Ukrainian and European employers call for continued support for Ukrainian SMEs

With no end of Russia's war of aggression against Ukraine in sight, it is clear that 2023 is going to be another extremely difficult year for Ukrainian businesses.

Immediately after the start of Russia's unjustified invasion of Ukraine, the EESC Employers' Group and Ukrainian business organisations started working closely together to support Ukrainian businesses during this crisis situation.

One of the joint initiatives was a call to EU Commissioners to provide urgent help for Ukrainian SMEs. The joint letter stressed that Ukrainian businesses need to be saved now to be able to act as the driver of reconstruction after the war. In his reply, Executive Vice-President Dombrovskis underlined his support for Ukrainian SMEs and his appreciation for the initiative.

In 2023, the market situation in Ukraine continues to be uncertain, and will most probably be even more difficult than in the first year of war. To stress the urgent need to prolong and enhance support measures by the EU for Ukrainian SMEs, the EESC Employers' Group issued another call, together with the Ukrainian Chamber of Commerce and Industry, the European Business Association in Ukraine and the Union of Ukrainian Entrepreneurs.

Based on the experience of working with Ukrainian businesses on a daily basis, the Ukrainian organisations have identified the following areas in which practical and political help from the EU is needed:

Facilitating Ukraine's access to the Single Market

The accession of Ukraine to the Single Market Programme has been an important step, which will offer benefits to both Ukraine and the EU. Participation in the provisions that are offered under this programme needs to be made as simple and as practical as possible.

In the last year, it has proven difficult for Ukrainian companies to make actual in-roads into the Single Market. While Ukrainian business associations have launched various initiatives with the aim of assisting Ukrainian enterprises to gain space within the Single Market, the progress on this front has been very limited.

Access to finance

As long as Ukraine's business environment is heavily disturbed by the war, Ukrainian SMEs need to have simplified access to direct and indirect financing. While Ukrainian companies have been provided with some relief through the financial assistance already provided by the EU, companies are still struggling with liquidity problems.

Further access to financing and guarantee instruments that are directly tailored to SMEs' needs are urgently needed by Ukrainian SMEs to survive 2023. Such financing needs to be easily accessible because, just like SMEs in the EU, Ukrainian SMEs cannot afford to use their resources for disproportionate amounts of bureaucracy. Furthermore, an easily accessible overview summarising existing EU funds for Ukrainian SMEs would enhance usability.

To attract further investment to Ukraine, investment guarantee schemes need to be developed at a European level for EU companies investing in Ukraine. A model for this could be the investment guarantees by Germany, which has assured German investors that they could still start projects in Ukraine, despite the war.

Determining the tax residency of displaced Ukrainian citizens

To alleviate additional burdens on the Ukrainian citizens who have been forced abroad due to the war, it would be reasonable to consider them tax non-residents of the respective countries for the 2022 tax year and until the end of the war, notwithstanding the residence threshold of 183 days on the territory of a respective country, based on their centre of vital interests in Ukraine. It could also be useful to automatically determine personal ties to Ukraine based on the availability of temporary protection status, and the duration of the martial law currently in place in Ukraine.

Knowledge sharing

Doing business in the EU is new for many Ukrainian SMEs that were forced by the war to expand their business outside of national borders perhaps faster than foreseen. Therefore, it is important to provide Ukrainian SMEs with simple and easily accessible information on how to do business in the EU and how to benefit from key EU programmes. This could be the objective of specific training programmes, that should be tailored to the needs of different sectors and different geographical markets in the EU.

You can find the full letter to download below.