Taxes for entrepreneurs in Ukraine

Taxes for entrepreneurs in Ukraine

An individual entrepreneur (IE) is an important player in the Ukrainian economy, even large businesses work through "their" entrepreneurs to reduce the tax burden, which is quite legal. Ukraine has a special taxation system for individual entrepreneurs, which includes various types of taxes.

Any individual can carry out entrepreneurial activities, but only after state registration in accordance with the established procedure. After such registration, an individual officially acquires the status of an individual entrepreneur.

Such an entrepreneur may operate under the general taxation system or choose the simplified taxation system. It is worth noting that individuals under the simplified taxation system make up a significant portion of small businesses in Ukraine.

Taxes for an entrepreneur under the general taxation system

The general taxation system is designed for individuals and legal entities that are not eligible for the simplified taxation system for certain reasons. By choosing this taxation system, a business does not need to comply with restrictions on the types of activities, number of employees, or amount of income. It is worth noting here that the general taxation system implies that taxes are paid on the profit, not on the income received by the entrepreneur, and therefore, if there is no profit, no taxes are paid. The general taxation system will be beneficial for an entrepreneur if he or she has a corresponding list of confirmed expenses that have already been paid and were related to the profit he or she has earned.

Main taxes:

- 18% personal income tax;

- 1.5% military duty (if there is no income, it is not charged);

- 22% unified social tax on net profit to the Pension Fund of Ukraine.

Additional taxes:

An entrepreneur under the general taxation system is required to obtain a value added tax certificate if his annual income exceeds one million hryvnias.

- Value added tax or VAT is an indirect tax included in the price of goods (works, services) and paid by the buyer, but recorded and transferred to the state budget by the seller (tax agent).According to Ukrainian legislation, the following are subject to VAT

a) transactions on sale of goods (works, services) in the customs territory of Ukraine, which may be carried out by both residents and non-residents

b) import of goods and services into the customs territory of Ukraine; and

c) export of goods and services outside the customs territory of Ukraine.

The Tax Code of Ukraine determines the tax rates. Different goods and services may be subject to different VAT rates: 0% and 7%, 20% of the value of the goods. In most cases, entrepreneurs pay VAT at the rate of 20%.

In addition, both under the general taxation system and the simplified taxation system, if an entrepreneur has employees, he or she becomes a tax agent for them. A tax agent is a person or organization that pays income to individuals and is obliged to withhold and pay taxes on this income on behalf of the income recipient.

The taxes to be paid by the tax agent on behalf of the employee include:

1) Personal income tax (PIT): the tax is levied on the employee's income (salary) and is 18%.

2) Military duty is withheld from the employee's income (salary) and amounts to 1.5%.

3) Social security contribution is paid by the employer (company) without deduction from the employee's salary - 22%.

Taxes for entrepreneurs under the simplified taxation system

The simplified taxation system is a special tax regime introduced to reduce the tax burden on small businesses in Ukraine, which provides for the payment of one type of tax - a single tax, in the amount depending on the selected group of single tax payer, as well as the payment of a single social contribution amounting to 22% of the minimum wage (the contribution must be paid despite the fact that the entrepreneur does not conduct any business, does not receive income or is on long-term sick leave.

This system also has certain restrictions, such as the types of activities that are prohibited under the single tax; the income limit; and the number of employees.

Entrepreneurs pay the single tax in groups as follows:

- the first group pays a single tax of 10% of the minimum subsistence level for able-bodied persons, which is UAH 269 per year;

- the second group pays 20% of the minimum wage, which is UAH 1,340 per year;

The amount of the single tax for entrepreneurs of the third group will depend on whether the person is a VAT payer or not.

- for VAT payers - 3% of monthly income and 20% VAT;

- for non-VAT payers - 5% of monthly income.


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