Starting a Tourism Business in Ukraine
Ukraine is rapidly becoming a popular tourist destination, and anyone who has visited our country once usually wants to come back again and again. No wonder! Ukraine’s beautiful nature, ancient history, rich cuisine, friendly people, dynamic cultural life in the big cities and affordable prices attract the attention of even sophisticated world travelers!
Indeed, since Ukraine’s recent hosting of international events such as the Eurovision Song Contest in 2017 and the 2018 UEFA Champions League Final, Ukraine has often been mentioned in foreign media as one of the most underestimated tourist destinations in Europe.
During recent years, the Ukrainian government has made efforts to increase tourism in Ukraine. While citizens of the USA, EU countries, Canada, Turkey and some others are able to enjoy visa-free visits, 15-day tourist or business visas on arrival have been introduced for visitors holding passports from 31 other countries (including China, India, Singapore, Australia and more). It’s also possible to obtain a visa electronically for passport holders from 45 countries. The entry into Ukraine of the Irish discount airline Ryanair is another good sign that the tourist industry in Ukraine is poised to grow quickly.
If you are one of those expats who love our country and would like to show it to others, and are considering opening your own travel business in Ukraine, this article is for you. Here is a quick guide for foreign nationals on opening a tourism-related business in Ukraine.
Tour Agency VS Tour Operator
According to the Ukrainian law, there are two main types of tourism businesses in Ukraine: a tour agency and tour operator. What are the key differences?
A tour operator is a company, registered in Ukraine, that holds a tour operator licence and whose activities are exclusively devoted to organizing tour product (a combination of two or more touristic services sold or offered for sale under a specific price, including transportation services, accommodation, support services such as visits to places of interest, cultural events or historical places of interest, organizing leisure and rest, etc.), realization and provision of tourist services, as well as support services to tourists as an intermediary. The tour operator is responsible to tourists for the tour and the quality of services rendered. A tour operator may also perform tour agency activities.
A tour agency is a company or a private entrepreneur in Ukraine, which does not require a license and which performs an intermediary activity of realization (sale) of the touristic product (a tour) created and offered by a tour operator(s), as well as the sale of other tourist services as an intermediary. According to Ukrainian law, opening a tour agency does not require a license.
The key difference between a tour operator and a tour agency is that tour operator creates a tour product and sells it, either directly to the customers or through a tour agency. This involves booking accommodation, transportation and other required tourist services. The essential agreement is between the tourist and the tour operator, not the tour agency. A tour agency acts only as an intermediary when selling the tour product (the tour) and tourist services.
Note that according to art. 37 of the Law of Ukraine “On Tourism,” foreign individuals and foreign legal entities can perform tour agency and tour operator activity in Ukraine through registration of a legal entity in Ukraine and by obtaining a tour operator licence.
A foreign tourist-related business entity may conclude an intermediary agreement related to tourism in Ukraine only with a tour operator company that is registered in Ukraine. Intermediary agreements with other partners will be considered as void.
Therefore, if a foreign national would like to bring tourists to Ukraine, he has to:
- Either partner with a local tour operator; OR
- Set up his/her own legal entity in Ukraine and get a tour operator licence, issued by the Ministry of Economic Development and Trade.
Key Requirements for Tour Operators in Ukraine
According to Ukrainian law, a tour operator’s activity needs to be licensed and the company needs to comply with a series requirements, such as:
- The tour operator must be registered as a company under Ukrainian law (in most cases, tour operators act as limited liability companies);
- The tour operator’s exclusive types of activity should involve organizing and selling tours, and intermediary tourist services. No other types of business activity are allowed.
- The tour operator is required to have its own website.
- The director of the tour operator company must have higher education and work experience in the field of tourism of not less than 3 years OR higher education in the area of tourism (Specialist, Master’s Degree) – in the latter case work experience is not required.
- Not less than 30% of the staff of the tour operator need to have work experience in the field of tourism for not less than 3 years OR higher education in the field of tourism (Specialist, Master’s Degree). All employees must be hired based on a labour contract.
- To obtain a tour operator license, the company must have a personal or rented non – residential premise where tour operator services will be provided (at least 10 square meters).
- To obtain a license, the tour operator is obliged to have a financial institution guarantee that will cover any financial damages caused to tourists by the tour operator in the amount set by legislation (equal to EUR 10000 for an operator of internal tourism (including foreign tourists visiting Ukraine), and EUR 20000 for a tour operator directing foreign tours).
- License issuing is subject to a government fee in the amount of one living wage. (In 2018 it is UAH 1762).
The sections below provide detailed information on minimum statutory requirements and the documents that have to be filed for setting-up a tour operator company in Ukraine.
Choosing an Appropriate Business Structure
Tour Operator in a Form of LLC
Ukrainian law offers a wide variety of possible business structures. However, the most popular business structure is a limited liability company (in Ukrainian, Товариство з обмеженою відповідальністю, or simply “ТОВ”), which strikes the best balance between complexity, flexibility, and scalability. It offers full liability protection to business owners (i.e. their personal assets are protected from business liabilities) and the flexibility to grow bigger as your business expands, yet at the same time involves simpler scrutiny and compliance requirements.
Individuals as well as companies can register an LLC in Ukraine. A unique feature of the Ukrainian Limited Liability Company structure is that share capital is divided into parts and not in number of shares. Each member owns a part of the company as prescribed in the Companies Register (called State Register of Legal Entities, Private Entrepreneurs and Public Formation).
Key features of an LLC include:
- Shareholders. An LLC must have a minimum of 1 shareholder. The shareholders can be individuals or corporate entities and either local or foreign individuals/entities.
- Directors. Directors can be one or more individuals (can be either local or foreign individuals; the latter have to obtain a work permit and temporary residence permit). Corporate directors are not permitted. Directors are appointed by shareholders via a general meeting of shareholders.
- Company Secretary. Appointment of a Company Secretary is not required.
- Registered Address. Each company must have a local registered address in Ukraine that acts as the office where the management of the company conducts its activities.
- Share Capital. Share capital has to be formed, but there is no minimum share capital required, so the minimum amount is 1 UAH. Shares reflect the percentage held by each company’s owner in the total share capital as listed in the company’s charter.
- Transfer of Shares. Shares can be freely transferred subject to the priority rights as described in the company charter.
- Registration Cost and Timeline. Government registration of an LLC is free of charge, and registration can generally be completed in 1 working day once the necessary documents are ready.
- Governance. An LLC is governed by the following bodies:
- General meeting of shareholders (“GMS”) – the main decision-making body, which has powers to resolve all issues
- Director / Board of Directors as elected by the GMS.
- Other bodies as described in company’s charter
Employment Agreements. Can be either in written or verbal form. Employment of foreign citizens can be only in written form. The general rule is that employment of foreign citizens requires a work permit and a temporary residence permit (unless the foreign individual has obtained a permanent residence permit).
How to Set Up a Company?
Quick Guide How to Register an LLC
An LLC, as with any other company in Ukraine, is considered to be created from the moment of its registration in the Companies Register. In order to apply for the registration, you will need to prepare the following documents:
- Company charter;
- Minutes of incorporation of an LLC and electing governing bodies;
- Application for registration
Additionally, foreign nationals or companies will need to present the following documents to register an LLC in Ukraine:
- Passport copy
- Tax registration certificate in Ukraine
- Power of Attorney – if registration of the LLC will be performed by a representative
Foreign legal entities:
- Extract from Company Registry (or another relevant state registry in which registration of legal entity is performed) or other documents, issued by government authorities, confirming the registration of a foreign company, its registered address, directors, shareholders and good standing
- A document confirming powers of a representative authorized to register the LLC in Ukraine
All documents that you bring from overseas must be either legalized or Apostilled unless prescribed otherwise by the international treaty between Ukraine and the document issuing country (for example, legalization and Apostille are not needed for documents issued in the Republic of Poland, Czech Republic, Republic of Latvia and some others). The exception is a passport, which does not require legalization and Apostille. Additionally note that if documents are compiled in a language other than Ukrainian, a certified translation has to be provided.
Note that if you plan to appoint a foreign individual as a director (or another employee) of the LLC, additional documents will be required to apply for a work permit. At the stage of company registration, you have to appoint a resident director until the foreign citizen obtains a work permit.
While preparing documents necessary for registration, you need to choose the type of business activity of the company under the National Classifier of Business Activities in Ukraine (КВЕД).
Therefore, in the case of a tour operator, you should chose business activity КВЕД 79.12 “Tour Operator Business Activity” only (as mentioned above, according to law it has to be the only type of business activity of the company).
Given Ukraine’s high level of bureaucracy, lack of clear-cut regulations, and language difficulties (most of the paperwork is done in the Ukrainian language), foreign entrepreneurs and companies are strongly advised to hire a competent and qualified corporate service provider that can assist them with all their initial setup as well as ongoing compliance needs.
Tour Operator License
Once a company is registered, before starting tour operator activity the LLC has to apply to the Ministry of Economic Development and Trade for a tour operator licence.
In order to apply for the licence, the company will need to provide the following documents:
- Application in the form approved by the Cabinet of Ministers of Ukraine.
- Filled-in form with information on locations of the tourist operator and its branches in Ukraine;
- Copies of education certificates and work experience of the director of the company (this should comply with the requirements as mentioned above for tour operators).
- Copy of insurance agreement with an insurance company, confirming mandatory insurance of tourists (medical insurance and accident insurance);
- Description (index) of documents, filed as part of the application.
A company that has obtained a tour operator license has to ensure it complies with all the requirements as mentioned above for tour operators. If the tour operator fails to do so, the authorised representative of the Ministry of Economic Development and Trade can withdraw the license and impose a fine.
Are you interested in proceeding with registration as a tour operator in Ukraine? Have further questions? Contact us at email@example.com.