Hiring

How do you legally hire Ukrainian developers from abroad?

Published 13 August 2026 · facts checked against the primary sources on 2026-08-08 · Ukraine For ALL, Kyiv

None of the three is "the correct one". They differ in who bears the tax, who owns the code, and what a Ukrainian inspector sees if they look. Below is what each consists of, as the statutes stand on 8 August 2026.

What do the three models look like side by side?

Those timelines are the statutory periods for considering registration documents under Art. 26(1) of Law No. 755-IV: 24 hours for a legal entity or sole trader, excluding weekends and public holidays, and five working days for a separate subdivision of a company formed under foreign law. Diia.City applications are reviewed within 10 working days (Art. 7(1) of Law No. 1667-IX).

What is the risk if you simply pay them from abroad?

There are two risks here. Yours is a permanent establishment in Ukraine. The developer's is foreign-source income that Ukrainian law expects them to declare — and which is taxed considerably higher than the contractor route people assume they are on.

Take the permanent establishment first. Under Art. 14.1.193(b) of the Tax Code, a non-resident supplying services in Ukraine through staff it has hired for that purpose creates a permanent establishment where that activity runs, within a single project or a connected project, for more than 183 days in any twelve-month period. Both qualifiers matter. A foreign company whose Ukrainian engineers build its own product is a different factual picture from a non-resident selling services into Ukraine, and the project link is where the argument is usually won or lost.

The separate agency route turns on people who habitually negotiate or conclude contracts for the non-resident. For that route the Tax Code names specific evidence: binding instructions given by the non-resident and carried out by the person, and the person's use of the non-resident's corporate email address to communicate with it or with third parties. Once a permanent establishment does exist, the non-resident must register with the tax authorities (Art. 64.5), and operating through a separate subdivision without that registration carries a UAH 100,000 fine under Art. 117.4 — roughly USD 2,230.

One carve-out matters. Sending individuals to another party under a personnel-provision agreement is expressly excluded from the definition, which is why staffing and employer-of-record structures exist.

Now the developer's side, which foreign employers routinely overlook. Where the payer is foreign, there is no Ukrainian withholding agent — but under Art. 170.11.1 of the Tax Code foreign-source income is included in the individual's total annual taxable income, the recipient must file an annual tax return, and the income is taxed at the 18% rate set by Art. 167.1, plus the 5% military levy. So the model that costs you nothing in Ukrainian payroll leaves the developer with the highest personal rate of the three, and with a filing obligation they may not know they have.

What does a FOP contractor actually cost?

A developer registered as a Group 3 single-tax payer pays 5% of turnover as single tax if not VAT-registered, or 3% plus VAT if registered (Art. 293.3 of the Tax Code). On top of that sits the military levy at 1% of income, introduced for Group 3 from 1 January 2025.

They also pay the unified social contribution for themselves: 22% of a base that cannot be below the minimum wage (Art. 8(5) of Law No. 2464-VI). The minimum wage from 1 January 2026 is UAH 8,647 a month (Art. 8 of Law No. 4695-IX), so the floor is UAH 1,902.34 a month.

Do not assume that contribution is waived. The wartime rule letting sole traders skip it (item 9-19 of Law No. 2464-VI) has been suspended for 2025 and again for 2026 by the State Budget law itself. It is off.

Group 3 also has a ceiling: annual income up to 1,167 minimum wages (Art. 291.4), or UAH 10,091,049 in 2026 — about USD 225,000. Breaching it does two things, and the second is the expensive one. The excess is taxed at 15% (Art. 293.4(1)), and the payer must move off the simplified system entirely, from the first day of the month following the quarter in which the excess occurred (Art. 298.2.3(3)). That means the 5% rate stops applying to everything, rather than only to the overshoot.

When does your own Ukrainian entity make sense?

When the team is large enough that Diia.City's fixed costs are cheaper than the reclassification risk. Diia.City is open only to companies registered in Ukraine — a foreign entity cannot join — but foreign ownership is allowed (Art. 5 of Law No. 1667-IX).

Entry normally turns on three continuous tests: average monthly remuneration per employee and gig specialist of at least EUR 1,200, an average headcount of at least nine, and at least 90% qualifying income. Inside the regime, a specialist's salary or gig-contract fee is subject to 5% personal income tax up to EUR 240,000 per year (Art. 170.14-1 of the Tax Code), the military levy is 5%, and the social contribution is the minimum insurance contribution — UAH 1,902.34 a month rather than 22% of the real salary (Art. 8(14-1) of Law No. 2464-VI). Residents that elect the special corporate regime pay 9% instead of the 18% base rate, charged on distributions and equivalent payments rather than on profit (Art. 136.8).

There is also a route for a company that cannot meet those tests yet, and it is the one that fits a foreign firm opening a Ukrainian entity for five engineers. Under Art. 5(3) of Law No. 1667-IX, a company whose state registration took place no earlier than 24 calendar months before it applies may hold resident status without meeting the EUR 1,200 and nine-person tests — but only until 31 December of the calendar year following the year it obtained the status. It must still carry out a listed activity, meet the 90% qualifying-income test and be free of the disqualifying circumstances in Art. 5(2), and its income must stay within the Group 3 single-tax ceiling in each of four years: the year before the application, the year of the application, the year status was obtained, and the following year. The minimum social contribution follows the same relief for the same period (Art. 8(14-1) of Law No. 2464-VI). If the company meets all the ordinary tests by the time the relief expires, the status simply continues.

We cover entry and exit mechanics in a separate page: what is Diia.City, and is it right for a foreign IT firm?

What turns a contractor into an employee?

Ukrainian law has no statutory checklist of "signs of employment". The test comes from the definition in Art. 21 of the Labour Code — work defined by the agreement, wages, and working conditions provided by the employer — applied by courts and by the State Labour Service to the facts.

The consequences are specific, and right now they are also softer than they look on paper. Art. 265 of the Labour Code sets a fine of ten minimum wages per person for allowing someone to work without a formalised employment contract — UAH 86,470 in 2026, about USD 1,930 — and thirty minimum wages for a repeat within two years. Where the employer is itself a Group 1–3 single-tax payer, the first such violation draws a warning instead. But while martial law lasts, Art. 16(3) of Law No. 2136-IX provides that the Art. 265 fines are not applied at all where the employer complies in full and on time with the inspector's order to remedy the violations found. That relief is tied to the war: Law No. 2136-IX itself expires when martial law ends, and the fines return to their ordinary force.

Where people get stuck

Assuming inspections stopped during the war. They did not. Under Art. 16(1) of Law No. 2136-IX, the State Labour Service can run unscheduled inspections on the application of an employee or a trade union, specifically including the detection of unformalised employment relations. The trigger is usually a developer you parted with badly.

Reading the wartime reprieve as an amnesty. It is not one. The fines fall away only if the remedial order is executed in full and within the deadline, which in practice means formalising the relationship the inspector objected to — and paying the payroll taxes that follow from it.

Missing the pre-start notification. Art. 24 of the Labour Code forbids admitting an employee to work without an order and a prior notification to the tax authority. Diia.City residents owe the same notification before a gig specialist starts work (Art. 23(1) of Law No. 1667-IX). It is the single easiest violation to prove after the fact.

Believing the contract's label settles it. A civil-law contract is not a gig contract unless it expressly says so (Art. 17(3) of Law No. 1667-IX). And a gig contract only escapes being treated as entry into employment where there is no evidence the resident misled the individual about the nature of the deal (Art. 17(8)).

Leaving IP to the default rules and hoping. For code the default is favourable: software is a copyright work, and for works made to order the economic rights pass to the customer in full at the moment of creation unless the commission contract says otherwise (Art. 15(2) of Law No. 2811-IX). Art. 430(2) of the Civil Code sets joint ownership between creator and customer as the general default for commissioned IP objects, but by its own wording that default yields where a contract or a law provides otherwise — and for works, Law No. 2811-IX is that law. Two things still need writing down: the author keeps a right to remuneration where the rights pass (Art. 15(3)), and anything that is not a copyright work sits back under the Civil Code default.

FAQ

Can a foreign company employ a Ukrainian directly, under Ukrainian labour law? The labour machinery — an order, a prior notification to the tax authority — assumes a party registered in Ukraine. Most foreign companies therefore use a contractor, a personnel-provision arrangement, or their own Ukrainian entity.

Is contracting FOPs illegal? No. It is a normal, lawful structure for genuinely independent providers. It becomes a problem when the substance is employment: fixed hours, a workplace, subordination, a single client.

Does hiring one Ukrainian developer create a permanent establishment? Not automatically. The service test in Art. 14.1.193(b) needs a non-resident supplying services in Ukraine, within one project or a connected project, for more than 183 days in a twelve-month period. The separate agency test needs someone with authority to negotiate or conclude contracts. Facts decide.

If we pay a developer from abroad, does Ukraine tax anything? Yes — just not through you. The developer includes the foreign income in their annual return and pays 18% personal income tax plus the 5% military levy (Art. 170.11.1 and Art. 167.1 of the Tax Code).

How many companies are actually in Diia.City? The official Diia.City site showed 4,552 residents on 8 August 2026. Treat any other figure sceptically — this one is a live counter on the state's own page.

Does the 5% Diia.City rate cover everyone? No. It excludes residents that simultaneously hold Defence City status, which was carved out of both the 5% rate and the minimum social contribution rule by Law No. 4577-IX of 21 August 2025.