What taxes do private entrepreneurs have to pay in Ukraine?

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In Ukraine, individual entrepreneurs (FOPs) can choose one of four groups under the simplified tax system or the general tax system. Each group has its own features regarding tax rates, income limits, and the number of employees. The taxation rules for FOPs have also been partially modified during the martial law period.

1. General Taxation System:

Taxes:
Personal income tax (PIT) — 18% of net income.
Military levy — 5% of net income.
Unified social contribution (USC) — 22% of net income, but not less than the minimum amount.
Features:
Mandatory full accounting.
No limits on income or the number of employees.

2. Simplified Taxation System:

First Group:

Single tax rate: up to 10% of the living wage for working individuals.
USC: 22% of the minimum wage.
Limits:
Income up to 1,085,500 UAH per year.
No employees.
Activities: retail sale of goods at market stalls or providing household services to the population.

Second Group:

Single tax rate: up to 20% of the minimum wage.
USC: 22% of the minimum wage.
Limits:
Income up to 5,421,000 UAH per year.
Up to 10 employees.
Activities: providing services to single tax payers and/or the population, production and/or sale of goods, catering.

Third Group:

Single tax rate:
5% of income (for non-VAT payers).
3% of income (for VAT payers).
USC: 22% of the minimum wage.
Limits:
Income up to 7,585,500 UAH per year.
No restrictions on the number of employees.

Fourth Group:

Single tax rate: depends on the area and the normative monetary valuation of agricultural land.
USC: 22% of the minimum wage.
Limits:
Activities: production of agricultural products, with at least 75% of income from its sale in the previous year.
Agricultural land area: from 0.5 to 20 hectares.
No employees, but family members can be involved in the work.

3. Changes in the conditions of martial law

Starting from 1 October 2024, the obligation to pay the military fee was introduced for individual entrepreneurs who are subject to the simplified taxation system. This is provided for in the draft law No. 11416-d adopted by the Verkhovna Rada of Ukraine. These changes will come into force after the relevant law is signed by the President and officially published.

Individual entrepreneurs of the 1st and 2nd groups: Are required to pay a military fee of 10% of the minimum wage. As of 2024, this amounts to UAH 800 per month. Payment is made monthly, within the same timeframe as the single tax.
Individual entrepreneurs of the 3rd group: Pay a military fee of 1% of their income. It is paid quarterly, along with the single tax.
Sole proprietors of group 4: Currently exempt from paying the military fee.

In addition, starting from October 1, 2024, the military tax rate for individuals, including sole proprietors on the general taxation system, was increased from 1.5% to 5%.

Also, the following preferential conditions for sole proprietorships were established during the martial law period:

Exemption from paying the unified social contribution: A sole proprietorship has the right not to pay the unified social contribution for itself from March 1, 2022 until the end of martial law and for 12 months after it ends. This exemption does not affect the entrepreneur's insurance record.
Deferral of reporting: Taxpayers who are unable to file tax returns in a timely manner due to military operations are exempt from liability for late filing. They are obliged to submit reports within six months after the end of martial law.

4. Privileges cancelled:

During the martial law, Ukraine introduced a number of tax benefits for individual entrepreneurs (IEs). However, as of 12 November 2024, a number of these privileges have been cancelled or changed.

The temporary single tax rate is 2%: Starting from April 1, 2022, sole proprietors of the 3rd group could switch to paying the single tax at the rate of 2% of income. However, this benefit was cancelled on August 1, 2023. Accordingly, sole proprietorships returned to standard tax rates.
Voluntary payment of the single tax for sole proprietors of the 1st and 2nd groups: During the martial law, entrepreneurs in these groups were not required to pay the single tax. However, starting from August 1, 2023, the obligation to pay the single tax was reinstated.