Sole Proprietor (FOP) Group 2 in 2026: conditions, income limit, taxes, RRO and reporting

The author of the article: Denis Korablyov

Modified date: 04 March 2026

FOP Group 2 in 2026 – one of the most popular forms of running a small business. A FOP (Fizychna Osoba-Pidpryiemets) is a Ukrainian legal status for an individual entrepreneur, similar to a sole proprietor or self-employed business owner in many other countries. In this article we will explain the conditions of staying in Group 2, the income limit, taxes, RRO/PRRO and the risks of cancellation of the single tax. You will learn who this system is suitable for, who cannot use Group 2 and when it is worth considering switching to Group 3.

Who can be an FOP in Group 2

The second group of the simplified taxation system is available exclusively to individual entrepreneurs. Legal entities (LLC, JSC, etc.) cannot operate under Group 2 – only under Group 3.

An FOP in Group 2 can sell goods to anyone: individuals, companies on the general or simplified taxation system, government bodies, foreign companies – without restrictions regarding the buyer.

Services are more restricted. They can only be provided to:

• individuals (citizens);
• FOPs and legal entities that are themselves on the simplified taxation system (for example, an FOP in Group 3 or an LLC in Group 3).

Providing services to companies on the general taxation system, government bodies, notaries, banks, foreign companies – is prohibited. Violation of this rule is grounds for cancellation of the single tax.

It is also important to understand who cannot use Group 2 in order to avoid mistakes when choosing a taxation system.

Who Group 2 is NOT suitable for:

• you provide services to LLCs or FOPs on the general taxation system
• you work with foreign clients specifically for services
• you plan annual turnover exceeding 7.2 million UAH
• you have more than 10 employees
• you build a business model with active cooperation with government authorities
  

In such cases it is advisable to consider FOP Group 3 or the general taxation system.

More details about choosing between FOP Group 2 and Group 3 with calculation examples can be found in a separate article.

Prohibited types of activity in Group 2

• providing internet communication services (internet provider services);
• jewelry business;
• providing services to entities on the general taxation system;
• providing services to the state and state-owned enterprises.

Income limit and employees in 2026

The income limit for Group 2 is calculated as 834 minimum wages established as of January 1 of the current year.

Total turnover (revenue) is counted, not profit. The exception – commission scheme (more details in a separate section below).

Exceeding the limit – automatic grounds for cancellation of the single tax.

Number of hired employees

An FOP in Group 2 may have simultaneously no more than 10 hired employees. If the number of employees is 8 or more, the FOP falls under legal requirements regarding the employment quota for persons with disabilities.

If such an employee is absent when the number of staff is 8 or more – the fine is approximately 86 000 UAH for each year.

Conditions of working under FOP Group 2 – what is allowed and what is prohibited

Form of payments

Only monetary payments are allowed in Group 2 – cash or non-cash. Prohibited: barter, offsetting mutual claims, payment with gift certificates as a substitute for money.

A gift certificate can be accepted, but it must provide a conditional discount on the product rather than replace the payment. 

Example: the buyer presents a certificate – the FOP accepts 1 kopeck in cash and gives a 99.9% discount. This format is legal.

Property rental

An FOP in Group 2 has the right to rent out their own real estate, but with area limitations:

• residential real estate – no more than 400 sq. m of total area;
• non-residential (commercial) real estate – no more than 900 sq. m.

The number of properties is not limited – only the total area is limited. At the same time, renting premises to notaries, banks, postal services and other entities on the general taxation system – is prohibited.

Bank accounts and seal

An FOP is not required to open a bank account – the law does not require it. However, in practice an account is necessary for most forms of payment. The number of accounts is not limited.

A seal for an FOP is not mandatory. It does not need to be registered or recorded anywhere.

Registration in Group 2 – deadlines and typical refusals

Group 2 is always registered from the 1st day of the month following the submission of the application. If the application is submitted on January 15, the FOP will be registered within 1-2 working days, but will actually start operating under Group 2 only from February 1. Until this date any income is treated as income under the general taxation system.

If an FOP is already in Group 1 or Group 3 and wants to switch to Group 2 – the application must be submitted no later than 15 days before the start of the new quarter.

Why can registration be refused?

1. Technical error in filling out the application.
2. Presence of tax debt – even several dozen hryvnias of debt for property tax or land tax.
3. Lost application – system failure. If within 2-3 working days after submission there is no response, the application was most likely not received. You need to contact the tax authority.

Grounds for cancellation of the single tax

The tax authority may cancel the simplified taxation system in four cases:

1. The annual income limit has been exceeded 
2. The number of hired employees exceeded 10 people.
3. A payment was received for a type of activity not specified in the taxpayer’s KVED codes.
4. A tax debt exceeding 3 060 UAH was recorded for two consecutive quarters.

Failure to update the address, absence of a cash register, failure to register a new bank account – are not grounds for cancellation of the single tax.

Cash register – when it is required and when it is not

RRO/PRRO for FOP Group 2 is applied not depending on the type of activity, but on the method of receiving payment.

A cash register IS REQUIRED if:

• you accept cash;
• you accept payments via Nova Poshta upon delivery;
• you use a payment terminal (acquiring) at the point of sale;
• you accept payments through marketplaces (Rozetka, Prom, etc.);
• you are connected to internet acquiring (WayForPay, Fondy, LiqPay, etc.);
• the client pays by card (except for the case below).

A cash register is NOT required if:

• payment is transferred directly to IBAN details (bank transfer);
• the client pays to the FOP card within the same bank (for example, from Privat to Privat – redirection to IBAN);
• payment is received through Ukrposhta.

An FOP in Group 2, regardless of the place of activity (except for combat zones), must provide clients with the ability to pay by card – through a terminal or QR code. 

Absence of such an option – a fine from 8 500 UAH.

Income accounting and primary documents

Income accounting book

If all funds are received exclusively through the bank – the bank statement is sufficient confirmation of income. If there are cash receipts or a mixed mode – it is necessary to maintain an income accounting book in free form, monthly.

Primary documents for goods

For most goods primary documentation is mandatory, but the penalty for its absence is fixed – 1 020 UAH regardless of the number of missing documents.

For high-risk groups of goods – complex equipment, jewelry, medicines – strict accounting is mandatory in the form approved by the Ministry of Finance. The penalty for missing documents for such goods – 100% of the sales amount of each unit.

The origin of goods can be confirmed with two documents:

• supplier invoice (for goods purchased in Ukraine);
• customs declaration with a customs stamp (for imported goods).

An invoice from a foreign online store and a card payment receipt are not primary documents and do not confirm the origin of the goods.

Commission scheme – how to account only for net profit, not the entire turnover

According to clause 292.4 of the Tax Code, an FOP in Group 2 may include in income not the entire turnover, but only the commission fee – if the sale of goods is carried out under a commission or agency agreement.

How does it work?

1. A commission or agency agreement is signed with the supplier (another FOP or legal entity).
2. An act of transfer and acceptance of goods for sale is prepared.
3. After the sale – the commission agent’s report with the list of sold goods and the amount of commission fee.
4. An act of services provided is signed, and the funds minus the commission are returned to the supplier through the bank.

The FOP’s income includes only the commission amount. 

This scheme is successfully used in practice and withstands inspections, but requires full maintenance of primary documentation for each transaction.

Taxes for an FOP in Group 2 in 2026

Single tax

Fixed rate – up to 20% of the minimum wage at the beginning of the year. 

The local council may reduce the rate to 15% or to 10% – you need to check the decision of your local community.

Paid monthly until the 20th.

Exempt from payment:

• FOP military personnel (subject to submitting an exemption application);
• FOPs in temporarily occupied territories or in combat zones;
• FOPs on vacation or sick leave – one month per year (without hired employees).

Military levy

The rate is the same for all FOPs in Group 2, it cannot be increased or reduced by the local council.

Paid monthly until the 20th.

Benefits – the same as for the single tax.

SSC (single social contribution)

Paid quarterly (monthly payment is allowed if desired).

Exempt from SSC payment:

• pensioners;
• persons with disabilities;
• FOPs who are also employees, if the employer paid SSC in full;
• FOP military personnel (the benefit applies automatically);
• FOPs on maternity leave (SSC is paid by social insurance).

Other possible taxes

• PIT (18%) + military levy (5%) + SSC (22%) – if there are employees, paid for each employee.
• VAT on imported goods – if the FOP officially imports and clears goods through customs.
• VAT 20% – when ordering services from non-residents with payment from Ukraine (except services of internet platforms – they pay VAT themselves).
• Tourist tax – if the FOP provides temporary accommodation services.
• MPT (minimum tax liability) – for FOPs with agricultural land plots.

VAT in the future

As of 2026 an FOP in Group 2 is not a mandatory VAT payer even after exceeding 1 million UAH in turnover. However according to the National Revenue Strategy and IMF requirements, mandatory VAT registration for FOPs in Group 2 is planned in the coming years. 

It is already advisable to look for suppliers who: sell goods via bank transfer, provide invoices, and are ready to issue VAT invoices.

Reporting for an FOP in Group 2

1. Annual single tax declaration – submitted once per year. It reflects total turnover, KVED codes, and number of employees. The SSC appendix is attached to the declaration (if the FOP paid SSC and has no benefits).
2. Unified reporting for employees – quarterly, if there are employees.

Special declarations

• Tourist tax declaration – if you provide temporary accommodation services.
• Land fee declaration – if you rent municipal or state land.
• Statistical reporting – submitted by FOPs engaged in cargo or passenger transportation or industrial production.

Receiving payments from abroad

An FOP in Group 2 can receive payments from abroad, but only for goods. Payments from foreign companies must be accompanied by invoices clearly confirming that this is payment for goods, not for services.

If the tax authority qualifies a foreign payment as payment for a service – this becomes grounds for cancellation of the single tax. Therefore when working with foreign clients it is necessary to keep all primary documentation.

Key facts about FOP Group 2 in 2026

For convenience we summarized the key operating conditions and tax indicators of FOP Group 2 in 2026 in one table.