available), identification code according to the Unified State Register of Enterprises and Organisations of Ukraine (from now on EDRPOU), location, contact phone number, email address, surname, first name, patronymic (if applicable) of the non-resident's director or its authorized representative;
- information regarding the non-resident's registration with the territorial bodies of the State Tax Service (from now on STS) as a corporate income taxpayer (non-resident's tax number, registration date as a taxpayer, name, and identification code of the STS territorial body where the non-resident is registered);
- information regarding the permanent representative office of the non-resident being registered with the territorial bodies of the STS (EDRPOU code, the date of registration of the permanent representative office as a taxpayer, the date of registration as a payer of the unified contribution to mandatory state social insurance, the name and identification code of the STS territorial body where the permanent representative offices registered).
2. Information about the actual address (addresses) where the permanent representative office of the non-resident conducts foreign economic activities.
3. The name of the type of foreign economic activity conducted by the permanent representative office of the non-resident or information about changes made to the license or previously submitted declaration.
4. The name of the permit (permits) being replaced by the submitted declaration or to which the declaration introduces changes.
5. A note stating that a non-resident (foreign company or organization) operating in Ukraine exclusively through a permanent representative office is familiar with the legislative requirements that establish an exhaustive list of requirements for conducting activities subject to licensing and undertakes to comply with them.
Thus, considering the mentioned amendments, Resolution No. 314 now undoubtedly applies to foreign companies that operate in Ukraine through permanent representative offices.