The State Tax Service of Ukraine has published a detailed explanation of the rules governing individual entrepreneurs’ participation in the simplified taxation system, emphasizing clear legislative restrictions on types of activities, income limits, and criteria for hired personnel.
As the tax authorities point out, not every type of business activity is compatible with the status of a single-tax payer.
Requirements for Groups 1, 2, and 3 of Sole Proprietors
Group 1: Intended exclusively for entrepreneurs without hired staff who engage in retail trade from market stalls or provide consumer services to the public. The maximum annual income must not exceed 167 times the minimum wage established by law as of January 1 of the reporting year.
Group 2: Intended for businesses that manufacture or sell goods, operate in the restaurant industry, or provide services to the general public or other single-tax payers. The permitted number of employees is no more than 10 at any given time (or no employees at all). Annual income is capped at 834 times the minimum wage. In this group, it is prohibited to provide brokerage services for the purchase, sale, and rental of real estate; internet service provider activities; as well as the production and sale of jewelry made from precious metals and gemstones.
Group 3: A universal group with no restrictions on the number of registered employees. The annual income threshold is 1,167 times the minimum wage.
Activities Strictly Prohibited for “Single Taxpayers”
According to the provisions of the Tax Code of Ukraine, the simplified tax system is strictly prohibited for entrepreneurs engaged in:
👉🏿organizing and conducting gambling, lotteries, and betting, as well as foreign currency exchange operations;
👉🏿the production, export, import, and sale of excise goods (except as provided by law);
👉🏿the extraction, production, and sale of precious metals, gemstones, and minerals;
👉🏿activities in the field of financial intermediation;
👉🏿provision of postal services (excluding courier delivery) and communications/telecommunications services;
👉🏿trade in antiques and art, and the organization of auctions;
👉🏿activities related to organizing touring events, conducting technical audits, and research.
Limits on Real Estate Leases and Financial Restrictions
The Tax Service draws particular attention to entrepreneurs who lease real estate. The simplified tax regime is revoked if the maximum area limits for the following properties are exceeded:
👉🏿land plots—more than 0.2 hectares;
👉🏿residential premises and/or parts thereof — more than 400 square meters;
👉🏿nonresidential buildings and structures (or parts thereof)—over 900 square meters.
In addition, under no circumstances may non-residents of Ukraine, financial institutions, pawnshops, credit unions, or entrepreneurs who, as of the date of application, have outstanding tax liabilities (with the exception of uncollectible debt resulting from force majeure circumstances).
Source: State Tax Service of Ukraine
