Private entrepreneurship in Ukraine

Another form of making business in Ukraine is the state registration of a natural (private) person as the private entrepreneur. In fact, rights of private entrepreneurs in Ukraine are almost the same as the rights of corporate entities, with some benefits and disadvantages in comparison with corporate entities.

The benefits of acting as the private entrepreneur are:

- Rather simple procedure of state registration (the procedure of registration is similar to incorporation of a corporate entity, but les complicated and requires much less documents).

- Rather favorable tax regime in comparison with corporate entities (if turnover of a private entrepreneur does not exceed UAH 500'000 per calendar year (it's about USD 100'000) it is possible for this private entrepreneur to pay very law fixed monthly tax from UAH 100 to UAH 200 (this is accordingly from about USD 20 to USD 40 per month)). This means, that for example the private entrepreneur has earned let's say UAH 450'000 of income (but not profit, depending on type of his business amount of profit can be less than the amount of income) per one calendar year, total amount of tax, which he has to pay makes only from UAH 1'200 to UAH 2'400 (this is accordingly from about USD 240 to USD 480) per the calendar year.

- if a private entrepreneur applies the above simplified tax regime, he is not required to keep any accounting records. He has to keep only one simple book, where should be recorded all his income and spending operations. The number of reports, which he has to file to various state bodies in this case is also very law and they are very simple. (Four simple reports to the district tax inspection and two reports to the district pension fund per one calendar year, if without employees).

- if a private entrepreneur applies the above simplified tax regime, he has the right to employ up to ten persons (however in this case amount of his fixed tax will be increased for UAH 600 to UAH 1'200 (this is accordingly from about USD 120 to USD 240) per each employee and additional reports should be filed to appropriate state bodies and services).

- therewith a private entrepreneur can also use the common tax system and in this case amount of his annual permissible income is unlimited as well as number of his employees, but amount of tax to be paid is rather higher in comparison with simplified tax regime and he has to file almost the same numerous reports as the corporate entity, therefore the common tax system for private entrepreneurs is almost never used.

- in the same way as it is provided for corporate entities, a private entrepreneur can have his own seal to certify his signature, if he wants it.

The disadvantages are:

- private entrepreneur is liable with all the property he owns (i.e. his responsibility is unlimited);

- very often it is impossible to sale the working business in form of a private entrepreneurship (for example, if talking about a corporate entity, its owner can sale his corporate entity together with all property (including the real estate), rented or owned land and premises, trademarks, licenses and permits and employees as well; for a private entrepreneur it is impossible to do this, because he cannot sale himself – i.e. the corporate rights in such case are absent, so nothing to share or sale).

Any resident or non-resident of Ukraine, who are not restricted to conduct commercial activities, can be registered as the private entrepreneur in Ukraine. Talking about non-residents of Ukraine (mainly about non-Ukrainian citizens), before such registration it is required to get the personal tax number at the local tax administration (every capable citizen of Ukraine already have such number) in form of appropriate reference. Also such non-resident is to be on the territory of Ukraine on the lawful grounds (i.e. valid VISA, etc.).

Therewith it is also should be mentioned, that non-residents of Ukraine can earn profits in Ukraine as the natural (private) persons, however such profits are to be taxed in accordance with Ukrainian regulations at rather high tax rate. Also a non-resident of Ukraine is limited from owning a car, real estate, land and other property without getting the personal tax number in Ukraine, because such number is required to notarize certain deals and to apply the state registration of the same (as far as the title of ownership for the real estate in Ukraine appears at the moment of state registration of the same, but it is impossible to do this without the personal Ukrainian tax number).

The above information is provided herein in educational and informative purposes only. It is provided that you have to get appropriate legal advice as regarding the legal and other issues of your interest in Ukraine in order to have the exact, extensive and up-to-date legal and other related information.

Do not hesitate to contact us if you have any questions or issues of legal nature, our Law Firm is working for you and our experienced legal specialists are always ready to help providing the client with appropriate legal consultations, legal reports and summaries, reasonable legal advices and all the other required legal support, assistance, coverage and protection.

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