During the several months of Russia’s full-scale war against Ukraine, many Ukrainian IT specialists have moved abroad, but continue to work remotely with domestic employers. We spoke with IT companies about how they recruit such employees and whether they have changed contracts with them. And the lawyers of Trustme Law Firm told DOU what are the options for registration of IT specialists abroad on the example of Poland, Estonia, and Portugal.
We have four offices in Poland. Among them is the Krakow Delivery Center, the largest outside Ukraine.
Polish law provides for various options for the registration of cooperation with specialists.
The classic option is to register relocated specialists based on an employment contract. Formal employment provides all the benefits of social protection guaranteed by Polish law but also has significant taxation.
In order for citizens of Ukraine (or third countries) to work legally in Poland, it is necessary to obtain an employment permit, with which Intellias helps its specialists.
After the start of the war in Ukraine, Poland, together with other EU countries, implemented the EU Directive on Temporary Protection, which gives Ukrainian citizens among IDPs the status of a protected person. The Polish special law stipulates that persons who meet specific criteria have the right to work in Poland for the next 18 months.
At present, our employees who came to Poland to escape the war can enjoy the rights granted by this particular law. The document also gives the right to register individual entrepreneurial activity (analog of Ukrainian private entrepreneurs), which opens another option for cooperation, which is quite common for our colleagues who were forced to leave Ukraine.
Accordingly, another option, which is widely used in Poland along with the classic employment, is cooperation on the basis of B2B agreements (similar to FOPs). This option is more flexible when compared to working under an employment contract and more interesting in terms of taxation. Its only drawback is the lack of social protection, typical of labor relations.
We wrote more about the types of employment contracts in Poland here.
Currently, as a short-term solution, we recommend those who cooperate with us as individuals-entrepreneurs and registered in Ukraine, to continue cooperation under current contracts.
When considering a long-term solution, a possible option for cooperation with each consultant is determined case-by-case.
When choosing this option, we take into account tax and social payments in a particular country, whether the company has a representative office there, the wishes of the consultant and his plans for the future, the availability of work and residence permits, temporary protection status; requirements and duration of an individual project, etc.
In some locations, such as Sweden and Poland, consultants have the opportunity to enter into an employment contract and work with our local companies as employees. They will be subject to local employment laws.
For priority countries where our offices already exist or are planned to open, the company provides instructions and action plans to its specialists on obtaining temporary protection status, finding housing, social security, taxation, etc. These countries include Poland, Sweden, Bulgaria, Romania, Portugal, Germany, Turkey, Hungary, the Czech Republic, and Spain.
SoftServe has entered the Latin American market this year and is now opening an office in Romania. In these difficult times, we continue to invest in what is essential and offer specialists relocation to new hubs. There are currently six major countries to move to Poland, Romania, Bulgaria, Mexico, Colombia, and Chile.
We support relocated employees in their desire to legalize themselves in these countries, ie we employ them officially on the basis of a local legal entity (SoftServe Poland, SoftServe Bulgaria, etc.). The level of compensation for people is determined by the conditions of the local market and taxation – by local law.
We also recommend moving to hub countries for those who have left for other countries and plan to stay abroad for a long time to work legally.
Gismart continues its work in Ukraine. About 70% of the employees of our Kyiv office are in the country and do not plan to relocate.
For those who have been forced to go abroad and those who plan to stay outside of Ukraine for a long time, the company helps with the opening of individual entrepreneurship and legalization in the country.
Now a significant part of our team is in Spain. They have not yet expired the regulated period of stay of 180 days, so the team continues to work for FOP. Then we plan to issue to employees who are there, an analog of our a private entrepreneur – autonomo.
As this measure is forced and new for all EU countries, we will look for options on how to continue to pay taxes in Ukraine.
From the first days of Russia’s invasion of Ukraine, we decided to urgently allow all our Ukrainian employees to move to a safe place.
In the new offices, we formalize employees within the country’s law where we open an office. So far, we have opened offices in five new locations: Poland, Montenegro, Bulgaria, Armenia, and Georgia. All employees relocating to these countries will be officially registered in accordance with the law of the location.
We also provide assistance and full support in obtaining a permanent residence permit for employees and their families. We currently have about 20 relocation applications from Ukraine. These workers left the country before the start of hostilities.
Since the start of hostilities, nine workers have decided to move abroad temporarily. Each of them stopped where he was most comfortable – in Poland, Spain, Germany.
We stay in touch with all employees and continue to pay salaries stably to personal accounts. We help individually and try to make the work process comfortable.
At the request of DOU, the managing partner of Trustme Law Firm Sergiy Barbashin and the company’s lawyers Oleg Chip and Iryna Syroid considered the options for IT employees in three European countries – Portugal, Estonia, and Poland.
According to lawyers, there are two options for registering IT workers in Portugal.
The first option is to register individual entrepreneurs in Portugal.
The taxation system is general at the progressive rate of personal income tax from 14.5% to 48%. Also, IT professionals can choose a special tax status NHR (Non-Habitual Residents). The NHR allows the payment of 20% of income received in Portugal and 0% of income outside Portugal (private income, dividends, rent, etc.), but of course, not without exception.
The general system does not tax all income, but only part of it (37%, 5%, 55%, 75%) depending on the type of activity. The tax is not paid if the entrepreneur’s income is below the subsistence level.
NHR preferential tax status provides for the taxation of 100% of income without the possibility of reducing the tax base. The status is granted after obtaining tax residency and is valid for 10 years.
Before reporting to the supervisory authorities, the entrepreneur can choose which tax system to apply – general or NHR.
In addition, social security contributions of 21.4% and VAT are paid if the income exceeds 12,500 euros. Entrepreneurs do not pay SDRs for the first year, and a further 70% of their revenue is taxed.
An individual entrepreneur in Portugal can continue to work as a sole proprietor in Ukraine and pay taxes. The income and taxes of the Ukrainian private individual are also reflected in the tax return in Portugal. In this case, the Portuguese tax authorities may require the sole proprietor to pay the difference between the taxes in Ukraine and Portugal.
The second option is to open a company in Portugal with the employment of top specialists as highly qualified employees, administrative staff, and the registration of individual entrepreneurs as freelancers while maintaining the validity of the Ukrainian FOP.
Employees and entrepreneurs pay personal income tax (according to the general system or NHR), social security contributions, and VAT (only for entrepreneurs).
For people who are already in Portugal and have received temporary protection, registering a sole proprietor or employment is somewhat simplified, as they are automatically provided with a local tax number – NIF.
Temporary protection allows you to stay legally in Portugal. After its abolition, an individual entrepreneur or employee can apply for a D2 visa as a freelancer or a D7 as a financially independent person.
A profitable option for the IT company is to open an OU (similar to our company) in Estonia.
The jurisdiction’s main advantage is the company’s zero income tax (if you do not withdraw dividends).
In addition, if the OU employs a non-resident of Estonia who does not reside in the country, the employee does not pay taxes in Estonia and must declare such income at the place of residence.
Estonia is a loyal jurisdiction to work with cryptocurrency and hedge funds, and you can register and manage the company remotely by obtaining an e-residency or power of attorney.
IT companies mostly have a request for jurisdiction with minimal bureaucracy, well-developed digital services, and easy interaction with the authorities and the tax authorities. The Estonian jurisdiction responds to this request.
What can OU be used for? Make settlements in Europe between Estonia and Ukraine (to the accounts of private entrepreneurs, entities, etc.); don’t pay (or pay the minimum) sales tax and, if desired, actually use the company for settlements.
OU is suitable for both temporary and permanent activities in the EU. Estonia is often chosen to optimize the tax burden, as many other European countries have high-income tax rates.
Most Ukrainians left for Poland because of Russian aggression, and many IT companies are relocating to the country with employees and opening offices.
Jurisdiction is suitable for the complete relocation. The most popular form of doing business in Poland is Sp. z o.o. (Spółka z ograniczoną odpowiedzialnością) (analog of LLC).
Total tax rate Sp. z o.o. income tax is 19%, but there is a reduced income tax rate of 9%. It can be applied to start-ups in the first tax year and to companies whose, gross income in the previous tax year did not exceed € 2 million.
Ukrainians who have received temporary protection have the right to employment without a permit. Employee tax rates are quite high, so business owners need to consider them immediately.
General employee taxes:
The employer also pays ZUS (analog of SRS) for the employee.
Taxes are fairly floating and depend on many factors, so lawyers recommend using a payroll calculator to calculate them.
Temporary protection status also allows Ukrainians to register in Poland as private entrepreneurs, for this, you need to have a PESEL and ePUAP profile (documents that will enable you to use social and public services in Poland). Open the status online; it lasts 1-2 days.
The material is prepared for DOU
Authors of the material:
Iryna Syroid, attorney at Trustme Law Firm
Oleg Chip, lawyer at Trustme Law Firm