Ukraine Reconstruction for Foreign Companies
Foreign companies can join Ukraine’s reconstruction through public ProZorro tenders, donor-funded contracts, subcontracting, joint ventures, or direct investment. The right structure depends on the project — tax exposure, procurement eligibility, and corporate compliance requirements differ significantly across these models, and the wrong choice is expensive to fix after a contract is signed.
Ukraine is rebuilding its infrastructure, economy, and cities on a scale that creates substantial commercial openings. The Ukraine Facility of the European Union provides up to €50 billion through 2027; by April 2026, approximately €29.5 billion had been disbursed. The European Bank for Reconstruction and Development (EBRD) has deployed approximately €6.2 billion in Ukraine since February 2022, including €639 million in the energy sector in 2024 alone. The World Bank’s Ukraine Recovery Trust Fund (URTF) has mobilised $2.8 billion in donor contributions and unlocked $7.3 billion in additional financing.
Behind these figures are specific, tendered projects: energy grid repairs, road and bridge reconstruction, housing, schools, water systems, industrial capacity. For contractors, suppliers, and donor implementing partners, the practical question is the same: how to participate legally, how to structure the engagement for tax efficiency, and what the contracts need to say.
This material is intended for foreign companies, investors, contractors, suppliers, founders, as well as legal and finance teams considering participation in Ukraine’s reconstruction, entering the Ukrainian market, setting up a local structure, participating in public or donor-funded procurement, or expanding operations during martial law.
1. Participation models
2. Presence in Ukraine
3. Procurement and donor contracts
4. Project contracts
5. Tax consequences
6. Equipment import regime
7. Work permits
8. Construction and real estate
9. Compliance and sanctions
10. Practical checklist
Frequently asked questions
How DLF can help
1. Participation models
Five practical routes exist:
| Route | Key characteristics |
|---|---|
| Public tender (ProZorro) | Direct bidding without a Ukrainian entity; equal treatment principle applies |
| Donor-funded contract (EBRD, World Bank, Ukraine Facility) | Donor’s own procurement rules govern; integrity screening and UBO checks required |
| Subcontract | Agreement with a Ukrainian or international general contractor; permanent establishment risk must be assessed |
| Joint venture / consortium | Joint Ukrainian LLC or contractual JV; requires structural planning |
| Direct presence | Ukrainian LLC or representative office |
The choice of route determines the company’s tax obligations, procurement eligibility, liability structure, staffing requirements, and capacity to repatriate earnings.
2. Presence in Ukraine
For reconstruction projects, foreign companies most often consider a Ukrainian LLC, a representative office, or a contractual or corporate partnership with a Ukrainian participant. The form determines who signs contracts, which permits are needed, and how tax risks are allocated.
Ukrainian LLC: Separate legal entity; 100% foreign ownership permitted; no minimum capital; full contractual capacity to act as a general contractor or project lead; UBO disclosure required. The most flexible structure for significant or long-term engagements.
Representative office: Not a legal entity; acts in the name and at the risk of the foreign parent company; has limited commercial capacity. For reconstruction projects, it may be useful where a coordination presence is needed and the simplified procedure for certain construction works during martial law is available.
Joint venture / consortium: Either a jointly owned Ukrainian LLC or a contractual consortium without separate legal personality — useful where Ukrainian partners are required or where tender conditions call for local involvement.
Permanent establishment risk: Operating in Ukraine without a registered entity can trigger a taxable permanent establishment (PE). Under Ukrainian tax practice, a PE arises when construction activities exceed 12 months, or when services on a single project exceed 183 days within any 12-month period. The consequence is mandatory tax registration and corporate income tax liability on PE-attributable profits.
3. Procurement and donor contracts
The Law of Ukraine on Public Procurement guarantees in Article 5 that non-residents of all ownership forms participate in procurement procedures “under equal conditions” — no local registration is required to submit a bid. All government and municipal tenders run through ProZorro. Mandatory competitive thresholds are UAH 200,000 (approximately USD 4,500) for goods and services and UAH 1,500,000 (approximately USD 33,500) for works. Tenders above WTO GPA thresholds must be published in English. Challenges to procurement decisions go to the Anti-Monopoly Committee of Ukraine.
Donor-funded projects — through the EBRD, World Bank, or the Ukraine Facility Investment Framework — are governed by each institution’s own procurement rules. The Multi-Agency Donor Coordination Platform has committed to routing all reconstruction procurement through ProZorro where possible, but the specific modalities depend on each financing agreement. One constant across all donor projects: integrity screening, UBO disclosure, and sanctions checks are hard prerequisites. Non-compliance means disqualification or permanent exclusion from future projects.
4. Project contracts
Governing law and dispute resolution: Ukrainian law permits parties to choose a foreign governing law for commercial contracts. English, Swiss, and German law are the most common choices in international reconstruction contracts. International arbitration — through ICC, LCIA, VIAC, or the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (UCCI) — is preferable to Ukrainian state courts for dispute resolution. Foreign awards are enforceable in Ukraine under the New York Convention.
Currency and payment: Internationally financed contracts are typically in euros or US dollars; Ukrainian state procurement contracts settle in hryvnias. The National Bank of Ukraine’s wartime foreign exchange framework continues to restrict cross-border transfers. Dividend repatriation is capped at €1 million per month per distributing entity, applicable to profits accrued from 2023.
Force majeure: The Ukrainian Chamber of Commerce and Industry (UCCI) is legally authorised to certify force majeure, characterising qualifying events as “extraordinary, unavoidable and objective.” The certificate alone is not sufficient: the party invoking force majeure must separately establish a direct causal link between the specific event and the impossibility of performing the particular obligation. Under current Supreme Court of Ukraine practice, martial law as such does not constitute force majeure for contracts concluded after hostilities began. For reconstruction projects — many of which are signed under wartime conditions — this distinction is operationally important. Contracts need force majeure clauses that identify specific triggering events, set notification timelines, and spell out the legal consequences, rather than relying on generic pre-war boilerplate.
5. Tax consequences
Corporate income tax: The standard rate is 18%, applying to Ukrainian entities and to the PE-attributable profits of non-residents. Non-residents operating without a PE are subject to withholding tax on Ukrainian-source income.
Withholding tax: Payments to non-residents — dividends, interest, royalties, engineering fees, lease payments, and agency commissions — attract 15% withholding tax unless a double tax treaty (DTT) provides a lower rate. Freight services: 6%. Ukraine maintains over 70 effective DTTs.
VAT: Standard rate 20% on construction works and services performed in Ukraine. VAT registration is mandatory once annual turnover exceeds UAH 1 million (approximately USD 22,000) over 12 consecutive months. Certain goods imported for the restoration of Ukraine’s energy infrastructure are exempt from import duties and VAT under martial law. The scope and duration of this exemption are set by applicable legislation and must be verified before each import (see Section 6).
Transfer pricing: Cross-border intra-group transactions are subject to the arm’s length principle; related parties are defined at a 25% corporate rights threshold. Transactions between a non-resident and its Ukrainian PE are subject to transfer pricing controls once annual volume exceeds UAH 10 million (approximately USD 223,000) (net of indirect taxes).
Structuring before the project starts: Projects below the PE thresholds can be run on a withholding tax basis. Projects that will exceed those thresholds — whether for construction timelines or service duration — need a registered entity or a PE before activities begin. Getting this wrong after the fact means back-taxes and penalties, not just administrative correction.
6. Equipment import regime
Standard Ukrainian import duties and VAT (20%) apply to construction materials and equipment. Goods imported for the restoration of Ukraine’s energy infrastructure — equipment for renewable energy generation, gas plants, and energy storage systems — are exempt from import duties and VAT during martial law. The specific goods covered and the duration of the exemption depend on applicable legislation and must be confirmed before each shipment. Equipment imported under donor-funded projects (World Bank, EBRD) may benefit from project-specific exemptions agreed in the financing agreement; this needs to be checked on a project-by-project basis.
7. Work permits
Foreign nationals employed by a Ukrainian legal entity generally need a work permit. The employer applies to the regional State Employment Service centre; processing usually takes up to 7 working days, and the maximum validity depends on the employee category.
Total cost of a locally employed staff member: gross salary × 1.22, reflecting the Unified Social Contribution (USC) employer rate of 22%, capped at UAH 172,940 (approximately USD 3,900) per month from 1 January 2026. In addition, the employer withholds and remits personal income tax (18%) and military tax (5% of gross salary, effective 1 January 2025).
One risk specific to Ukraine’s current situation: Ukrainian nationals of conscription age can be mobilised at any time, and their position must be kept open. Reconstruction companies working with local teams should build substitute arrangements and documented handover procedures into their project planning from the outset.
8. Construction and real estate
During martial law, foreign companies operating exclusively through a representative office in Ukraine can carry out construction work in consequence class CC2 (medium) and CC3 (significant) by filing a declaration — without obtaining a full construction licence. This is based on a 2024 amendment to the relevant Cabinet of Ministers resolution. The declaration is filed free of charge through the Diia portal or an Administrative Service Centre, and covers the representative office, the foreign parent company, and the Ukrainian tax registration. A full licence must be obtained within three months of martial law ending.
For land: non-residents may acquire non-agricultural land within city and settlement limits for construction purposes. The acquisition of agricultural land by foreign companies remains prohibited. Commercial real estate can be leased without restriction.
9. Compliance and sanctions
Reconstruction projects are under active scrutiny from multiple directions. The National Anti-Corruption Bureau of Ukraine (NABU) handles criminal prosecution of high-level corruption; the National Agency on Corruption Prevention (NACP/NAZK) monitors procurement compliance. Price inflation and lack of transparency in contractor selection are the most commonly flagged risk patterns in the reconstruction sector.
UBO registration: Every company active in Ukraine must register its ultimate beneficial owner in the Unified State Register (EDR); changes must be reported within 30 business days.
Sanctions: Companies with beneficial owners linked to Russia or Belarus face banking blocks and notarial refusals in Ukraine. Every transaction must be screened against Ukrainian sanctions lists and against EU, US, and UK sanctions before execution.
Donor integrity requirements: World Bank, EBRD, and Ukraine Facility projects require conflict-of-interest declarations, UBO disclosure, and integrity screening. Violations lead to disqualification or permanent exclusion from donor programmes.
10. Practical checklist
- Decide on participation route (direct bidder, subcontractor, JV, own entity)
- Select the form of presence (LLC, representative office or JV/consortium) and prepare the corporate structure
- Assess PE risk based on project duration and activities (12-month threshold for construction / 183-day threshold for services)
- Review applicable DTT and structure accordingly (WHT reductions, dividend repatriation)
- Learn ProZorro requirements and the electronic submission process
- Obtain and read the applicable donor procurement rules (EBRD, World Bank, Ukraine Facility)
- Register UBO in EDR; notify changes within 30 business days
- Run sanctions screening across the full ownership structure
- Draft the project contract with governing law clause, arbitration agreement, and a project-specific force majeure provision
- Check which cross-border payments are currently permitted under NBU foreign exchange rules
- Identify the construction permit path: declaration (representative office, CC2/CC3) or standard licence
- Verify the customs status of imported goods: energy infrastructure exemption under current law
- File work permit applications for foreign staff in advance (processing: 7 working days)
- Build mobilisation cover plans for Ukrainian team members
Frequently asked questions
Can a foreign company bid on ProZorro tenders without setting up a Ukrainian entity?
Yes. Non-residents may submit bids without local registration, but contract performance must be monitored for permanent establishment risk.
When does a foreign company become liable to tax through a permanent establishment in Ukraine?
A PE risk generally arises when construction activities exceed 12 months or services on one project exceed 183 days within any 12-month period. The final position depends on the contract structure and the applicable DTT.
How are donor-funded reconstruction projects tendered?
They are tendered under the relevant donor’s procurement rules and, where possible, through ProZorro. UBO disclosure, conflict-of-interest declarations and sanctions screening are usually mandatory.
Can a foreign company build in Ukraine without a full construction licence?
Yes, during martial law, if it operates exclusively through a representative office and the project falls within CC2 or CC3. The simplified declaration route ends when the standard licensing regime becomes applicable again.
What restrictions apply to transferring profits out of Ukraine?
The NBU’s wartime FX regime restricts cross-border transfers, including dividends and interest on non-resident loans. Each transfer should be checked against the current NBU rules before execution.
What does force majeure mean in practice for reconstruction contracts in Ukraine?
A UCCI certificate alone is not enough; the party must prove a direct link between the event and non-performance. Contracts should define triggering events, notification deadlines and legal consequences clearly.
How DLF can help
For Ukraine reconstruction projects, DLF helps foreign contractors, suppliers and investors choose a participation model, prepare for public or donor-funded procurement, structure their Ukrainian presence, assess tax and currency implications, and review project contracts, construction assets and real estate with sanctions risks in mind before work begins.
Igor Dykunskyy, LL.M., Partner, Attorney-at-law, DLF attorneys-at-law
Contacts: +380 44 384 24 54, info@dlf.ua.
This material is for general information purposes. The application of the approaches described depends on the circumstances of each specific situation and requires a separate legal assessment.