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How to choose a taxation system for business in Ukraine?

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As a business owner in Ukraine, choosing the right taxation system is a crucial decision that can impact the financial health of your business. With several taxation systems available, it can be confusing to determine which one is best suited for your business needs. In this article, we will guide you through the process of selecting a taxation system for your business in Ukraine.

Understand the types of taxation systems in Ukraine


There are three main taxation systems in Ukraine: the Simplified Taxation System, the Unified Taxation System, and the General Taxation System.

The Simplified Taxation System (STS) is designed for small businesses with an annual turnover of up to 5 million Ukrainian hryvnias (UAH). This system offers a simplified way of reporting and paying taxes, and it is the most popular system among small businesses.

The Unified Taxation System (UTS) is designed for businesses with an annual turnover of up to 20 million UAH. This system offers a choice of three types of taxation: income tax, value-added tax (VAT), or a combination of both.

The General Taxation System (GTS) is designed for businesses with an annual turnover of more than 20 million UAH. This system is more complex than the other two systems and requires businesses to keep detailed records of their income and expenses.

Consider your business needs


To choose the right taxation system, you need to consider your business needs. Factors such as the size of your business, the nature of your business, and your financial goals will determine which taxation system is best suited for you.

For instance, if you own a small business with a turnover of less than 5 million UAH, the Simplified Taxation System may be the most suitable choice. However, if you have a larger business with a turnover of more than 20 million UAH, the General Taxation System may be more appropriate.

Understand the tax rates and requirements


Each taxation system has different tax rates and requirements. Therefore, it is essential to understand the tax rates and requirements of each system before making a decision.

For example, under the Simplified Taxation System, businesses are required to pay a fixed amount of tax based on their turnover. The tax rates vary depending on the type of business activity. In contrast, under the Unified Taxation System, businesses can choose to pay income tax, VAT, or a combination of both. The tax rates and requirements will differ depending on the chosen taxation type.

Consult with a tax professional


Choosing the right taxation system for your business in Ukraine can be a complex process. It is advisable to seek advice from a tax professional to ensure that you make an informed decision.

A tax professional can provide valuable insights into the advantages and disadvantages of each taxation system and guide you through the process of choosing the best option for your business needs.

In conclusion, choosing the right taxation system for your business in Ukraine is a critical decision that requires careful consideration. By understanding the types of taxation systems available, considering your business needs, understanding the tax rates and requirements, and seeking advice from a tax professional, you can make an informed decision that will benefit your business in the long run.

Related article: How much does it cost to register a business in Ukraine?

Tax rates for business in Ukraine


The tax rates in Ukraine vary depending on the chosen taxation system and the type of business activity. Here are some examples:

  • Simplified Taxation System (STS): Under this system, businesses pay a fixed amount of tax based on their turnover. The tax rates vary depending on the type of business activity. For example, a business engaged in retail trade pays 5% of turnover, while a business engaged in transportation pays 3% of turnover.
  • Unified Taxation System (UTS): Businesses under this system can choose to pay income tax, VAT, or a combination of both. The tax rates and requirements will differ depending on the chosen taxation type. For example, the income tax rate for businesses engaged in trade is 5% of the taxable base, while the VAT rate is 20% for most goods and services.
  • General Taxation System (GTS): Businesses under this system pay income tax, VAT, and other taxes, including social security contributions. The income tax rate is a flat 18% on profits, while the standard VAT rate is 20%.

It's worth noting that some businesses may be eligible for tax exemptions or reductions under certain conditions. For example, small businesses with fewer than 10 employees and an annual turnover of up to 3 million UAH may be eligible for a reduced income tax rate of 3%.

Taxes, however, may differ depending on the type of activity that you plan to engage in. Here are some examples.

IT industry


The IT industry is one of the fastest-growing sectors in Ukraine, and the Ukrainian government has implemented tax incentives to support its development. Here's some additional information about tax rates for IT businesses in Ukraine:

  • Simplified Taxation System (STS): Under the STS, IT businesses that are classified as "software development" or "information and consulting services" are eligible for a reduced tax rate of 5% on their turnover, regardless of their annual turnover. This tax rate is significantly lower than the standard STS tax rate for other business activities.
  • Unified Taxation System (UTS): IT businesses under the UTS can choose to pay income tax or VAT, or a combination of both. If an IT business chooses to pay income tax, they are eligible for a reduced tax rate of 5% on their taxable income. However, if they choose to pay VAT, the standard VAT rate of 20% applies.
  • General Taxation System (GTS): IT businesses under the GTS are subject to a flat income tax rate of 18% on their profits. However, they may be eligible for tax exemptions or reductions under certain conditions, such as investing in research and development activities.

In addition to the above tax incentives, the Ukrainian government has implemented other measures to support the growth of the IT industry, such as establishing technology parks and providing grants for research and development activities.

It's worth noting that IT businesses in Ukraine must meet certain criteria to qualify for the tax incentives, such as registering with the government as a "software development" or "information and consulting services" business and meeting specific staffing requirements.

The Ukrainian government has implemented tax incentives to support the growth of the IT industry in Ukraine. IT businesses in Ukraine can benefit from reduced tax rates under the STS and UTS and may be eligible for tax exemptions or reductions under certain conditions under the GTS. However, it's important to meet the specific eligibility criteria and consult with a tax professional to ensure compliance with Ukrainian tax laws.

Related article: How to open a company for business in Ukraine for foreign citizens?

Import and export


If you're importing goods from Ukraine, you may be subject to several taxes and fees, including:

  1. Value Added Tax (VAT): VAT is a tax on the value added to goods and services at each stage of production and distribution. In Ukraine, the standard VAT rate is 20%, and it applies to most goods and services, including imported goods.
  2. Customs duties: Customs duties are taxes on imported goods. The rate of customs duties depends on the type of goods being imported, their origin, and their value. Ukraine is a member of the World Trade Organization (WTO) and has applied the WTO's Most Favored Nation (MFN) principle, which means that the same customs duties apply to all WTO member countries.
  3. Excise taxes: Excise taxes are taxes on specific goods, such as alcohol, tobacco, and fuel. The rates of excise taxes in Ukraine vary depending on the type of goods.
  4. Other fees: You may also be subject to other fees, such as administrative fees, storage fees, and handling fees, depending on the specific circumstances of your import.

It's worth noting that Ukraine has signed free trade agreements with several countries, including the European Union, which may impact the amount of customs duties and taxes you'll need to pay when importing goods from Ukraine.

It's important to consult with a customs broker or a tax professional to determine the exact taxes and fees you'll need to pay when importing goods from Ukraine. They can also help you understand the customs procedures and requirements for importing goods into your country.

If today you are only planning to start your business or activity in Ukraine, do it wisely. Contact our specialists, and we will help you not only register the type of business you need, but also help optimize the tax burden for your company.

The cost of starting a business in Ukraine is here.


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