On September 27, 2017, the law No. 2058-VIII “On Amending Certain Legislative Acts of Ukraine in Respect of Removal of Barriers for Attraction of Foreign Investments” (hereinafter referred to as the Law), adopted by the Verkhovna Rada of Ukraine on May 23, 2017. The Law amends the following legislative acts:
- Code of Ukraine on Administrative Offences;
- Law of Ukraine “On the Legal Status of Foreigners and Stateless Persons”;
- Law of Ukraine “On Employment of the Population”;
- Law of Ukraine “On Unified State Demographic Register and Documents Evidencing the Citizenship of Ukraine, Certify the Identity or His/Her Special Status”.
Along with the main purpose – to increase the level of investment attractiveness of Ukraine – the objective of the new changes is the simplification of the procedure of issue of certificates for temporary residence in Ukraine (hereinafter referred to as the certificate) and permits for use of foreigners’ labor and stateless persons.
Further we propose to get familiarized with currently important innovations and to determine whether such changes will actually lead to the simplification, or, on the contrary, will make more complex the process of receiving permissive documents by foreigners.
In general, the changes will be introduced to the law of Ukraine “On the Legal Status of Foreigners and Stateless Persons” which determine:
- Grounds for stay of foreigners and stateless persons in the territory of Ukraine for the period of validity of the certificate.
- Term of validity of the certificates and the grounds for prolongation thereof.
- Procedural changes (administrative fee for issuance of the certificate or for prolongation of the term of validity thereof; time period for issue of the certificate).
І. Grounds for stay of foreigners and stateless persons in the territory of Ukraine for the period of validity of the certificate.
The new legal grounds for stay of foreigners and stateless persons (hereinafter foreigners) in the territory of Ukraine for the period of validity of the certificate is the fact that such foreigners are founders and/or members, and/or beneficiary owners (controllers) of a legal entity which is registered in Ukraine and arrived to Ukraine with the purpose of supervision over the activities of such legal entities and received the certificate.
Although, in such case there are limitations, too: the grounds for issue of the certificate, along with initially obvious evidencing information and documents, there is an amount of contribution by a foreigner being the founder (member) to the authorized capital of the legal entity in the amount of not less than Euro 100 thousand (at official exchange rate set by the National Bank of Ukraine as of the date of making foreign investment, as a contribution to the authorized capital, if such foreign investment is made in money form).
It is worth to agree that that is quite a large amount, and far from every foreigner invests such money into the authorized capital. At the same time, we understand that such regulation is directly intended for favoring the attraction of foreign investments, and thus we account for the efficiency thereof.
II. Term of validity of the certificates and the grounds for prolongation thereof.
From now on, the term of validity of the certificate will be directly dependent from the grounds of issuance thereof. In such a way, if the certificate was issued:
- on the grounds of a permit for employment, the term of its validity will be equal to the term of validity of the permit for employment;
- for participation in implementation of international technical aid projects – the term of implementation of the international technical aid project;
- for founders/members/beneficiary owners (controllers) of a legal entity, the term of validity of the certificate will be 2 years;
- with the purpose of study – for the period of study.
In all other cases, the term of validity of the certificate, as it was before, will be one year. At the same time, such term of validity cannot be longer than the term of validity of foreigner’s passport document.
Such innovations will remove the necessity of annual prolongation of the validity of the certificate for all foreigners.
One more essential change is related to the grounds for prolongation of the term of validity of the certificate which was issued on the grounds of the employment permit. From now on, for prolongation of the validity of such certificate, a foreigner is entitled to prove the employment with a relevant legal entity of at least citizens of Ukraine who were employed not later than six months before the application for prolongation of the validity of the certificate, or the payment by the legal entity of enterprises’ profit tax in the amount of not less than 50 minimum wages in the last full financial year before the application for prolongation of the validity of the certificate.
That is, two ways of solving the issue are foreseen: the necessity of ‘emergency’ employment of citizens of Ukraine for increased staffing of the legal entity, or contribution to the state treasury in the form of taxes provided that the activities of the company were sufficiently successful. In such case, a logic question arises whether the need for proving the employment of at least three citizens of Ukraine will transform into a mass phenomenon of ‘fake’ HR policy or not.
ІІІ. Procedural changes.
We regard as a positive change the possibility to submit documents for receiving the certificate through a representative acting under a power of attorney, which will simplify enough the procedure of submitting documents, because it minimizes the necessity of another presence of a foreigner at the State Migration Service. Although at the same time, the requirement of receipt of the certificate by a foreigner only in person still remains, which we consider, in the end, expedient for direct identification of a foreigner’s identity.
The period for issuance of the ready certificate and the deadline of reference for prolongation of the term of its validity is shortened (in both cases – to 10 calendar days), and for both services the administrative fee is set in the amount of 20 tax exempt minimum incomes of citizens (UAH 340).
From now on, public authorities are prohibited to demand for issuance of the certificate any other documents which are not provided for by the Law, and because of that the procedure of issue or prolongation of the certificate itself becomes more transparent.
The Law also introduces a significant number of changes to the Law of Ukraine “On Employment of the Population” in the part of use of the foreigners’ labor.
Although, we consider one of the most essential changes the requirement of ready formed authorized capital of a legal entity at the moment of submission of an application for issuance of the permit for employment of founders and/or members, and/or beneficiary owners (controllers) of a legal entity. Although the question of the expediency of such regulation arises, because in the case when a foreigner is not the only founder (and/or member, and/or beneficiary owner) of a legal entity, the fact of ready formed status of such authorized capital depends not only on the foreigner alone.
Also, for the first time the condition of payment of minimum wage (MW) for foreigners is introduced, in the amount of 5 MW for foreign employees in public associations, charitable organizations and educational institutions, and 10 MW for all other employed foreigners.
Taking into consideration such changes, an employer at an enterprise has to pay to a foreigner a wage amounting not less than UAH 32,000 per month. The setting of such a requirement towards the minimum wage for foreign employees, on the one hand has to favor the restriction of manipulations of some foreign citizens with the employment for further receipt of the certificate for residence in Ukraine, and, on the other hand, it will discourage the employers to employ foreigners, which will significantly lower the chances of qualified foreign employees to be employed in Ukraine.
Moreover, the new legislation determines special categories of foreign employees, namely:
- foreign highly-paid professionals;
- founders and/or members, and/or beneficiary owners (controllers) of a legal entity incorporated in Ukraine;
- graduates of universities which are in the list of the world’s hundred top rated universities, in accordance to the list determined by the Cabinet of Ministers of Ukraine;
- foreign employees of creative professions;
- foreign IT professionals.
The requirement of the minimum wage is not applied for these very categories of foreigners. Although, certain criteria and conditions of documentary proof of the above mentioned categories are not clearly defined; this may lead to perplexities during the processing of the documents.
Also, among important changes, in particular, are:
- the procedure of concurrent service by foreigners is regulated, which we consider a positive novelty because in practice often problems occurred, for example, with the appointment of an acting representative of top management, the deputies of whom often are foreigners, but the concurrent service was prohibited for them;
- the list of documents to be submitted for issue and prolongation of the permit for employment of foreigners is shortened and significantly simplified;
- the term of validity of permits for employment is changed, which is now to be set in accordance with the category of foreigners;
- new amount of fee for issue or prolongation of the permit for employment of foreigners, the fee will depend on the minimum subsistence income and the term for which the permit is issued;
- the period of time for review of applications for issue (7 business days) or prolongation (3 business days) of the permit for use of the labor of foreigners and stateless persons is regulated, and the procedure of acceptance of applications for issue/prolongation/making changes/annulment of the permit for use of the labor of foreigners and stateless persons is also regulated;
- the procedure of refusal to issue, to prolong the validity of the permit for use of the labor of foreigners, and to making changes in such permit, is made more precise.
As we can see, the changes will be essential; actually, a new procedure and rules for processing documents for the right to stay in the territory of Ukraine for foreigners, is introduced.
We have to mention that not all of discussed changes in the legislation will actually simplify the procedure of issuance of permissive documents for foreigners, although we hope that the will have a positive effect during putting the regulations into practice and will contribute to more transparent procedures connected with issue of certificates and of permits for use of the labor of foreigners.
Author: Liudmila Kasian, Legal Assistant