We provide comprehensive legal and consulting services for sole proprietor/individual entrepreneur registration in Ukraine. What in America is called “sole proprietorship” and in the UK is called “sole trader” is known as “FOP” in Ukraine. FOP can be a good solution for you to establish a business in Ukraine. We will be happy to help you register as such an entity in order to conduct business in Ukraine. We offer both Ukraine FOP formation services and tax advice.
Our service includes:
- consultation and drafting of all necessary documents;
- tax advice*;
- state registration of sole proprietor in the Ministry of Justice of Ukraine;
- FOP seal (stamp) obtaining;
- business bank account opening;
- single or VAT tax registration*;
Registration time takes from 2 to 7 working days.
Our fee for these services starts at $190.
What is an individual entrepreneur or sole proprietor in Ukraine?
A sole proprietor (also called a private entrepreneur) in Ukraine is an individual that owns his own business and possesses all the profit. In Ukraine, an individual entrepreneur is called “fizichna osoba-pidpriyemets” or FOP. FOP is one of the most common forms of business registration in Ukraine. A sole proprietorship is also the simplest type of business structure defined in Ukraine law. Citizens of Ukraine and foreigners who have reached 16 years of age and have a Ukrainian tax ID number (Ukrainian tax code) can be registered as an individual entrepreneur in Ukraine. Sole proprietors can conduct almost any type of business. They can hire local and foreign employees as well as invoice Ukrainian and overseas companies and individuals. So an individual entrepreneur is allowed to provide services and supply goods for companies, government agencies, and local governments.
To be registered as FOP, non-Ukrainian citizens must have a residential mailing address in Ukraine. A residence permit is no longer required, simply a mailing address will do. If you have decided to engage in some small businesses in Ukraine, individual entrepreneurship can be a good solution. A sole proprietorship is not a corporate entity or a company. There is no director nor any shareholders, share capital, dividend payout, etc. There is only an individual that is registered in the Ministry of justice of Ukraine as a private businessman and has the right to make a business activity and to invoice clients. It is important to understand that individual entrepreneur is legally responsible for every aspect of their business. But the best thing is that there is no dividend payout procedure. That means that you can withdraw cash directly from your business account right after paying all the required taxes. Last but not least, FOP Ukraine is the only type of business in our country that can accept cash from clients as a legal means of receiving payment for goods or services.
An individual entrepreneur has the right to do business in all the types of economic activities which are not directly prohibited by law in general or as it relates to fiscal regulations. An FOP can engage in trading, wholesale, construction, agriculture, tourism, general services (including IT), providing consultations, etc. Moreover, even if you do not live in Ukraine, you can still register as an FOP and legally conduct every aspect of your business as you would normally. There are no requirements to be present in Ukraine on the date when the service is performed, the invoice is issued, or when the financial transfer is made. Anyway, starting a small business in Ukraine using sole entrepreneur legal form might be the right decision.
How to set up FOP in Ukraine?
It is not difficult to simply register one’s self as an individual entrepreneur in Ukraine. However, in order to do everything properly and optimally for your specific business goals, it can be more complex. That’s why it’s important to seek out experienced lawyers who can properly guide you through this process.
The FOP registration Ukraine process begins with submitting an application to the State Registrar of Legal Entities and Sole Proprietors of Ukraine. The following information shall be filled out in the application (in the Ukrainian language):
- Name and Surname (as officially translated from the name appearing at the bottom of your passport)
- Ukrainian tax ID number
- Citizenship of the applicant
- Address of FOP registration in Ukraine (a Ukrainian mailing address will suffice)
- Code for the type of business activity (analogous to NAICS in the US or NACE code in the EU)
- Optional contact information such as email, phone number, or website
The Ukrainian legal system allows for a private entrepreneur Ukraine to name an authorized representative who can legally sign documents on their behalf without the power of attorney. This registration process can also be conducted by a qualified lawyer, provided they are given the power of attorney by the registering individual.
The next stage is to choose which system of tax structure you want for your Ukraine sole proprietorship. To declare this, you must submit a special application to the fiscal authorities. If you don’t submit this special application, you will be considered as a general profit (18%) taxpayer. Only after this application has been filed (or not filed) can an FOP apply to open a Ukrainian bank account. See the next chapter below to learn more about the fixed tax rates and regulations in Ukraine.
What are the tax rates and regulations for private entrepreneurs in Ukraine?
Of course, before you are registered as a Ukraine sole proprietor, you should have a clear understanding of the tax system. At its core, there are two main tax structures you can use for your business: the profit tax or the revenue tax.
With the profit tax, you must pay 18% of all the profit you earn; that is to say, your revenue minus your expenses. This tax shall be paid to the fiscal authorities one time per year. If you are engaging in some business where you will incur lots of expenses, this is definitely the tax structure you want to use. For example, a business that earns 1,000,000 UAH but spends 900,000 UAH will pay just 18,000 UAH in taxes. In this example, the business owner would only pay 1.8% of their revenue in taxes.
With the revenue tax, you must pay up to 5% of all the income you earn. You must pay this tax to the fiscal authorities once per quarter. If you are involved in a small, high-margin business, this is definitely the tax structure you want to use. For example, if you earn 1,000,000 UAH you must pay up to 50,000 UAH regardless of your expenses. Even if your expenses were 900,000 UAH you would still have to pay 50,000 (therefore more than if you had used the profit tax structure). However, if your expenses were only 500,000 UAH you would still pay just 50,000 as opposed to 90,000 with the profit tax structure. That’s why this structure is a huge favorite among IT service providers as they have little to no physical expenses and you cannot list your time as a valid expense.
If Ukraine private entrepreneurs choose to pay the revenue tax, there are several other factors to take into account. Please consult this table for further details about the subgroups within the revenue tax structure.
|group 1||group 2||group 3|
|Annual income||UAH 1 000 000,00||UAH 5 000 000,00||UAH 7 000 000,00|
|Allowed contractors||only individual citizens||individual citizens and Ukraine single taxpayer registered companies||no restrictions|
|Allowed businesses||retail in the markets; personal household services||most services for individuals and companies (which are registered as a fixed taxpayer); production, trade, IT, restaurants||services for individuals and companies (regardless of their tax rate); production, trade, IT, restaurants|
|Tax rate**||UAH227+ UAH1320/mo||UAH1200 + UAH1320/mo||UAH1320/mo + 5%|
|Statements||every year||every year||every quarter|
**tax rates are mentioned in UAH as of 2021; social security and pension taxes are included; Keep in mind that for group 1 and group 2 taxpayers the monthly rate is fixed and independent of your revenue as long as you do not go over the annual maximum.
Keep in mind that there are certain types of businesses that can’t be conducted in Ukraine under any type of single tax structure. These include:
- Gambling activities including lotteries and sports 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 activities such as blind trusts
- Postal and telecommunications services
- Brokering of high-value art and antiques
- Organization of concert tours
- Technical testing and clinical trials
- Almost all financial companies such as insurance brokers, credit unions, pawnbrokers, leasing companies, pension operators, and investment funds
Individual entrepreneurs have the right to be registered as VAT (value-added tax) payers. Entrepreneurs have the right to make trade activities in the export/import of goods and services.