Taxation of Physical Persons- Businessmen

Physical persons – businessman shall choose one of three systems of taxation:

1. General system of taxation:

According to this system, profit of citizens got within a legal year from carrying out of business activity is subject of taxation.

Taxable income is total net profit, it means the difference between gross revenue (profit in money and natural form) and expenses confirmed by documents direct connected with acquisition of income. If these expenses can not be confirmed by documents, in this case they are accounted by tax authorities by final calculation due to the norms determined by State Tax Administration of Ukraine in concordance with Ministry of Economics of Ukraine and State Business Undertakings.

Tax rate on current date is 13%, and from 01.01.2007 it is 15%.

Tax is paid in order as following:

During a year, every quarter, payers pay to the budget, 25% of year tax amount deducted according to profit of last year, and payers, who pay tax for the first time pay 25% of amount deducted for them by tax authority, according evaluative profit for a current year. For payment of advance payments is determined such terms during a year as following: till March 15, till May 15, till August 15, and till November 15. In case of significant increase or decrease of payer profit during a year, rating authority shall make a fresh account of tax sums on tax discharge terms which did not come yet;

Extra fees according to the final calculation of tax sum are to be paid within a month from the date of receipt of a note from rating authority, and excess paid sums of tax are to be returned to payer within a month after final calculation, or on announcement of payer, are accounted as future payments.

Citizens, carrying on business, present to rating authority declarations according to results of every financial quarter in terms determined by the law. In declaration, shall be noted general sums of got profit, expenses and paid taxes for the financial year or other period in which taxation is done (taxation period).

2. Fixed tax

Citizens, carrying on business without creating legal entity have right to choose themselves a manner of taxation of profits got from this activity, according to fixed tax rate (hereinafter called as a fixed tax) by procurement of patent, if:

number of persons, having labor relations with this citizen – tax-payer, including members of his family who take part in his business, does not exceed five persons;

gross revenue of this citizen from self carrying of business, or by using hired labor, during last 12 solar months which precede the month of acquisition of procurement of patent, does not exceed seven thousand of exemption limits of citizens profits;

a citizen carries on business of goods trade and rendering of services attending such trade, and is a payer of market due according to the legislation. Profits of this citizen, got from carrying on other businesses is taxed in general order.

Application of fixed tax is forbidden by carrying on trade of alcoholic drinks and tobacco goods.

Rate of fixed tax is determined by appropriate local council according to territory location of trade place and shall not be less than 20 UAH and more than 100 UAH for financial month, for citizens who carry on business on their own.

Pay attention, that fixed tax shall choose only those businessmen who carry on business activity only on markets.

3. Single tax

Order of payment of single tax and its collection on current date, is regulated by Decree of President of Ukraine “About simplified system of taxation, accounting and book keeping of subjects of small business undertakings”.

According to this document, simplified system of taxation, accounting and book keeping is applied for physical persons, who carry on business without creating of legal entity, and who have labor relations, including members of their families, with not more than 10 persons during a year, and which profit of goods (products, works, services) sale does not exceed 500 thousand UAH per year.

Rate of single tax for subjects of small business undertakings – physical persons is determined by local councils on the place of their state registration according to kind of their activity, and shall not be less than 20 UAH a month and more than 200 UAH a month.

In case if physical person – subject of small business undertakings carries on several kinds of business activities, for which different rates of single tax are determined, this person gets one certificate and pays single tax which does not exceed determined maximum rate.

In case, when payer of single tax carries on business, using hired labor, or if members of his family take part in his business, rate of single tax exceeds on 50% for every person.

Subject of small business undertakings who pays single tax, does not pay such taxes and duties, as followings:

value added tax;
tax of profits of physical persons;
land tax (duty);
duty for special use of natural resources;
obligatory social insurance tax;
trade tax;
duty on obligatory state retirement insurance;
duty on permit on location of objects of trade and service;
duties to the Public Employment Fund;
payment for patents according to the Law of Ukraine “About patenting of some kinds of business activity”.

New created and registered in established order subjects of small business undertakings, who handed in to Public Tax Authority, on place of their registration, an application of using of them a simplified system of taxation, book keeping and accounting, are considered as subjects of simplified system of taxation, book keeping and accounting from that quarter, when their state registration was done.

Subjects of business activity – physical persons – payers of single tax have right not to use electronic check and cash registers for settlement with customers.

Simplified system of taxation, book keeping and accounting of subjects of small business undertakings does not applied for:

subjects of business activity carrying on business in field of playing business (including activity connected with operation of casino, other playing places, slot-machines with money or property win, drawing of lotteries (including public lotteries) with payment of money prizes in cash or in property), or carry on currency exchange;

subjects of business activity, who are producers of goods under excise, carry on economic activity connected with export, import and wholesale of goods under excise, whole sale and retail trade of fuel and petrol materials under excise;

subjects of business activity who carry on mining and produce of precious metals and precious stones, precious stones of organogenic formation, which must be licensed according to the Law of Ukraine “About licensing of certain kinds of economic activity”.

In case if physical person - entrepreneur uses hired labor, he shall be a Fiscal Agent regarding hired employees, and he is obliged to deduct and transfer to the budget appropriate taxes of salary (profit tax, duties to pension fund and other funds of social insurance).

This is just to inform you.
For more detailed information don’t hesitate to contact us in our office!