Publication date: 11.06.2024
Tax systems for sole proprietorships: choosing the best option
Choosing the optimal tax system for an individual entrepreneur is an important stage in planning business activities. The correct choice of the tax system allows you to minimize tax costs and ensure the financial stability of the business. In this article, we will consider the main tax systems for sole traders in Ukraine, their features and criteria for choosing the best option, as well as the role of a legal opinion, a lawyer's consultation and online lawyer assistance in this process.
Basic tax systems for FOP
In Ukraine, the FOP can choose one of two main taxation systems:
- General system of taxation
- Simplified tax system
General system of taxation
The general taxation system provides for the payment of personal income tax (PIT) at the rate of 18% of net income, as well as military duty at the rate of 1.5%. Net income is defined as the difference between income and expenses related to business activities.
The main advantages of the overall system:
- Ability to consider expenses to reduce tax liability.
- No restrictions on the amount of income and types of activities.
Main disadvantages:
- Difficulty keeping records of income and expenses.
- High level of tax burden in the case of significant incomes.
Simplified tax system
The simplified taxation system provides for the payment of a single tax at a fixed rate, which depends on the group of the single tax payer. In Ukraine, there are three groups of simplified taxation system for FOP:
The first group: Entrepreneurs who do not use the labor of hired persons, carry out retail trade in markets or provide household services to the population. The maximum annual income is UAH 1,002,000. The tax rate is up to 10% of the minimum wage.
The second group: Entrepreneurs who employ up to 10 employees, provide services, manufacture or sell goods. The maximum annual income is UAH 5,004,000. The tax rate is up to 20% of the minimum wage.
The third group: Entrepreneurs who do not have restrictions on the number of employees and types of activities. The maximum annual income is UAH 7,002,000. The tax rate is 3% of income (with VAT) or 5% (without VAT).
The main advantages of the simplified system:
- Ease of accounting and reporting.
- Low tax burden for small businesses.
Main disadvantages:
- Restrictions on the amount of income and types of activities.
- Restrictions on the use of the labor of hired persons.
Legal opinion
A legal opinion is an important tool for evaluating the legal aspects of choosing a tax system. It contains an analysis of the legal requirements and conditions that must be met for the correct application of the chosen taxation system. A legal opinion helps entrepreneurs avoid legal problems and ensure compliance of their actions with current legislation.
Consultation of a lawyer
A lawyer's consultation is necessary to determine the optimal tax system. An online lawyer can provide professional assistance in choosing the best option for taxation, taking into account the specifics of the business, financial indicators and legal requirements. A lawyer's consultation includes recommendations on filling out tax returns, accounting for income and expenses, as well as analysis of legal risks.
Written consultation
A written consultation is an official document provided by a lawyer to a client. It contains a detailed analysis of tax issues related to the choice of a taxation system, and specific recommendations for further actions. Written consultation allows entrepreneurs to have documentary evidence of their legal position, which can be useful in case of disputes or audits by tax authorities.
The role of online lawyer assistance
The help of a lawyer online is especially valuable in today's environment, when speed and availability of information are crucial. Online consultations allow entrepreneurs to quickly receive the necessary legal advice and support, which ensures prompt resolution of issues related to the choice and application of the tax system. This is especially important for enterprises that carry out international operations and may face various challenges
