The current tax legislation of Ukraine provides for two taxation systems: general and simplified. Today we dwell in more detail on the differences and features of a simplified tax system.
So, this tax system provides for four different groups that differ in the tax rate, the circle of people who are allowed to work, the types of activities that are allowed to engage in, annual income, the number of authorized employees and the like. The main issue on which clients come to Prikhodko & Partners Law Firm is choosing the most profitable group in order to minimize tax deductions. We will describe this question in detail in this article.
Individual entrepreneurs pay the so-called single tax. Its size is calculated depending on the minimum wage or the cost of living, depending on the group.
Thus, business entities located in group 1 of the simplified taxation system pay 10% of the cost of living every month. That is, it is 2102 UAH. x 10% = 210.2 UAH.
As for the second group of the simplified tax system, they pay 20 % of the minimum wage of each month. That is, it is 4723 UAH. x 20% = 944.6 UAH.
The third group of the simplified tax system pays 5 % of income (i.e. turnover) or 3 % of turnover plus value added tax.
And from here the most common question arises: which group is more profitable?
The answer to this question is your monthly income. If it is less than 18 892 UAH. per month, it is worth choosing the third group, but if it exceeds this amount, then the 2nd group will be more profitable. However, it is worth considering other differences between these groups.
≡ So, the first group is prohibited from using hired workers, and the annual income is not more than 1 million UAH. The first group provides household services to the population or retail trade in the markets.
≡ In the second group, it is forbidden to provide services to legal entities (if they are not single tax payers), but it is allowed to sell goods to such business entities. The annual income in the second group should not exceed 5,000,000 UAH, and the number of employees should not exceed 10.
≡ With regard to the third group, the annual income should not exceed 7,000,000 UAH.
However, what to do in a situation if the allowed income limit is exceeded? Current tax legislation establishes an additional taxation of 15% of the amount of such excess for 1 and 2 groups and 10 % for 2 groups. Therefore, it is necessary to keep a detailed account of the income of an individual entrepreneur in order to avoid negative consequences.
Prikhodko & Partners lawyers provide tax advice and services to individuals, entrepreneurs and legal entities. Therefore, to optimize the tax burden on your business, please contact Prikhodko & Partners Law Firm, we will be happy to help you.