Types of taxes and their functions

Taxes are mandatory payments levied on individuals and legal entities on a regular basis. They are the main source of budget revenues and are necessary for the functioning of the state apparatus and the implementation of measures in such areas as healthcare, education, infrastructure, defense, etc. The payment system is quite structured and clear: it is regulated by the relevant legislative acts.

What are taxes?

The taxation system is a multi-component structure that includes direct and indirect taxes. It performs a number of tasks, including the following:

• Fiscal - providing the state with financial resources for the development and support of citizens;
• regulatory - impact on the economic activity of consumers.

There are clear rules for collecting payments. They can be charged directly from income or property or added to the cost of goods and services. The main features of a tax are the unilateral and compulsory nature of its establishment and collection. Elements:

• object - something to which an obligation is imposed;
• rate - a percentage or a fixed amount;
• subject - an individual or legal entity that is obliged to make a payment;
• period - a period of time during which taxpayers are obliged to transfer funds (month, quarter, year).

All financial issues related to fees and payments are handled by the State Tax Service. On the official website https://tax.gov.ua/ you can familiarize yourself with the latest changes and current rates, find out what taxes are available, and in the electronic office you can file a declaration, pay the accrued amounts, and make sure you have no debts.

Types of taxes and fees in Ukraine

There are two main categories of tax payments. Direct taxes are those that are paid directly from the payer's income or property. The main types of direct taxes are:

• personal income tax (PIT) - paid from the funds received (salary, entrepreneurial activity, lease or sale of property);
• corporate income tax - levied on the income of legal entities;
• on real estate - charged if the area of a house, apartment or land plot exceeds the established standards;
• transportation - relevant for owners of cars under 5 years old and worth more than 375 times the minimum wage established in the current year.

All payments that citizens of a country make from their income or property are direct. Indirect taxes are levied through consumption. They include.:

• value added tax (VAT);
• excise taxes;
• duty;
• for sale;
• for inheritance;
• for donation.

Their main difference is that they are paid by the consumer who uses goods and services. Regardless of the level of their income or benefits, they pay an indirect tax when purchasing products in a retail network. The advantages of this solution for the state include rapid budget replenishment, no risk of incomplete or no payments, and, most importantly, an even distribution among all regions of the country. At the same time, this makes it possible to regulate demand by making unhealthy products less affordable by raising prices.

Taxation systems and tax groups in Ukraine

Indirect taxes are an important tool for supporting the economy, but they are paid automatically. And for business, it is useful to know about the peculiarities of different income taxation options.

General system

Applies to all business entities that cannot or do not wish to use the simplified taxation system. It provides for the payment of taxes based on profit. Groups of taxes to be paid:

• on the net profit of the enterprise;
• 20% of the cost of goods and services;
• personal income tax, which applies to salaries and other types of income.

The advantages of this format are that it allows companies to deduct business-related expenses from tax expenses, which reduces the amount of taxable profit. This is especially beneficial for large enterprises. For the state, the benefit is that consumers pay a premium to the cost of goods and services, as VAT is an indirect tax.

Simplified system

This is the best option for small and medium-sized businesses that want to simplify accounting and reduce their tax burden. This system is divided into several groups of taxpayers depending on the amount of income and type of activity:

1. The first one is a business in the field of retail trade and provision of consumer services, without employees. What taxes are paid by an individual entrepreneur in the first group: a single tax - 10% of the subsistence minimum, which in 2024 is 302.3.
2. The second is that the income limit should not exceed UAH 5.9 million per calendar year, with up to 10 employees. Single tax rate of 20% of the minimum wage - UAH 1,420 in 2024.
3. Third, the following conditions are set for this type of taxation: 5% of income for those who do not pay VAT, 3% for those who do.

Payment of the unified social contribution for the period of martial law is optional. There is a separate fourth group, which was created specifically for representatives of the agricultural sector. An important condition is that the share of agricultural products is more than 75% in the income structure. Entrepreneurs do not have the right to hire employees, and the size of the plot must be in the range of 0.5-20 hectares.

Peculiarities of taxes in Ukraine

Depending on the method of calculation, there are direct and indirect taxes. The types of mandatory payments may also differ depending on where the revenues are to be used:

• national;
• local.

The latter category includes a tourist tax that tourists have to pay when checking into a hotel, as well as payments for owning real estate or a land plot of a certain area. The functions of the taxes are the same, but some of them replenish the general budget of the country, while others remain at the local level.

Conclusions

In recent years, the Ukrainian taxation system has been undergoing an active restructuring, with changes in the basic principles and conditions, as well as more active controlling authorities. And while previously a significant part of small businesses operated in the shadows, not even thinking about what a tax is, the situation is gradually changing.

But improving current legislation requires constant attention to changes: mistakes in taxation can be costly. That is why it is so important to understand the specifics of calculating payments for different systems, forms and groups, which will allow you to plan your activities effectively and rationally.