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How to determine the Classification of Economic Activity for a business? Why is it important to choose the right KVED?

KVED is a classifier of types of economic activities, with codes established for various types of business. Each branch of the economy has its own codes. All of them are collected in a single document.

You can view the general list of KVEDs on the official website of the State Statistics Service of Ukraine at the link http: //kved.ukrstat.gov.ua/KVED2010/k …

Before opening a sole proprietorship or LLC, each entrepreneur registers the KVEDs corresponding to his business. In order to choose them correctly, you need to answer the question:

What kind of business will you be doing in general?

What direction will be the main one?

? Will you provide additional services?

When registering an enterprise, you will need to indicate the main KVED and others. The presence of the main KVED is a prerequisite.

Why is it important to choose the right KVED?

If a business entity that is on the general taxation system has received income as part of an activity that does not fall under the selected Classification of Foreign Economic Activity, then such income is taxed at a rate of 18% + 1.5%. The risk is that such income is taxed not after deducting expenses, but before, that is, on the total amount credited to the account.

As for the simplified taxation system, such income is taxed at a slightly lower rate, namely 15%. The negative consequence of fixing such a violation is that you will be obliged to switch to the general taxation system (subject to a preliminary stay on the simplified taxation system).

Practice shows that state registrars (less often notaries) refuse to enter more than five KVED codes into the register. At the same time, the legislation does not provide for such restrictions, so you can completely legally use an unlimited number of KVED. Even if they do not fit on 1 sheet of the registration application, you simply add another similar application sheet.

If an agreement was made, but it does not fall under those KVEDs that are already reflected in the USR, you will have to add them as quickly as possible. Therefore, it is better to take care of this in advance.

On the other hand, when registering an enterprise on the Internet, KVEDs can be added without the threat of getting some kind of refusal. In addition, this registration method is more convenient and faster.

In addition, it is worth paying attention to the fact that there are a number of activities prohibited for implementation in certain types of taxation systems (applies to the simplified system). The list of types of activities entitled to carry out single tax payers who have chosen the first and second groups can be viewed on the website of the State Tax Service of Ukraine by the link

https: //tax.gov.ua/podatki-ta-zbori/m …

If you are not sure about the definition of the KVED code or you have other questions regarding taxation and accounting by business entities, please contact the specialists of the Prikhodko & Partners Law Firm, we will be happy to answer your questions!

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