Doing business in Ukraine: Ukraine trade and export guide
Updated 22 October 2015
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1. Ukraine export overview
Ukraine is going through a difficult political transition following Russia’s illegal annexation of the Crimean peninsula and the ongoing ‘Anti-Terrorist Operation’ in eastern Ukraine.
Contact a Department for International Trade (DIT) Ukraine export adviser for a free consultation if you’re interested in exporting to Ukraine.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Ukraine.
Despite the difficult political and economic climate, Ukraine continues to offer opportunities in a broad range of sectors. Many of these involve co-operation with Ukrainian companies and authorities, and require Western financial investment.
The UK is the sixth largest investor in Ukraine. Over 150 well-established UK companies in Ukraine, with many more brands present. Major UK companies in the market include BP, Shell, GSK, Astra Zeneca, BAT, Imperial Tobacco, Mott MacDonald, Crown Agents, Next, and Marks and Spencer.
Benefits for UK businesses exporting to Ukraine include:
- large developed consumer market
- £500 million+ market for UK exports
- 6 cities with a population of at least 1 million
- starting to harmonise with European Union (EU) regulations
- free trade agreement signed with EU
- strategic location at the crossroads of European, Russian and Asian markets
Strengths of the Ukraine market include:
- highly educated workforce
- low labour costs
- good natural resources
2. Challenges
The main challenges for UK businesses in Ukraine include:
- political and economic instability
- temporarily occupied territory in Crimea and ‘Anti-Terrorist Operation’ in eastern Ukraine
- corruption
- bureaucracy and inefficient tax and legal system
- overregulation
- protection of Intellectual Property (IP)
- underdeveloped transport infrastructure
- local currency devaluation
Read the latest information for UK businesses on Russia and Ukraine, including the Crimea, following the introduction of EU sanctions.
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
Read the Foreign and Commonwealth Office’s (FCO) overseas business risk guide for more information on the risks to your business in Ukraine.
3. Growth potential
3.1 Economic growth
Ukraine’s state budget for 2015 is based on a forecast of a 4.3% fall in Gross Domestic Product (GDP) and inflation of 13.1%. Ukraine’s GDP in 2014 is USD 131.8 billion according to the World Bank.
The European Bank for Reconstruction and Development (EBRD) predicts a 7.5% fall in GDP in 2015 with 3.0% growth in 2016.
The Ukrainian government reached an agreement with its private creditors in August on restructuring USD 18 billion of Ukraine’s debt. This satisfied a major condition of the International Monetary Fund’s (IMF) bailout agreement. Further arrangements are expected to be finalised at the end of October 2015.The initial agreement offers a 20% nominal haircut and payment postponing until 2019.
Ukraine has a broad (if ageing) industrial base which is strong in ferrous metals and chemicals. This includes much of the former Union of Soviet Socialist Republic’s (USSR) space and rocket industry and a well-developed defence and security sector.
Ukraine is a major producer of agricultural products such as:
- grain
- sunflower seeds and oil sugar beet
- corn
3.2 EU Deep and Comprehensive Free Trade Agreement (DCFTA)
Ukraine and the EU signed the Deep and Comprehensive Free Trade Agreement (DCFTA) in 2014. Ukraine committed itself to implementing changes in laws, regulations and administrative practices with the aim of closer political association and economic integration with the EU.
The EU granted a temporary unilateral preferential trade regime to Ukraine in March 2014 which runs to 31 December 2015.
3.3 Development aid
Ukraine is a member of the EBRD. The EBRD had committed over USD 12 billion through 344 projects in Ukraine. Investment increased by 46% in 2014 to over USD 1.2 billion annually. EBRD is expected to invest up to USD 1 billion in 2015 if real reforms are implemented.
The World Bank announced an extra USD 3 billion of new financing to Ukraine in March 2014 in addition to its existing arrangement. This is to assist the country in formulating and implementing urgently needed reforms.
Ukraine accounts for about 10% of the International Finance Corporation (IFC) outstanding portfolio. Funds include USD 200 million for the agribusiness sector.
The Department for International Development (DFID) is active in Ukraine.
4. UK and Ukraine trade
UK exports to Ukraine in 2014 amounted to £354.817 million.
Top goods exports include:
- medicinal and pharmaceutical products
- road vehicles
- textile fibres
- chemical materials and products
- various specialised and industrial machinery
5. Opportunities for UK businesses in Ukraine
DIT provides free international export sales leads from its worldwide network. Search for export opportunities.
Identify opportunities to supply products and services to international aid agencies. Contact DIT’s Aid Funded Business Service for more information.
5.1 Agriculture
Agriculture is the lead export sector in Ukraine. There are a number of UK companies already operating in this market and it offers a wide range of opportunities.
70% of Ukraine is arable land. The agriculture sector is responsible for 16% of Ukrainian GDP and 30.2% of exports.
By 2020 the Ukrainian government plans to:
- increase grain production to 100 million tons a year
- double agricultural exports
- triple production of high value-added products
The EBRD has made EUR 250 million of funds available to Ukraine agribusiness sector.
Opportunities include:
- agribusiness/farm management consultancy
- project engineering
- agri-tech
- animal feeds
- crop protection products
- animal health and genetics
- biomass and biogas
- ports and logistics development
Contact DIT Ukraine at commercial.kyiv@fco.gov.uk for more information on agriculture sector opportunities.
5.2 Education
Ukrainian government reforms include pilot projects on enhanced use of modern Information and Communications Technology (ICT) for education. There is also an increased focus on the quality English language training.
Extensive English language training is considered a must for a successful career in Ukraine. 20,000 Ukrainian students per year go to study abroad and the UK is regarded as a top destination for Ukrainian students.
Opportunities for UK companies include:
- studying in the UK, ranging from summer camps and boarding schools up to postgraduate study
- distance learning
- exchange programmes with private schools/universities
- supply of learning materials
- development of UK qualifications in Ukraine
- English language training and certification
- business training
- ICT for education
Contact DIT Ukraine commercial.kyiv@fco.gov.uk for more information on education sector opportunities.
5.3 Energy
Ukraine has a broad base of natural resources including oil and gas, coal and renewables potential.
The most recent energy sector crisis in Ukraine has led to increased interest in energy efficiency/biomass and biogas projects. Many of these are funded by the international donors.
Opportunities for UK companies in the energy sector include:
- domestic gas and oil production development/rehabilitation of existing fields
- energy efficiency projects
- renewable energy (especially biomass and biogas)
- nuclear energy projects
- grid modernisation and capacity increase
- upgrades of the gas transportation system
Contact DIT Ukraine commercial.kyiv@fco.gov.uk for more information on energy sector opportunities.
5.4 Infrastructure
Opportunities in the infrastructure sector are linked to donor financing.
The EBRD has channelled funds into the infrastructure sector with investment in road rehabilitation projects, municipal utilities as well as port improvements. 26% of the current EBRD portfolio of EUR 5.1 billion in Ukraine (including undisbursed commitments) is allocated to infrastructure projects.
Increased agricultural exports from Ukraine have resulted in new opportunities in ports and logistics capabilities development. Projects include new grain terminals and development of river transport infrastructure.
Opportunities for UK companies include:
- consultancy
- supply
- maintenance
Contact DIT Ukraine commercial.kyiv@fco.gov.uk for more information on infrastructure sector opportunities.
5.5 Retail / luxury goods / e-commerce
Many British retail brands are already present in Ukraine and there is potential for more.
Ukraine’s well-developed delivery networks and the EUR 150 duty-free import allowance for individual customers opens up new opportunities for e-commerce exports.
Opportunities for UK companies include:
- designer clothes and accessories
- interior products
- fine foods and drinks
Contact DIT Ukraine commercial.kyiv@fco.gov.uk for more information on retail sector opportunities.
5.6 Defence and security
Since the Russian annexation of Crimea and the ongoing conflict in the east of the country rearming and modernising Ukrainian Armed Forces has become a priority for the Ukrainian government.
The Ukrainian government announced plans to raise defence spending by an estimated 50% over the next 3 years in August 2014. The additional £1.73 billion is for retrofitting and purchasing essential equipment for Ukraine’s armed forces.
President Poroshenko aims to make Ukrainian Armed Forces fully compatible with NATO standards by 2020.
There are opportunities for UK companies to supply a range of non-lethal defence products. There is also potential business in supplying cyber security, innovative and niche solutions for:
- cyber forensics
- cloud security
- mass data collection/analysis
- audit for system vulnerabilities
- e-government
- critical national infrastructure protection
Contact Export Control Organisation (ECO) to check your goods you are meeting legal requirements for export.
Contact DIT Ukraine at commercial.kyiv@fco.gov.uk for more information on defence and security opportunities.
6. Start-up considerations
Ukraine is not an easy market to enter.
The most straightforward option to start exporting your product into Ukrainian market is to appoint a distributor. This should be a local company with importing experience and be registered as an importer with the local customs service.
Previously local retail chains were not interested in direct imports. However, this practice is now changing as businesses try to offer the best cost margins to their customers. This follows local currency devaluation and increased import costs.
The following legal forms for foreign businesses are available in Ukraine:
- foreign enterprise
- subsidiary
- private enterprise
- general partnership
- limited partnership
- added liability company
- Limited Liability Company (LLC)
- Joint Stock Company (JSC)
Some industries, including banks and insurance companies, are more heavily regulated, and must be established in compliance with specific requirements.
A foreign company may also establish a representative office in Ukraine which can carry out marketing, promotional and other functions on behalf of the company. A foreign legal entity can have both a representative office and establish a wholly-owned subsidiary at the same time.
7. Legal considerations
Contact the DIT team in Ukraine to help find tax and legal advisers before entering into agreements.
7.1 Standards and technical regulations
There is no bilateral agreement between Ukraine and the UK on mutual recognition of standards. Most products must be certified locally. The EU Commission in the context of DCFTA is working on an agreement for mutual recognition of standards.
The Ukrainian State Inspection on Consumer Protection has responsibility for standards and technical regulations.
7.2 Intellectual property
Ukraine is a member of the World Trade Organization (WTO).
Trademarks, designs, patents and copyright are the principal forms of intellectual property protection governed by Ukrainian legislation. The legislation is harmonised with most relevant international treaties and compliant with WTO requirements.
Ukraine is not a party to the European Patent Convention.
IP rights protection in Ukraine is a serious concern. The Office of the United States Trade Representative (USTR) named Ukraine a ‘Priority Foreign Country’ in a Special 301 report on IP in 2013. This rarely used, bottom-tier judgement demonstrated the deteriorating climate for Intellectual Property Rights (IPR) protection in Ukraine.
8. Tax and customs considerations
The State Fiscal Service administers tax and operates customs services in Ukraine.
The general principles of the Ukrainian tax system are laid out in the Tax Code adopted in 2010. Ukrainian tax reporting year uses the calendar year, starting 1 January and ending 31 December.
8.1 Value Added Tax (VAT)
VAT is generally levied on goods and services at 20%, calculated on the Cost, Insurance and Freight (CIF) value plus import duty. Special VAT regimes apply to certain goods.
There are excise duties levied on food, beer, wine, spirits, tobacco and fuel.
Many foreign companies have experienced delays with VAT refunds in Ukraine. This situation has recently started to improve but has not been completely resolved.
8.2 Corporate income tax
Corporate income tax is levied at 18%.
8.3 Individual income tax
The general tax rate is 15%. If the monthly income exceeds 10 minimal salaries it’s taxed at 20%.
Tax residents can benefit from certain tax exemptions and reduced tax rates.
8.4 Customs
The State Customs Service of Ukraine has responsibility for Customs.
All imported goods must be cleared with customs whether they are imported by air, sea or post. Import of goods under EUR 150 for private use is free of customs charges. Import duty is based on the CIF value of goods.
You can find more about import tariffs in the Market Access Database.
8.5 Documentation
The following documents are required to import goods into Ukraine:
- commercial invoice showing the value of the goods (prepared in English and Ukrainian)
- international way-bill
- certificate of origin
- certificate of conformity
Additional documents may be required depending on the goods and the means of transportation.
Import controls are in place for certain products. There may be pre-shipment controls on imports of manufactured products.
Customs clearance of goods (regular export-import documentation) is required by the Ukrainian authorities when transporting goods between mainland Ukraine and Crimea. Customs clearance is carried out at border checkpoints with Crimea.
9. Entry requirements
You don’t require a visa to enter Ukraine for a visit of up to 90 days within any 180 day period. The Ukrainian embassy provides details of visa requirements.
Special permits are required for foreign nationals wishing to travel to Crimea from mainland Ukraine. These can be obtained from the Ukrainian government authorities.
9.1 Travel Advice
If you’re travelling to Ukraine for business check the FCO Travel Advice.
10. Contacts
Contact the DIT team in Ukraine for more information and advice on business opportunities for doing business in Ukraine.