Expert Guide on Use of outsourced IT personnel in Ukraine

1. Can IT specialists be engaged/contracted directly by a foreign company?

Yes.

2. Can IT staff be engaged as contractors?

Yes.

IT staff can be engaged as contractors as either private entrepreneurs (independent contractors) or gig-contractors (a special form of engagement available only to residents of Diia City).

3. Should contractors be registered as private entrepreneurs (or equivalent)?

Yes. 

If contractors are engaged as private entrepreneurs (independent contractors), then they must first be registered in the legal status of private entrepreneurs. If engaged as gig-contractors, no registration is required.

4. Can teams be hired via an intermediary (an outsourcing company) and is this common?

Yes, common. In practice, this depends on the size of the team to be hired. For more than ten people, intermediaries are normally engaged, primarily for logistical purposes.

5. What is the risk of re-qualification into employment relationships?

For the engagement of IT specialists as independent contractors, the risk is traditionally assessed as low, if all documents are properly drafted and relations properly structured. For those engaged as gig-contractors, the risk is zero.

6. Is a local presence for the foreign company mandatory to hire an IT team?

No. 

If the IT team is engaged as private entrepreneurs, then normally a local presence is not required. But it depends on the size of the team and the way it is engaged (i.e. directly or via an intermediary). A local presence might be needed for tax purposes. If the IT team is to be engaged as gig-contractors, a company must have a local presence in Ukraine and be registered as a resident of Diia City.

7. If a local presence is mandatory, what form should it take?

Not recommended. Leasing an office directly without having a local presence can create the risk of a permanent.

A local presence is mandatory only for the engagement of the IT team as gig-contractors. In such case, a company can decide on any legal form for incorporation in Ukraine (typically, this is an LLC). Further to incorporation, a company that wants to engage the team as gig-contractors must register (become a resident) in Diia City.

8. Are any regulatory approvals needed to hire an IT team?

No. 

9. Can a foreign company lease premises locally for the hired team? 

Establishment, and unnecessary tax risks. This should be analysed on a case-by-case basis.

10. Can a customer compensate a contractor (intermediary) for the leased premises?

Yes. 

The wording should be properly drafted to avoid tax risks related to a permanent establishment.

11. What kind of agreements should be entered into between the IT specialist and a foreign customer?

IT services agreement; IP assignment agreement (as a separate document or be incorporated into IT services agreement).

12. What kind of agreements should be entered into between a foreign customer and an intermediary?

Services agreement; IP assignment agreement (as a separate document or be incorporated into IT services agreement). If an intermediary is involved, the contractual relations between the intermediary and an IT specialist (at the Ukrainian level) should be carefully verified subject to proper IP assignment arrangements with the IT specialist/intermediary, otherwise there is a risk that the subsequent IP assignment to the end customer could be at risk.

13. Can payments between the contractor (intermediary) and a customer be made in a foreign currency (USD, EUR, GBP)?

Yes.

Only regarding foreign customers.

14. Can moral rights be transferred to a customer?

No.

15. Is ‘work for hire’ recognised in your jurisdiction?

No.

16. What documents are necessary to transfer proprietary IP rights properly?

IP assignment agreement; Acts of acceptance. Acts of acceptance are not mandatory but may often be asked by the contractors (intermediaries) to confirm the fact of rendering the services as well as transfer of IP rights.

17. Are noncompete/non-solicitation arrangements enforceable?

No. 

This depends on the governing law of the contract and the place of enforcement. Also, noncompete is enforceable under the Diia City legal regime.

18. Can foreign law govern contracts between the customer and a contractor (intermediary)?

Yes. 

19. Are warranties/indemnities recognised concepts?

No. 

In a limited form, the concept of warranties is recognised in Ukraine.

Portrait ofOlga Belyakova
Olga Belyakova
Partner
Kyiv (CMS CMNO)
Portrait ofMykola Heletiy
Mykola Heletiy
Senior Associate
Kyiv (CMS CMNO)