Intermarium Helped an International Business Optimize Financing in Ukraine

Client’s Situation

The consulting firm had been active in Ukraine for over a year, primarily servicing internal group needs rather than generating commercial income from Ukrainian clients. Their operational model was supported by periodic financial transfers from the U.S. parent company.

However, several critical issues had been overlooked:

• There was no official legal documentation formalizing the financial relationship between the Ukrainian subsidiary and its U.S. counterpart.
• Incoming payments were not categorized appropriately, appearing as service fees rather than as internal financing or capital contributions.
• Currency control rules in Ukraine were not fully respected, creating additional exposure to fines. Without a clear financial model backed by legal agreements, the company was at risk of running into trouble with Ukrainian tax inspectors. The worst-case scenario included not just hefty fines but even the freezing of local bank accounts. What the firm really needed was a fast but lasting fix — something that could both defuse the current tension and serve as a reliable structure for future business in Ukraine.

Problem

The client was exposed to several serious legal and financial risks due to improper classification and documentation of its financial flows:

Misclassification of Inflows as Taxable Revenue Payments from the U.S. were booked as “consulting service fees.” Under Ukrainian law, this classification would require the company to charge 20% VAT and report the income for 18% corporate income tax—resulting in unexpected tax liabilities and possibly penalties.

Lack of Legal Documentation for Intra-Group Transfers The absence of financing agreements or shareholder documentation made it difficult to prove that the funds were not revenue but internal support. This ambiguity could easily be interpreted as an attempt to underreport taxable income.

Non-Compliance with Currency Control Rules Ukraine maintains a strict regime of currency regulation. The lack of formal justification for the cross-border inflows could lead to fines from the National Bank of Ukraine or delays in banking operations.

Regulatory and Reputational Risk Any adverse action by Ukrainian authorities—such as inspections or account seizures—could severely disrupt business operations, damage reputation, and threaten local team stability.

Our Approach

Analysis

Intermarium began by conducting a full legal-financial audit of the client’s operations in Ukraine, with particular attention to:

• The origin and legal basis for financial inflows
• The Ukrainian company’s statutory documentation and internal policies
• Tax accounting and VAT treatment of incoming funds
• Currency control and cross-border payment reporting procedures

This analysis confirmed that without immediate restructuring, the company was likely to face a tax reassessment and possible penalties.

Strategy

We designed a step-by-step legal and financial restructuring plan, centered on aligning financial flows with their true economic purpose and ensuring full compliance with Ukrainian laws:

Reclassification of Financial Inflows Instead of treating incoming funds as service payments, we advised the company to convert them into contributions to the company’s charter capital. This approach allowed for the complete legalization of funds without triggering VAT or CIT obligations.

Alternative Structuring Options Where appropriate, funds could also be formalized as targeted financing or non-refundable financial aid, depending on their intended use and internal policies.

Legal Documentation We prepared all necessary corporate resolutions, shareholder decisions, and registration filings to properly document capital contributions. In parallel, we developed template agreements for future intra-group financing to ensure legal clarity and repeatability.

Currency Control Compliance Our team ensured that all cross-border transactions were properly reported and supported by documentation in line with the rules of the National Bank of Ukraine, thus avoiding potential fines or delays in fund transfers.

Preventive Tax Risk Management We issued a formal legal opinion to accompany future financial flows, clarifying their non-commercial nature in the event of inquiries by tax inspectors. The company also updated its accounting policies to reflect the new structure.

Implementation

Intermarium worked closely with the company’s local accounting team, international finance department, and Ukrainian bank representatives to synchronize all legal, financial, and procedural aspects. The process included:

• Amending statutory documents to reflect changes in capital
• Preparing all filings for charter capital increases
• Coordinating with banks to smooth cross-border fund acceptance
• Conducting workshops with internal staff on legal compliance and risk avoidance

Result

The restructuring produced clear and measurable outcomes for the client:

• No additional tax charges were levied by Ukrainian authorities, and the company remained fully compliant under tax and currency control laws.
• All incoming funds were legalized as charter capital contributions, removing any ambiguity about their nature and exempting them from VAT and CIT.
• The risk of tax inspections and account freezes was eliminated, ensuring business continuity and protecting the company’s local reputation.
• A long-term financing structure was implemented, allowing the company to receive future support from its parent entity without fear of regulatory violations.
• Internal policies and documentation templates were created for future use, streamlining legal operations in Ukraine and reducing legal overhead.

Expert Commentary

“In today’s regulatory environment, international companies cannot afford to treat intra-group payments casually—especially in jurisdictions like Ukraine, where classification and documentation are key. By aligning the legal and economic nature of financial flows, we not only resolved the client’s immediate concerns but helped them build a platform for long-term, compliant operations.” — Partner, Intermarium Law Firm

Conclusions

This case is a good example of how important it is to align financial reality with documentation when working internationally. It’s not just about where the funds come from—how they’re described and recorded matters just as much. When there’s a gap between actual business activity and what’s written on paper, that mismatch can quickly attract tax-related issues. To avoid trouble, companies can rely on tools like boosting share capital, setting up internal funding agreements with a clear purpose, or turning outstanding debt into equity—each of these methods helps keep financial flows both transparent and compliant with local laws.

Submit a Request

Concerned about the legal classification of financial flows in Ukraine? Whether you’re a multinational company or an NGO, Intermarium Law Firm can help structure your financing in a way that is legally sound, tax-efficient, and regulator-proof.

Contact us today to secure your operations and eliminate unnecessary legal risk.