Kompas

Since the outbreak of the war in Ukraine, many international humanitarian organizations have opened branches and representative offices in Ukraine (hereinafter referred to as the Branches).

In their country of registration, they are usually established as non-governmental organizations, while in Ukraine they operate without legal entity status. Such Branches implement charitable projects both independently and in partnership with Ukrainian and international non-profit organizations.

All of them are registered in Ukraine as separate subdivisions of a foreign legal entity and become taxpayers in Ukraine.

There is a widespread belief that Branches may maintain accounting records in Ukraine in accordance with the rules of their Head Office and the country of its registration. However, this approach contradicts the requirements of Ukrainian legislation.

Accounting in Ukraine is regulated by the Law of Ukraine “On Accounting and Financial Reporting in Ukraine.”

Pursuant to Article 2 of this Law, its provisions apply, inter alia, to branches and representative offices of legal entities established under the laws of foreign states, which are required to maintain accounting records and submit financial statements in Ukraine.

Therefore, Branches representing non-residents in Ukraine are obliged to maintain accounting records and prepare financial statements. This requirement has been in force since 2024.

The Law also provides that a Branch independently determines its accounting policy, subject to approval by the Head Office.

It is evident that accounting in Ukraine might differ from accounting practices in the country where the Head Office is registered. In Ukraine, National Accounting Standards (Ukrainian GAAP – N(U)AS) apply and regulate the recognition and recording of business transactions. At the same time, a Branch may choose to maintain accounting records in accordance with International Financial Reporting Standards (IFRS).

For example, Ukrainian accounting rules apply different criteria for the recognition and accounting of fixed assets and inventories. Therefore, all such decisions must be carefully considered and documented in an Accounting Policy Order.

Non-residents should also pay special attention to the issue of financial statement consolidation, namely the alignment of financial statements submitted in Ukraine with those of the Head Office in the country of registration.

Responsibility for organizing accounting, ensuring complete and timely recording of all business transactions, and safeguarding primary documents, accounting registers, and financial statements (for at least three years) rests with the authorized body or official managing the Branch, even if such person is a non-resident.

As a summary, Branches and representative offices of non-profit organizations are required to:

• maintain accounting records in Ukraine;
• submit financial statements in accordance with the Ukrainian legislation;
• develop and approve their own accounting policy.

If you have any questions regarding the arrangement of accounting or financial reporting for branches of non-residents, we would be pleased to share our experience and provide professional guidance.