We provide accounting and bookkeeping services in Ukraine for all the types of companies and sole proprietors, regardless of the sphere of business, turnover, and the number of employees. Our English-speaking accountants have more than 15 years of experience in bookkeeping and taxation.
We can provide you with the following services:
- complete accounting services in Ukraine;
- bookkeeping of profit and VAT taxpayer businesses
- submission of all tax reports, tax return, and records;
- drafting of all necessary bookkeeping documents;
- registration of VAT declarations and tax credit;
- payroll taxes calculation;
Despite the fact that we are a law firm, we’ve decided to create an accounting department in our company because of the actual demand for such services from the side of our clients. In Ukraine, it is very important to have a high level of communication between a lawyer and an accountant in every company as their decisions and job are always connected.
Accounting and bookkeeping in Ukraine
This is a very important part of every business in Ukraine. Even before you will start a company formation process it is necessary to understand clearly what are the tax rates for your Ukrainian business.
Despite the fact that the Ukrainian Government has made a lot of reforms in order to make accounting in Ukraine easier and more transparent, still, it has a certain level of formalities and bureaucracy. It takes years of practice to be able to make bookkeeping in Ukraine properly. It is not sufficient just to be a good accountant and it is necessary to be a perfect one to match the requirements of Ukrainian financial and accounting regulations. Usually, foreigners after facing some issues on bookkeeping in Ukraine think that many formalities are ridiculous and needless. But this is the system that we have here. In general, compared to other countries Ukrainian tax law is not so hard but full of formalities and important details that are necessary to follow.
Businesses in Ukraine have to submit the statements to tax authorities (depending on the tax system) every month and/or every quarter and/or every year. It is much more difficult to manage accounting for value-added taxpayers in Ukraine. The most simple tax structure is a sole proprietor (or a sole trader) registered as a fixed taxpayer. The value-added tax rate is 20% for most goods and services. Only import, production, and sale of some medical and pharmaceutical products are taxed at a 7% rate and some special types of transactions have a 0% tax rate.
The most difficult is to make bookkeeping in Ukraine for companies that provide financial services, such as banks, insurance companies, and other businesses that provide financial services.
What are the main statements that shall be submitted by the Ukrainian company or by an entrepreneur?
The number of statements that the Ukrainian company shall submit depend on the tax system (or so-called tax structure) that such business is running on. There are 4 main tax structures in Ukraine that are available for Ukrainian companies (corporations), for Ukrainian sole traders (or FOP), and not available for foreign companies (except officially registered representative offices).
Profit tax with no VAT registration. This is not a very popular tax structure in Ukraine as the company when exceeding the turnover or revenue of 1 million UAH is obliged to be registered as VAT taxpayer, unless this company is registered as a fixed (simplified) taxpayer. So this company will have to pay an 18% corporate profit tax. Also, such a corporation will unlikely be able to sell goods or services to middle and big companies as in most cases VAT registration is required for this, due to the requirements of those companies. At the same time, this company is able to work with companies and privates, regardless of the jurisdiction.
Profit tax with VAT registration. This tax structure is the most popular for medium and big companies. Almost all the companies in the field of construction, wholesale, manufacturing, big retail, and other businesses are using this type of taxation. Such a tax scheme has no limits on turnover and/or the profit and the companies have the right to provide services or sell products to anyone regardless of the jurisdiction or citizenship. This is one of the most popular tax systems among companies working in B to B way. In case if the turnover exceeds 20 million UAH per year the company will have to pay taxes more often as some part of the profit tax shall be paid in advance.
Fixed tax with no VAT. This is the most popular type of tax structure in Ukraine. Consider that more than 1,5 million sole proprietors in Ukraine are using this type of taxation. Also, there are many companies (legal entities) that have chosen this duty to make business in Ukraine. This is not the best solution for production as the expenses do not reduce the taxes. This is the best tax scheme to provide services to foreign companies as VAT is not involved at all. But some spheres of business are forbidden for fixed tax in Ukraine, such as:
- gambling business, including lotteries and betting;
- currency exchange (Forex);
- producing, export, import, or sale of certain excise goods, such as tobacco, alcohol, fuel, etc.;
- the extraction, production, and trade of precious metals and minerals;
- mining or natural gas exploration;
- company management activity, such as (but not exclusively) blind trusts;
- postal and telecommunications services;
- brokering of high-value art and antiques;
- organization of concert tours and events;
- technical testing and clinical trials;
- auditing (mostly for tax audit);
- almost all financial companies such as insurance brokers, credit unions, pawnbrokers, leasing companies, pension operators, and investment funds.
This duty type in Ukraine is not ok for big businesses but is perfect for medium and small companies. It is just perfect for services and other fields of economic activity where you do not have so many expenses and most of the profit are generated by your brain and skills. Although it works well for very small manufacturing or artisans.
There are 3 categories (also called groups) of businesses with the fixed tax system in Ukraine:
- 1-st category – are the sole traders (FOPs) who do not use the labor; legal entities and/or companies can not choose such a tax structure; the type of activity can be the retail sale of goods on the markets and/or the provision of household services to individuals; it is forbidden to sell goods or services to companies and to provide other types of services, like IT, legal, consulting, accounting and other types of intellectual professional services; this category fits well for artisans that work alone; up to 1 million UAH is a maximal permitted turnover/profit per year;
- 2-nd group – are the sole traders (FOPs) who do not use the labor or have up to 10 employees; allowed to sell goods to privates and to companies that are registered as a single taxpayer (3-rd group of this list); not allowed to work with profit taxpayers and foreign companies; allowed to work in any business sphere, except types that are forbidden for single taxpayers in general; legal entities and/or companies can not choose such a tax structure; up to 5 million UAH is a maximal permitted turnover/profit per year;
- 3-rd group – are the sole traders (FOPs) or companies, regardless of the number of employees; allowed to sell goods to privates and to companies regardless of the jurisdiction and the type; up to 7 million UAH is a maximal permitted turnover/profit per year; most of IT specialists in Ukraine have chosen this tax structure for their business activity.
Taxpayers of 1-st and 2-nd groups have to pay fixed taxes every month, regardless of the turnover and/or profit. But the statement ar submitted one time per year so it makes these two categories as the most simple for bookkeeping.
The 3-rd group has to pay fixed taxes every quarter. The tax rate is 5% on the turnover. Expences are not calculated. It is more difficult to make bookkeeping for such businesses as the statements shall be submitted every quarter. Most of our clients to who we provide legal and accounting services for IT companies in Ukraine are registered on this tax rate. Also, if you want to become 3-rd group taxpayer, you might need Ukraine company registration in case if a legal entity is required.
Fixed tax with VAT. We think that this is the best tax rate for small production. This tax structure will also do for small construction businesses. Only taxpayers that have chosen 3-rd group of fixed tax can be registered as a value-added taxpayer at the same time. It makes possible to provide services or sell products to other VAT taxpayers as well as big businesses. For such businesses, there is more accounting work to do, because VAT tax is involved in.
Payroll statements and taxes in Ukraine
Every official employer has to pay the salary at least every month. As it was mentioned above, the statements shall be submitted every month to fiscal service with a bookkeeping record. Before transferring the wage to the employee, it is necessary to pay all the payroll taxes. Most of the payroll taxes in Ukraine shall be paid by the employer. All the taxes shall be transferred by the company so for some taxes the company is acting as a tax agent. The total payroll tax rate in Ukraine is 41.5%. It include:
- 18% – individual profit tax;
- 1,5% – war tax;
- 22% – social security and pension tax.
The minimal wage in Ukraine is approved by the government and can not be less than a certain level. It is also done for the purpose of taxation in order to avoid that some employers declare deliberately underestimated the salary amount in order to pay fewer taxes. Beginning from September the 01-st 2020, the minimal wage shall be UAH 5 000,00.