Ukraine is preparing global changes for individual entrepreneurs

Ukraine intends to increase the annual income limits for individual entrepreneurs (IEs) under the simplified taxation system, Business.ua reports. However, only as part of a change in the single tax system. There is no information on what exactly the new limits will be and when they will come into force - it is only known that the Polish system (with a limit of EUR 2 million) may be used as a basis, as well as plans to transfer such sole proprietors to the regular taxation system three years after the end of martial law.

This was announced by the Chairman of the Committee on Finance, Taxation and Customs Policy Danylo Hetmantsev. He noted that the need to change the single tax system is caused by the fact that it has "turned from business support into a system of tax evasion by small and medium-sized businesses."

"It makes sense to increase the limits currently set by law for individual entrepreneurs. However, in conjunction with the single tax system," the report says.

How the system can be changed

Hetmantsev reminded that in December 2023, the Cabinet of Ministers approved a national revenue strategy, which stipulates that within 3 years from the end of martial law, the single tax system will be transformed into one of the systems operating in the EU. As part of this strategy, the Ministry of Finance took the Polish model as a basis.

"The limit is higher there - EUR 2 million (about UAH 81.5 million - Ed.). But there are also different tax rates: there is one group for single tax payers, not three. There are also different tax rates depending on the activity being carried out," said the MP.

He also emphasized that the Ministry of Finance proposes to "cancel the registration of individual entrepreneurs altogether" and to deprive small businesses of the right to use the single tax. And within 3 years, both should be transferred to the regular taxation system.

"The introduction of such a system, together with the mandatory use of payment transaction registers (PTRs), is a prerequisite for creating a system that will stimulate the development of small businesses. And it will not be used by medium and large businesses for tax evasion," explained the MP.

At the same time, he emphasized that there is currently no final decision on the changes. It is expected to be developed in the framework of discussions, "but the general approach will be preserved." Moreover, according to him, the framework established by the Cabinet of Ministers and the Ministry of Finance is "agreed upon and supported by partners."

What are the current limits?

In 2024, the amount of income for individuals paying the single tax should not exceed UAH 1,185,700 (approximately EUR 29.1 thousand) for the first group. And in addition, for:

the second group - UAH 5,921,400 (approximately 145.4 thousand euros);
the third group - UAH 8,285,700 (approximately EUR 203.5 thousand).

Individual entrepreneurs will have to pay more than before

At the same time, starting from January 1, 2024, the amount of the single tax for individual entrepreneurs (IEs) in Ukraine has increased. The fact is that the minimum wage has been increased since the beginning of the year, and according to the Tax Code, the income limit for single tax payers of the first to third groups is calculated based on the minimum wage as of January 1.

Now, the minimum unified social contribution for individual entrepreneurs is UAH 1,562 per month, or UAH 4,686 per quarter, which is 22% of the minimum wage.

The maximum amount is set at 22% of 15 minimum wages. And it is as follows:

• UAH 23,430 per month;
• UAH 70,290 per quarter.