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by Valentyna Heorhytsia CEO  BuhalteriO

Since 2022, Ukraine has become one of the largest humanitarian hubs in Europe. Hundreds of international NGOs, charitable foundations, humanitarian missions, and foreign aid organizations entered the country to support humanitarian programs, reconstruction projects, healthcare initiatives, logistics, and emergency response operations.

At the same time, many organizations faced an issue that was often underestimated during rapid wartime deployment: the legal status of foreign employees and humanitarian workers operating in Ukraine.

In practice, we regularly encounter situations where international organizations confuse the legal status of:

• foreign representative offices;
• Ukrainian charitable foundations established by foreign founders;
• volunteers;
• foreign employees temporarily working in Ukraine;
• contractors and humanitarian coordinators.

Since 2022, these mistakes have become one of the most common compliance risks for international organizations operating in Ukraine.

A Representative Office Is Not the Same as a Ukrainian Charitable Foundation

One of the biggest misunderstandings concerns the organizational structure itself.

Many international NGOs establish a fully separate Ukrainian legal entity — usually a charitable foundation or public organization. Legally, this structure becomes an independent Ukrainian organization governed by Ukrainian law.

At the same time, many organizations mistakenly believe that because the founder is a foreign NGO or international foundation, foreign staff automatically retain a “special international status” while working in Ukraine.

This is incorrect.

A Ukrainian charitable foundation is a separate legal entity. Its employees work under Ukrainian labor legislation, Ukrainian payroll rules, Ukrainian tax regulations, and Ukrainian employment compliance requirements.

This structure is fundamentally different from a representative office of a foreign organization.

Representative Office: Different Structure, Different Consequences

A representative office of a foreign NGO is not a separate legal entity. It operates on behalf of the foreign head office.

This distinction creates substantial legal and operational differences.

Employees of representative offices may legally remain connected to the foreign parent organization while physically performing work in Ukraine. Depending on the structure, foreign employees may receive immigration support through procedures different from standard work permit mechanisms previously used for ordinary Ukrainian employers.

Historically, foreign representative offices often used special service cards and simplified migration procedures for foreign personnel. Although the migration framework has evolved significantly since 2022, representative offices still operate under a substantially different compliance model compared to ordinary Ukrainian legal entities.

This distinction is critically important for:

• migration compliance;
• payroll structure;
• tax residency risks;
• employment documentation;
• cross-border payroll;
• humanitarian mobility programs.

Employees Are Employees — Not Volunteers

Another major issue concerns the misuse of volunteer status.

Many international and Ukrainian organizations unintentionally create significant legal exposure by treating de facto employees as “volunteers.”

Under Ukrainian legislation, volunteers do not receive salaries, bonuses, regular compensation, or structured employment benefits.

However, in reality, many organizations have individuals who:

• work full-time;
• report to supervisors;
• follow working schedules;
• manage teams;
• coordinate operations;
• receive regular monthly payments;
• perform operational functions essential to the organization.

From the perspective of Ukrainian labor authorities, these individuals are not volunteers. They are employees.

This issue has become especially visible since 2022, when humanitarian structures rapidly expanded operations in Ukraine without fully redesigning their compliance systems for long-term local operations.

Tax Residency Risks: The Problem Most Organizations Underestimate

The second critical issue concerns tax residency.

Foreign employees working in Ukraine often believe that if they continue receiving salary abroad, they do not create Ukrainian tax obligations.

In practice, the situation is far more complicated.

Under Ukrainian tax rules, individuals who stay in Ukraine for more than 183 days during a calendar year may become Ukrainian tax residents depending on their factual circumstances.

In addition to physical presence, Ukrainian tax authorities may analyze:

• center of vital interests;
• employment structure;
• family location;
• housing arrangements;
• source of income;
• management and operational activity in Ukraine.

This means that foreign humanitarian workers, coordinators, project managers, and operational staff may unintentionally become Ukrainian tax residents even while formally employed abroad.

If a person becomes a Ukrainian tax resident, they may become obligated to:

• declare worldwide income in Ukraine;
• disclose foreign salary;
• analyze double taxation treaty applicability;
• pay Ukrainian taxes where required.

Many organizations underestimate this risk because they focus exclusively on immigration documentation while ignoring tax consequences.

The Difference Between a Business Trip and Local Employment

Another common misunderstanding concerns business trips.

If a foreign employee of a foreign NGO temporarily visits Ukraine for short-term coordination meetings, monitoring activities, or humanitarian supervision while remaining employed abroad, this may qualify as a genuine business trip.

However, if the person:

• continuously works in Ukraine;
• manages local operations;
• performs operational duties daily;
• coordinates Ukrainian personnel;
• physically works from Ukrainian offices for extended periods,

the situation may no longer qualify as a simple business trip from the perspective of Ukrainian authorities.

This distinction becomes extremely important during:

• tax audits;
• labor inspections;
• migration reviews;
• banking compliance checks;
• financial monitoring procedures.

Why Many Structures Created in 2022 Now Require Full Compliance Review

During the first months of the full-scale invasion, many international organizations urgently entered Ukraine under emergency conditions.

In many cases:

• structures were registered rapidly;
• temporary operational models became permanent;
• HR systems were never fully redesigned;
• payroll structures remained unclear;
• volunteers gradually became operational employees;
• foreign staff stayed in Ukraine far longer than originally planned.

As a result, many organizations operating in Ukraine today face accumulated compliance risks that were simply not analyzed properly in 2022–2023.

We regularly encounter cases where organizations genuinely believed they were operating correctly but later discovered serious inconsistencies regarding:

• labor relations;
• foreign payroll;
• tax residency;
• volunteer classification;
• immigration status;
• reporting obligations.

The Risk of Labor Requalification

If the Ukrainian State Labor Service or tax authorities determine that a “volunteer” was actually performing employment functions, the consequences may be significant.

Organizations may face:

• penalties for undeclared employment;
• retroactive payroll taxation;
• social contribution liabilities;
• personal income tax reassessments;
• military tax liabilities;
• financial penalties and late payment sanctions.

As of 2026, fines for allowing employees to work without proper formalization may reach the equivalent of 20 minimum salaries per employee.

For large international organizations with multiple foreign workers, this may create substantial financial and reputational risks.

Compliance Is No Longer Optional

The humanitarian sector in Ukraine has become significantly more regulated since 2022.

Today, international organizations must clearly understand:

• who is an employee;
• who is a volunteer;
• who is employed abroad;
• who works locally;
• who may become a Ukrainian tax resident;
• which structure is being used operationally;
• whether the organization functions as a representative office or as a separate Ukrainian legal entity.

The legal structure chosen at the beginning of operations directly affects:

• migration procedures;
• employment obligations;
• payroll taxation;
• reporting requirements;
• tax residency risks;
• operational flexibility.

The Main Question Organizations Should Ask Themselves

The key issue is not simply “Are we filing reports correctly?”

The real question is:
“Does our current structure actually reflect how our organization operates in Ukraine?”

For many international NGOs, the answer requires a full legal, tax, and operational reassessment.

And in 2026, that reassessment is no longer just a recommendation — it has become a necessary part of responsible international humanitarian operations in Ukraine.

A foreigner receiving income from a Ukrainian source automatically becomes subject to Ukrainian tax legislation. The issue of double taxation arises when two states simultaneously — Ukraine and the country of residence — claim tax on the same income. However, the existing system of international conventions and the provisions of the Tax Code of Ukraine provide foreigners with specific legal tools to avoid this.

Who Is Considered a Non-Resident and Pays Taxes

Non-resident status determines the scope of tax obligations in Ukraine. A foreigner receives this status if they do not meet the residency criteria under the TCU.

A foreigner’s tax status is determined by the following criteria:

• Length of stay: A person who has spent fewer than 183 days in Ukraine during the tax year remains a non-resident.
• Centre of vital interests: The absence of permanent housing, family, or a primary source of income in Ukraine confirms non-resident status.
• Business registration: A foreigner registered as an entrepreneur in Ukraine acquires resident status regardless of the length of stay.
• Self-determination: A foreigner may confirm Ukrainian residency through the STS — this grants access to DTT benefits.

It is precisely non-resident status that determines which income is subject to taxation in Ukraine — only that which has its source on Ukrainian territory.

Personal Income Tax and Military Levy Rates for Foreigners

Ukraine does not apply discriminatory rates for foreigners — non-residents pay the same basic rates as Ukrainian citizens. The current rates for income from Ukrainian sources are shown below.

Type of Income	PIT Rate	Military Levy
Salary from a Ukrainian employer	18%	5% (from 01.01.2025)
Income from real estate in Ukraine (first sale, owned for more than 3 years)	0%	0%
Income from real estate (other cases)	18%	5%
Dividends from Ukrainian companies	18%	5%
E-resident income (single tax, group 3)	5% (within the limit)	—

Income in foreign currency is converted to hryvnias at the NBU exchange rate on the date of receipt. At the same time, most DTT agreements do not cover the military levy — it is paid separately.

How the Convention Protects a Foreigner from Double Taxation

Ukraine has concluded double taxation treaties (DTT) with more than 70 countries. The convention determines which state has the primary right to tax a specific type of income and eliminates the conflict between two jurisdictions.

The Method of Foreign Tax Credit in Ukraine

The practical application of a DTT convention is implemented through three mechanisms:

• Credit method: The tax paid in the foreigner’s country of residence reduces their PIT obligations in Ukraine by the corresponding amount. For example, if a foreigner paid 15% in their home country and the PIT rate in Ukraine is 18%, the additional payment will be only 3%.
• Exemption with progression method: Income already taxed abroad is excluded from the tax base in Ukraine, but is taken into account when determining the applicable rate.
• Convention exemption: Certain types of income (for example, the salary of a non-resident physically working outside Ukraine) are fully exempt from Ukrainian PIT, provided that a supporting document is submitted.

To apply any of these mechanisms, the foreigner is required to provide the employer or tax authority with a legalised certificate of residency from their country before the income is paid.

E-Residency as a Legal Alternative for Foreigners

From 1 April 2023, foreigners gained the ability to conduct business with Ukraine without physically relocating. E-residency is registration through the Diia application following financial and security screening.

An e-resident receives the following opportunities and conditions:

• Single tax payer status under group 3 without VAT, at a rate of 5% of income within the limit (above the limit — 15%).
• An electronic digital signature and remote opening of an account at a Ukrainian bank.
• Fully electronic document management and correspondence with the STS.
• Taxation in a single jurisdiction — with no risk of double assessment.

Citizens of the aggressor state russia, persons on the FATF list, and foreigners who already have active income in Ukraine (other than passive income) cannot become e-residents. E-residency is the optimal tool for foreigners conducting business remotely and seeking to minimise administrative burden.

Documents to Confirm Non-Resident Status

Tax authorities accept only officially executed documents. A verbal description of the situation or a reference to a convention without supporting paperwork does not constitute grounds for PIT exemption or the application of a preferential rate.

The standard package of documents for a foreigner includes:

1. Certificate of tax resident status of a foreign state — issued by the competent authority of the country of residence, subject to legalisation (apostille or consular legalisation) and official translation into Ukrainian.
2. RNОКРР — registration number of the taxpayer’s account card, mandatory for any settlements with Ukrainian counterparties.
3. Declaration of assets and income — submitted by 1 May of the following year; in the absence of the required documents, the deadline may be extended to 31 December.
4. Certificate of the amount of tax paid abroad — required for applying the credit method under Article 13 of the TCU; also subject to legalisation.

The residency certificate must be renewed annually — this guarantees the continuous application of benefits under the DTT convention.

Accounting Support for Foreigners from BuhalteriO

Document legalisation, determination of non-resident status, selection of the correct DTT mechanism, and timely submission of the declaration — each of these steps requires precise knowledge of the TCU and international tax law. An error at any stage leads to additional PIT assessments, penalties, and loss of the right to benefits.

BuhalteriO supports foreigners and non-residents at every stage: from obtaining the RNOКРР and registering as an e-resident to the correct application of DTT conventions and filing of reports. Order the service for foreigners and non-residents and eliminate tax risks before they arise.

Frequently Asked Questions About the Taxation of Foreigners in Ukraine

Does a foreign non-resident pay PIT on Ukrainian income?

A foreign non-resident pays PIT at 18% on income sourced from Ukraine. If a DTT convention is in effect between Ukraine and the foreigner’s country, the tax is credited and double taxation does not arise.

How can double taxation be avoided when a DTT convention exists?

The foreigner provides the employer or tax authority with a legalised residency certificate from their country before the income is paid. The credit method applies: tax paid abroad reduces the obligations in Ukraine by the corresponding amount.

What does e-residency give a foreigner from a tax perspective?

An e-resident pays the group 3 single tax at a rate of 5% of income without the need to be physically present in Ukraine. This is a legal way to conduct business with Ukraine and pay taxes in a single jurisdiction.

Returnable financial aid (RFA) is one of the most widely used instruments for replenishing a company’s working capital. Under sub-clause 14.1.257 of the Tax Code of Ukraine, it is a sum of funds provided under an agreement without interest accrual that is mandatory for repayment. Unlike a bank loan, RFA requires no licences and is available from any individual or legal entity — including a founder or director of an LLC. This simplicity of attraction makes the instrument popular — and at the same time an area prone to frequent accounting errors.

Financial Aid from a Founder: How to Execute the Agreement Correctly

What Must Be Specified in the RFA Agreement

The RFA agreement is executed in simple written form. Where the lender is a legal entity, written form is mandatory regardless of the amount (Article 1047 of the Civil Code of Ukraine). The agreement must clearly define: the amount (lump-sum or ceiling), the interest-free condition (an explicit clause is mandatory — by default a loan agreement is considered interest-bearing under Article 1048 of the Civil Code), the repayment term, the procedure for transferring funds, and the primary document confirming the transfer.

The absence of any of these elements creates grounds for reclassifying the RFA as a financial service or for challenging the transaction.

Signing the Agreement as Both Director and Founder: Legal Risk

If a director is simultaneously a founder and signs the agreement on both sides — on behalf of the company and as an individual — such a transaction violates Article 238 of the Civil Code and may be declared void. The solution is straightforward and standard: issue a power of attorney to another employee who will sign the agreement on behalf of the legal entity. A correctly executed power of attorney fully protects the transaction from any challenge.

LLC Financial Aid: Repayment Terms and Consequences of Default

Why the Term in the Agreement Is a Critical Accounting Detail

The RFA term determines how it is classified in accounting. If more than 12 months remain from the nearest balance sheet date to the repayment date — the liability is long-term and subject to discounting. If up to 12 months remain — it is current, and discounting does not apply (clause 11 of NAS 11 “Liabilities”).

Common practice: set a term of 1 year and extend it by supplementary agreements as needed. The number of such extensions is not restricted by law. Importantly: an overdue RFA does not become long-term — it remains a current liability, as confirmed by the Supreme Court ruling of 04.12.2019 in case No. 826/16321/18.

Consequences of Non-Repayment for Single Tax Payers

For single tax payers of groups 1–3, failure to repay the RFA within 12 calendar months of receipt results in the amount being included in taxable income (sub-clause 3, clause 291.11 of the Tax Code). For corporate income tax payers there are no term-related restrictions — the transaction does not affect the financial result either upon receipt or upon repayment.

Discounting of RFA Debt: When It Arises and How to Avoid Errors

Short-Term and Long-Term RFA: Different Accounting Approaches

Companies maintaining accounting under National Accounting Standards (NAS) discount only long-term liabilities with a clearly defined future repayment date. Companies applying IFRS are required to discount any long-term interest-free loan — using the market interest rate for a comparable instrument (IFRS 9, IAS 39). During the period of martial law no special exceptions regarding RFA discounting are provided — this is confirmed by the letter of the Ministry of Finance of Ukraine dated 20.02.2024 No. 41010-06-62/5120.

Income and expenses arising in bookkeeping as a result of discounting are accepted in tax accounting without adjustments (ZIR 103.12). Correct classification of the RFA term from day one is not a formality — it is protection against additional tax assessments following an audit.

Taxation of Returnable Financial Aid: Corporate Tax, VAT, Personal Income Tax

Below is a summary table of tax consequences of RFA transactions, covering all key taxes and enabling a quick assessment of the tax burden without unnecessary calculations.

Tax	Consequences upon Receipt and Repayment of RFA
Corporate Income Tax	Does not affect the financial result; income/expenses from discounting — without adjustments (ZIR 103.12)
VAT	Does not arise — RFA is not a supply of goods or services (ZIR 101.04)
Personal Income Tax / Military Levy	Not taxable upon repayment (clause 165.1.31 of the Tax Code); reflected in Annex 4DF: code 197 — upon issuance, code 153 — upon return to an individual

Zero tax burden with correct execution is the main advantage of RFA over other forms of financing. The key condition: full compliance with all agreement requirements and repayment terms.

Returnable Financial Aid with BuhalteriO: Zero Errors from Day One

An agreement without an interest-free clause, a director’s signature on both sides, an incorrect payment reference, a misclassified liability term — each of these mistakes costs the company time, stress and additional tax assessments. Comprehensive LLC accounting services from BuhalteriO cover the full cycle of RFA management: from drafting the agreement to correct reflection in accounting records and financial statements. Submit a request — and receive a consultation today.

Frequently Asked Questions about Returnable Financial Aid

Can a Director Provide RFA to Their Own Company?

Yes, a director as an individual is entitled to provide returnable financial aid to the company. However, signing the agreement simultaneously on behalf of the company and in a personal capacity is not permitted — this constitutes a violation of Article 238 of the Civil Code. The agreement on behalf of the company is signed by another employee under a power of attorney.

What Happens if the RFA Is Not Repaid within 12 Months?

For corporate income tax payers — no automatic tax consequences arise. For single tax payers of groups 1–3 — the RFA amount is included in income and subject to the single tax. In both cases the overdue liability remains current and is not subject to discounting.

Is Discounting of an Interest-Free RFA Required during Martial Law?

Martial law does not cancel or alter the general discounting rules. If the RFA term exceeds 12 months from the nearest balance sheet date — discounting applies under the general procedure in accordance with NAS 11 or IFRS 9, depending on the company’s accounting system. This is confirmed by the official position of the Ministry of Finance of Ukraine (letter dated 20.02.2024 No. 41010-06-62/5120).