Vlada and Liudmyla Mashchenko were speaker’s on the meeting of the Committee on Women's Entrepreneurship Development at the Mariupol Branch of the Donetsk Chamber of Commerce and Industry, took place on December 06, 2019. They told entrepreneurs about innovations in tax legislation effect individual entrepreneurs.
In particular, on the following changes were made:
Unified Social Payment (USP) rate for Physical Bodies Entrepreneurs
After approval by the Parliament of Ukraine of the budget for 2020, the size of the minimum wage and the subsistence minimum became known. Along with the increase of these indicators, there were changes in the rates of the USP and the single tax since 01.01.2020.
Taking into account the increase of the minimum wage from 01.01.2020 to UAH 4 723,00, the minimum amount of the USP has increased accordingly. From January 1, 2020, it amounts to 1039.06 (22% of the minimum wage).
The Law of Ukraine of 23.11.2018 №2628-VIII "On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts of Ukraine on Improving the Administration and Revision of Rates of Some Taxes and Fees" introduced some changes regarding the payment of a unified payment to the obligatory state social insurance, effective January 1, 2019.
In effect of thees amendment, the entrepreneurs - including those who have opted for a simplified taxation system, for persons with disabilities - is set at 8.41% of the USP accrual base for persons with disabilities. That is, since 2019, not only legal entities, but also natural persons - entrepreneurs in which persons with disabilities work, can charge the USP at a preferential rate (8.41%).
Single tax rates for Individual Entrepreneurs.
Group 1 (income up to 300 thousand UAH per year, absence of employees) - up to 10% of the subsistence minimum, which equals 210.20 UAH (2102 UAH * 10%),
Group 2 (income up to 1.5 million UAH, maximum of 10 employees) - up to 20% of min. wage equal to UAH 944.60 (UAH 4723 * 20%)
Group 3 (income up to UAH 5 million, employees unlimited) - 3% + VAT or 5% of income.
In 1-2 groups, the report is submitted to the State Tax Service once a year within 60 calendar days after the end of the year (clauses 49.18.3 and 296.2 of the Tax Code), tax payment deadline (according to 295.1 and 295.3 of the Tax Code) up to the 20th day (inclusive) of the current month or advance payment for the whole reporting period (Sec. 295.1 of the Tax Code). For example, a single January tax is payable by January 20 inclusive.
For group 3, the report is submitted to the STS on a quarterly basis within 40 calendar days (clause 49.18.2 and 296.3 TCU), the tax payment period (according to 295.1 and 295.3 TCU) within 10 calendar days after the last day of filing the quarterly statement (clause 295.3 TCU). For example: The first quarter report is submitted by May 10 (40 calendar days). Therefore, the tax payment deadline for the first quarter is May 20.
The minimum that will have to be paid for a hired employee from 01.01.2020 is 5,762.06 UAH. (minimum wage 4,723 UAH + USP 22% from "minimum" 1,039.06 UAH)
Physical Bodies’ income tax - 18% that is 850.14 UAH.
Military fee - 1,5% - 70,85 UAH.
Ukraine is also waiting for the changes that are likely to be introduced by the Bill on Amendments to the Tax Code of Ukraine on Measures to Shadow the Circulation of Goods and Services No.2338
The bill proposes to set new limits for groups 1, 2 and 3. They want to raise them to 1 million, 5 million and 10 million hryvnia respectively, which is positive news for entrepreneurs.
As of today, the draft law is under consideration by the Verkhovna Rada (the Parliament) committees.
Application of PPO for FOP
On October 17, 2019, the President of Ukraine signed the Bill "On Amendments to the Tax Code of Ukraine on the Unshadowing of Payments in Trade and Services" No. 1073, according to which the cash registers are obliged to use all entrepreneurs of the single tax group 2-4. At the same time, the Bill "On Amendments to the Law of Ukraine "On Application of Registrars of Settlement Transactions in the Field of Trade, Catering and Services” on unshadowing of settlements in the field of trade and services No. 1053-1 (which was also signed by the President on October 17, 2019) brings the concept of software cash registers, what means that entrepreneurs are now not obliged to buy cash registers, but can use the appropriate software, including on a smartphone.
Who should use the cash register:
At the moment and in the future:
taxpayers of groups 2 and 3 in which the amount of income for the calendar year exceeds UAH 1 million,
selling "technically sophisticated" products that are subject to warranty repair,
providing medical and medical services
From October 1, 2020, individual entrepreneurs are added which:
sell goods or services online,
currency points, gas stations,
sell jewelry, medicines, used goods, auto parts,
provide hotel and tourist services.
From January 1, 2021 - apply all single tax payers of 2-4 groups
Accordingly, cash registers may not use:
Group 1 single tax payers;
payers of 2-4 groups with income less than UAH 1 million per year until January 1, 2021 (with some exceptions).
Software cash registers
As mentioned earlier, on October 17, 2019, Bill No. 1073 was signed, according to which all entrepreneurs of the single tax group 2-4 are obliged to use cash registers.
The law does not oblige entrepreneurs to buy cash registers, for this purpose the bill No. 1053-1 introduced the concept of "software cash registers" - it could be a program or application on a smartphone, tablet, computer, so that any payment document could be formed from any device .
State Tax Service of Ukraine provides an opportunity to use cash register software for free - this is the system of registration of electronic cash checks "E-Receipt" ("E-check"). The installation package is available online. Currently, the program runs on Windows and Android.
The fiscal functions of the cash register program will be implemented through the fiscal server of the controlling authority. Fiscal for such “cash register in a smartphone" will be a mode of operation that ensures registration of settlement documents on the fiscal server of the controlling body.
Sanctions for the cash register violations is the most pressing issue related to draft laws No. 1053-1 and 1073. In particular the size of penalties and the introduction of new ones. For example, for the violation of paragraph 1 of Art. 17 of the Law on cash registers (non-application of a cash register or carrying out settlement operations for incomplete amount, etc.), now the fine is 1 UAH, and for repeated during the calendar year violation - 100% of the value of the sold. Bill No. 1053-1 announced fines of 100% of the value of goods (works, services) sold for infringements - for the first time violation, and 150% for each subsequent violation. Please note that by October 1, 2020, the sanctions laid down in paragraph 1 of Art. 17 of the Law on cash registers, apply at the rate of 10% of the value of goods (works, services) sold with infringements - for the infringement committed for the first time, and 50% - for each subsequent committed violation.
Threefold - up to 5100 UAH - will increase the fine in the case of application, in carrying out settlement operations, the cash registers the design or software of which have been changed, and such changes are not stipulated by the manufacturer's design and technological documentation. However, the application of such a charge will no longer be affected by the absence or damage of the seal of the service center on the cash register.
In the amount of 510 UAH (now - 170 UAH) there will be a fine in case of failure to submit to the controlling bodies reports related to the use of cash registers, settlement books and copies of settlement documents and fiscal reporting checks with cash registers and / or programmatic cash registers via wired or wireless channels in the case of its submission.
Provided Art. 20 of the Law on cash registers the sanction in the amount of double value of such goods which are not accounted for in the established order at the sale price, but not less than 170 UAH, will be applied not only for the sale of goods which are not accounted for in the established order, but if during the inspection, the business entity did not provide documents confirming the registration of the goods in the place of sale (business premises). Such requirements do not apply to individual entrepreneurs who are single tax payers and not registered VAT payers (except those engaged in the sale of technically sophisticated household goods subject to warranty repair, as well as medicines and medical supplies, jewellery and household goods articles of precious metals, precious stones, precious stones of organogenic formation and semi-precious stones).
What to expect
We think it makes no sense to discuss whether changes are needed. Changes will come, the question is only whether the mentioned bills come into force in 2019 or 2020.
Changes seem difficult to implement, but once accountants used calculators, then calculators, then computers. Each innovation had to be adapted and many of them eventually simplified their work. Therefore, it is necessary to adapt for changes more quickly and take them as positive.
Vlada Mashchenko, Partner at MBLS Law Firm
Liudmyla Mashchenko, Partner at MBLS Law Firm