Important changes being prepared for sole proprietors: who will have to pay up to 10% single tax

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Ukraine plans to review the conditions for individual entrepreneurs on the simplified taxation system. Among possible innovations are transferring part of the entrepreneurs from the 2 group to the 3 group, differentiated single tax rates, and mandatory VAT registration for entrepreneurs with a certain income level.

This was reported by “Judicial-Legal Newspaper,” as reported by News.LIVE.

Part of the entrepreneurs may be transferred to the 3-group.

The Ministry of Finance informed in response to a request by a member of parliament regarding further reform of the simplified system about preparation of the corresponding bill.

According to information from the ministry, the document will provide several important innovations.

In particular, it is proposed:

to exclude some types of activities from the list allowed for the 2-group of the single tax and transfer the respective entrepreneurs to the 3-group;

establish different single tax rates for the 3-group depending on the type of activity;

introduce a single tax rate of up to 10% for certain types of services;

from 1 January 2028 of the year, make VAT registration mandatory for entrepreneurs on the simplified system if they exceed the established income threshold.

At the same time, the Ministry of Finance notes that the threshold for mandatory VAT registration cannot exceed 85 thousand euros.

Tax burden on certain entrepreneurs may rise.

Special attention in the proposed changes is drawn to the possibility of increasing the single tax rate for certain types of services.

Currently, the 3-group entrepreneurs who are not VAT registered pay 5% single tax and 1% military tax.

If for certain categories of entrepreneurs a single tax rate up to 10% is introduced, their tax burden under this tax could rise twofold.

Meanwhile, the Ministry of Finance has not yet specified which exact types of services will fall under the increased rate.

They want to administer VAT more simply.

Along with introducing mandatory VAT registration for part of the simplified taxpayers, the Ministry of Finance proposes changing the administration of this tax as well.

Among possible innovations are switching from monthly to quarterly reporting, the ability to prepare consolidated tax invoices, and pre-filling certain data by tax authorities.

At the same time, it has not yet been finally determined which categories of the FOPs can be excluded from the 2-group, for which services the rate will be 10%, and how the new rates will interact with the VAT system.

Earlier, News.LIVE reported that in Ukraine some FOPs may not pay taxes. This concerns entrepreneurs registered or located in occupied or front-line territories. Currently this is over 10 800 settlements in 15 regions of Ukraine.

News.LIVE also wrote about what mistakes could lead to imprisonment for entrepreneurs in Ukraine. In particular, punishment is provided if a person knowingly provided false information or knowingly submitted a certificate with outdated data for verification.