If you aspire to become self-employed in Ukraine, this is a guide with all the steps you need to take during the registration process. In Ukraine, a self-employed person is called a Private Entrepreneur (PE), an individual entrepreneur, or a sole proprietor.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Private Entrepreneur Business Structure Overview
An individual who runs their own business and assumes the risk for the business's profitability or losses is considered a Private Entrepreneur. The Ukrainian name is "fizichna osoba-pidpriyemets", also called FOP.
In Ukraine, most freelancers have found the Private Entrepreneur business structure the best option for their needs. This form of business is the most common among business registration and the simplest type defined by Ukrainian law. The two main reasons for that is its simple registration process and simplified taxation system.
In Ukraine, both Ukrainian citizens and foreign individuals can be registered as Private Entrepreneurs.
Registration of a Private Entrepreneur
Here are the key characteristics you need to fulfill to be able to register as a Private Entrepreneur:
- You are a natural person and not a legal entity
- You are 18 years old or more
Exception: you can become a Private Entrepreneur at the age of 16 with the consent of the parents or the guardianship authority
- You have a Ukrainian tax ID number (Ukrainian tax code). This taxpayer identification number is a document issued by the State Fiscal Service of Ukraine on the basis of an application. The tax ID number is needed for several administrative processes such as opening a bank account, being employed, setting up a company or registering a sole proprietorship in Ukraine, etc.
If you are a non-resident or a foreign national who needs to obtain a TIN (tax identification number), you will need a translation of their passport for a non-resident business founder (private individual).
Where to register
You need to submit an application to the State Register, which is the Register of Legal Entities, Individual Entrepreneurs and Public Organizations of Ukraine. The registration can be executed by one of the following appropriate authority at the place of your residence:
- Executive committees of municipal city councils
- Public legal entities
You can process to the registration through the Register, by filling out and submitting the documents by email or in person (see the paragraph below) or by using electronic services that require an electronic signature.
Documents and Information Requirements
Necessary documents to provide the information to be filled out in the application:
- A passport copy
- Ukrainian tax number
- Completed application form for registration of a Private Entrepreneur
- If you're younger than 16, a notarial consent letter from parents or guardians
- The address of the individual
If a foreigner wants to register as a Private Entrepreneur, they need to provide a mailing address in Ukraine. This address can be a registered residential address or another address for communication with state authorities.
- Information on the types of business activities
Keep in mind: if the application for registration is filled by an attorney, the certified power of the attorney will be required.
The Private Entrepreneur Registration Confirmation
Usually, if the application form is filed correctly, you should be registered as a Private Entrepreneur into the State Register.
Then, the registration of the Private Entrepreneur with tax authorities is automatic under the Standard Tax Scheme, which therefore requires no further action. The State Register notifies the tax authorities of the new registration automatically. You can also apply for the Simplified Tax Scheme to the registrar, for more information, please see below.
Once successfully registered as a Private Entrepreneur, you will have online access to your registration information.
Registration with Tax Authorities and Taxation of the Private Entrepreneur
As said before, the registration of the Private Entrepreneur with tax authorities is done automatically after the registration in the State Register and doesn't require any other action by the person.
A Private Entrepreneur can choose between one of the following tax assessment schemes:
- Standard Tax Regime in which standard taxes and tax rates apply to business income. These taxes include income tax, military tax, VAT tax, etc.
- Simplified Tax Regime in which the Private Entrepreneur pays one Unified Tax, instead of different types of taxes such as in the Standard Tax Regim. This tax system requires registration with tax authorities as Unified Tax Payer, as it's not automatic. The advantage is that the Unified Tax rate is lower than the Standard Tax rate which can lead to great tax savings. Be careful, however, as it requires certain conditions to be met, in particular not having an annual income that exceeds 5 million UAH.
Concerning foreigners who want to set-up as a Private Entrepreneur, they can benefit from the Simplified Tax Regime if they are tax residents in Ukraine.
Benefits of using Deel
- Have a centralized platform that takes care of all the documentation, such as contracts, invoices, and compliance documents.
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