According to the Ukrainian Vice Prime Minister, last year, IT outsourcing reached 4% of Ukrainian GDP. This number is 5 times bigger than 5 years ago. More than 170K talented IT specialists work in Ukraine, which makes this country a right place for opening R&D centres for foreign IT companies. Such famous international companies as Amazon, Snapchat, Perion, Very Good Security, and others have their R&D offices opened in Ukraine.
When it comes to opening an R&D centre in Ukraine, foreign entrepreneurs usually face a few specifics of the Ukrainian legal landscape. The following step-by-step guide might help them to better prepare when planning to set up a remote IT team in Ukraine.
1. Company registration in Ukraine
The most popular form of legal entity in Ukraine is “TOV,” which is roughly the equivalent to the LLC (Limited Liability Company) in the U.S., and it might suit best for registering the R&D office there. An alternative way of R&D office legal structuring might be the team members’ registration in the form of Individual Entrepreneurs. This way will be more cost-efficient in terms of accounting and taxation; however, it works mostly for small R&D offices (for example, startups). So, the size of the R&D office would have to be taken into account when choosing the most suitable legal entity to operate it from.
2. Obtaining a work permit for foreign directors/employees
In case the director or employees of the R&D office will be foreign citizens – it will be necessary to obtain a work permit for them. The good news is that just recently, the Ukrainian Ministry of Digital Transformation announced updated applications for obtaining a work permit and simplified the procedure of it.
3. Signing agreements with the R&D team with the clauses of IP transfer
As intellectual property created by the R&D team is the most valuable asset – it is necessary to prepare and sign legal agreements with each of the R&D team members. Such agreements should include clauses according to which all IP rights created by the R&D team will be transferred to the R&D company.
4. Signing agreements between R&D and Head offices for Privacy Compliance
In some cases, the company must transfer personal data from the Head office to the R&D office and vice versa. If so – depending on the countries of Head office incorporation, it might be necessary to sign additional agreements (for example – Data Processing Agreement) between R&D and Head office for Privacy Compliance. You can read more information about this here.
5. Amending internal policies for R&D office
Usually, the Head office has its internal policies (Security Policy, Personal Data Protection Policy, etc.). As in most cases, the R&D office should be connected to the Head office’s CRM systems, task management services, databases, etc. It is necessary to amend such internal policies for making them legally binding for the R&D office and, as a result – to adjust all accesses to corporate databases.
This guide is not exhaustive and might vary from case to case. However, we hope that it might help foreign entrepreneurs looking to open the R&D office in Ukraine to get a brief understanding of the scope of legal works when setting up a remote R&D team in Ukraine.
Nestor Dubnevych, Co-Founder of Legal Nodes