Intermarium Helped an International Business Optimize Financing in Ukraine

Our client, an international consulting company operating in Ukraine, faced significant challenges related to structuring the financing of its operations, tax risks, and compliance with currency regulations. The company received substantial financial inflows from a U.S. company to cover operational expenses, including office rent in Ukraine. However, due to the absence of a proper legal financing structure and insufficient alignment of payments with their economic purpose, there were potential risks of tax reassessments and inspections by Ukrainian regulatory authorities.

Key Challenges

1. Financial inflows were classified as payments for consulting services, which could have resulted in the assessment of VAT (20%) and corporate income tax (18%).
2. Lack of a clear financing structure – funds were received without proper legal agreements, raising concerns from tax authorities.
3. Potential tax risks due to the absence of a properly structured operational model, which could have led to fines and legal claims.

Our Approach and Solution

1. To resolve the client’s issue, we developed a step-by-step legal and financial strategy that allowed us to:
2. Mitigate tax risks and avoid regulatory inspections related to misclassified payments.
3. Structure the financing through legally sound mechanisms – converting received funds into charter capital or formalizing them as targeted financing.
4. Ensure compliance with currency regulations and avoid potential penalties from regulatory authorities.

Outcome

✔ The company avoided additional tax assessments and fines from Ukrainian tax authorities.

✔ Funds were legalized without additional taxation (by contributing them to the company’s charter capital).

✔ A long-term strategy was developed for transitioning to a more efficient legal business structure in Ukraine, helping to avoid similar risks in the future.

✔ A potential tax dispute was avoided, which could have led to account freezes and significant financial losses.

Conclusions

This case demonstrates that a well-structured legal strategy enables the efficient restructuring of international business financing, helps avoid tax risks, and ensures compliance with currency regulations. Utilizing legal mechanisms such as debt-to-equity conversion or structuring financing through non-commercial entities strengthens the business and prevents excessive tax burdens. Proper documentation of financial transactions and effective communication with banks and tax authorities are key to the stability of international business operations in Ukraine. Our team successfully assisted the client in not only resolving immediate issues but also laying the foundation for long-term, efficient business operations in Ukraine!