NPE and LLC taxation systems in 2020
Have you decided on the form of doing business?The next step is to choose a taxation system.

First of all, in Ukraine, there are two systems of taxation of business entities: general and simplified. At the same time, the simplified taxation system is divided into four groups of a single tax, each of which has its own requirements and restrictions.Both taxation systems apply to both individual entrepreneurs and legal entities, but with some features, which are described below.

Which group to choose - depends on the planned activities, the expected turnover, necessity to hire employees.
General taxation system

The general system of taxation with payment of income tax (for legal entities) or personal income tax (for NPE), in contrast to the simplified system, does not provide for any restrictions on the type of activity, annual income or the number of employees. However, such "freedom" has its disadvantages. The tax rate on the general system is 18% of net income/ income.

At the same time, legal entities pay tax on income, which is calculated as the difference between income and expenses. Therefore, for company that has a significant amount of costs (for example, rent office or industrial premises, purchase of materials, equipment, products needed for business activities, etc.) is sometimes much more profitable to be on the general taxation system, because in this case the amount of income may be or very small, or even negative.

Simplified taxation system

We mentioned above that there are four groups of single tax on the simplified taxation system. It is important that the payers of the first and second groups of the single tax can be only NPE, while the third and fourth – both NPE and LLC. The simplified taxation system provides lower tax rates, but at the same time imposes certain restrictions on each group in types of activities, number of employees and annual income.

If on the general system of taxation you can engage in any activity without any restrictions, then on the simplified system there are restrictions on activities. That is, there are activities that cannot be engaged in at all (for example, production, trade in alcohol and other excisable goods), as well as restrictions on activities in specific groups.

The first group of single taxpayers is suitable for retail or household services. Hiring is prohibited. The annual income limit is 1,000,000 UAH.

The second group is for providing services to the individuals or other single taxpayers, for the production and sale of goods, activities in the field of restaurant business. Therefore it will not be possible to provide services to legal entities or individual entrepreneurs that are on the general tax system.

The number of employees should not exceed 10 people, and the annual income –5 000 000 UAN.

NPE/LLC on the third group can provide their services to anyone, both the individuals and other legal entities, natural persons-entrepreneurs on any taxation system. There are no restrictions on hiring. The annual income limit is 7,000,000 UAH.

NPE/LLC on the fourth group – сan be chosen by agricultural producers. It is forbidden to hire employees for sole proprietorships, for limited liability companies - not limited. The amount of income - for NPE there are no restrictions, for LLC - the share of agricultural production for the previous tax (reporting) year must be equal to or greater than 75%.

Taxes. When and how much to pay


General taxation system

NPE pays income tax at the rate of 18% from net income (income minus expenses from entrepreneurial activity) and military tax at the rate of 1.5% and a single social contribution – 22% of net income. LLC pays income tax at the rate of 18% of income.

If NPE/ LLC maintains an income of more than 1,000,000.00 UAH during the year, the law stipulates the obligation to register as a value added tax payer.

Simplified taxation system

NPE pay a single tax and SSC «for yourself» - 22% of the minimum wage. Today it is 1,039.06 UAH.

LLC pays only a single tax.

The first group (NPE) – a fixed rate – no more than 10% of the living wage. In 2020 it is 210,02 UAN.

The second group (NPE) – a fixed rate – no more than 20% of the minimum wage. In 2020 it is 944,06 UAN.

Fixed rates for the first and second groups are set by local governments depending on the type of activity. The tax is paid every month.

The third group (NPE/LLC) – 5% of all income or 3% and VAT. The tax is paid once a quarter.

The fourth group (NPE/LLC) – the tax rate is determined from one hectare of agricultural land and/or water fund lands and depends on the category (type) of lands, their location. The tax is paid once a quarter.

Reporting

General taxation system

NPE submits a tax return on property and income once a year within 40 calendar days following the reporting year.

LLC files an income tax return. As a general rule, it is submitted once a quarter and is calculated as a cumulative total.

Simplified taxation system

NPE шn the first and second groups file a tax return once a year, no later than 60 calendar days following the last calendar day of the reporting year.

NPE/LLC in the third group file a tax return once a quarter, no later than 40 calendar days following the last calendar day of the reporting quarter.

ФОП/ТОВ in the fourth group file a tax return once a year, no later than February 20 of the current year.

Reporting on SSC

NPE, including those who have opted for a simplified taxation system, submit a Report in the form № D5 «for yourself» once a year until February 10 of each year.

VAT reporting

In case of registration as a VAT payer, NPE/ LLC submits a value added tax return on a monthly basis within 20 calendar days following the reporting month.

Accounting


NPE in the general system and in the third group of the single tax (VAT payers) keep a Book of income and expenses.

NPE in the first, second and third groups of single taxpayers (not VAT payers) keep a Book of income.

From 01.01.2021 the obligation to maintain the Book of income will be canceled. The taxpayer may, at his request, to maintain the Book of income in paper or electronic form.

If you have any questions - we advise you to contact specialists who will help you choose a taxation system with minimal losses for business.

05 NOVEMBER / 2020

By: Anastasiia Popilevych

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