Sole Proprietor Taxes in Ukraine under the General Tax System in 2026

The author of the article: Denis Korablyov

Modified date: 04 June 2026

A sole proprietor on the general taxation system in 2026 pays taxes not on turnover, but on net income. That is why, for some sole proprietors, the general system may turn out to be beneficial, especially if the business has significant expenses. At the same time, it requires more complex accounting, proper documentation, and control over tax payment deadlines.

But there is another situation: a sole proprietor switches to the general system involuntarily. For example, because of exceeding the income limit or violating the conditions of the simplified tax system. In that case, the new rules need to be understood quickly, and they are much more complicated.

In this article, we will explain how a sole proprietor should pay taxes under the general system.

When should a sole proprietor switch to the general taxation system 

The general taxation system for sole proprietors in 2026 is a business format in which an entrepreneur pays taxes only on profit. In other words, what matters is not all income received, but the difference between income and documented expenses.

A sole proprietor switches to the general system in several cases:

Entrepreneurs who have just registered and have not applied to switch to the single tax may also be on the general system. In this case, they automatically end up on the general system.

The main difference between the general system and the single tax is the approach to taxation. It is necessary to keep more careful income records and expense records, collect supporting documents, and correctly determine the tax base. Without proper expense documents, the tax base is not reduced.

Advantages and disadvantages of the general taxation system

The general taxation system does not always mean higher taxes. For some entrepreneurs, it may even be more beneficial than the simplified system, especially if the business has significant expenses.

The advantages of the general system include:

• taxes are paid on net profit, not on total turnover;
• business expenses can be deducted to reduce the tax base;
• there are no income limits that apply to single tax payers;
• it is possible to work with almost any counterparties and types of activity, without being limited by the rules of the simplified system.

At the same time, the general system also has its disadvantages:

• more complex tax and accounting records;
• the need to collect and store primary expense documents;
• higher risks of additional tax assessments during tax audits;
• more reporting and stricter control over tax payment deadlines.

The general system is most often suitable for entrepreneurs with high expenses, large turnover, or specific types of activity that cannot operate under the simplified system. If there are almost no expenses and the activity meets the single tax requirements, the simplified system often remains more beneficial.

How to calculate the net taxable income of a sole proprietor on the general system

The taxable income of a sole proprietor on the general system is determined not from turnover, but from profit. That means from what was earned and left after expenses. Profit is calculated using the formula:

net income = total income – confirmed expenses

What is included in a sole proprietor’s income:

• payments from clients to a bank account or in cash; 
• income in non-cash form, such as barter;
• fines and compensation received from counterparties;
• any other receipts from business activity.

What is not considered income of a sole proprietor:

• VAT amounts that a sole proprietor receives from buyers and transfers to the budget, if they are a VAT payer;
• excise tax on retail sales;
• a government grant.

How to reduce the tax base for a sole proprietor

To legally reduce taxes for a sole proprietor on the general system, it is necessary to clearly determine the tax base. Under the law, expenses include:

• everything purchased for production or service provision, including raw materials, materials, goods, fuel, and spare parts;
• payments to employees, including wages, bonuses, and so on;
• mandatory payments and contributions, including employee insurance;
• taxes and fees related to business activity, as well as the unified social contribution, except for VAT, retail excise tax, personal income tax, and residential real estate tax;
• expenses for licenses, permits, and royalties;
• operating business expenses, including rent, advertising, communication services, business trips, banking services, logistics, and services of external specialists;
• depreciation of fixed assets, if separate accounting is kept.

What cannot be included in expenses

Expenses cannot include anything that:

• is not related to business activity;
• relates to the purchase of equipment, machinery, and other depreciable assets;
• relates to the purchase or maintenance of land, housing, or passenger cars.

Important: if expenses are not supported by documents – they cannot be used to reduce the tax base! 

Along with serious fines, this is another reason why documentation must be kept very carefully under the general system. If, during a tax audit, the tax authority notices the absence of primary documents, it will additionally assess tax on the full amount of those expenses. 

Taxes for a sole proprietor on the general system: PIT, military levy, USC

A sole proprietor on the general system in 2026 pays three main taxes: personal income tax (PIT), military levy, and unified social contribution (USC). Each of them has its own assessment base and payment procedure.

PIT and the military levy are charged on the same base – net income, meaning profit. Together, this is 23% of profit. For comparison, a group 3 sole proprietor on the simplified system pays 5% of total turnover, regardless of expenses.

USC for sole proprietors on the general system is also charged on net income at a rate of 22%. But there is an important point here: USC has a set minimum. So the minimum USC in 2026 is:

If there was no income during the month, a sole proprietor may pay none of these taxes, including USC. 

However, an entrepreneur may pay USC voluntarily to preserve their insurance record. The maximum monthly assessment base is UAH 172,940. In other words, this is the maximum amount from which 22% USC can be calculated.

By the way, a sole proprietor may also work under an employment contract at the same time. In that case, if the employer pays at least the minimum contribution for them, the entrepreneur may not pay USC for themselves for those months.

In addition to the basic payments, the following may also arise in certain cases: 

• VAT, 
• PIT, military levy, and USC for employees, if the sole proprietor has hired employees,
• transport tax, if there is a relevant vehicle,
• excise tax, when selling excisable goods,
• land payment, meaning land tax or rent,
• real estate tax, on property other than a land plot,
• environmental tax and rent payment, for the use of natural resources,
• customs duty, in export-import operations,
• tourist tax and parking fee, depending on the type of activity,
• other payments.

Example of calculating taxes for a sole proprietor on the general system

Suppose a sole proprietor received UAH 300,000 in income for the quarter and has confirmed expenses of UAH 180,000.

Net income: 300,000 – 180,000 = UAH 120,000

All three payments are calculated from this amount:

That means that from UAH 120,000 of net income, the entrepreneur pays UAH 54,000 in taxes – and keeps UAH 66,000.

Important: if the expenses were not confirmed by documents, the tax base would be not 120,000, but the full UAH 300,000. In that case, almost three times more tax would have to be paid.

VAT for sole proprietors on the general system

VAT for a sole proprietor on the general system becomes mandatory if the sole proprietor’s annual turnover exceeds UAH 1,000,000. Before reaching this threshold, the entrepreneur may register voluntarily. 

For a registered VAT payer, it is important to understand one thing: 

the VAT amount that a sole proprietor receives from buyers is not their income. 

In other words, the VAT amount is not included in the sole proprietor’s tax base.

In practice, this means that three things must be clearly separated:

• the total amount received in the bank account;
• the VAT amount included in these receipts;
• the entrepreneur’s actual income that is taken into account for taxation.

For example: 

A sole proprietor received UAH 120,000 from a client, of which UAH 20,000 is VAT. Only UAH 100,000 is included in income. It is from this amount that net profit is calculated and, accordingly, PIT and the military levy. So VAT does not increase business income, but it requires separate accounting and timely payment. By the way, if an overpayment occurs, VAT can be refunded.

But if a sole proprietor exceeds UAH 1,000,000 in turnover and does not register as a VAT payer independently, they will be registered compulsorily. Under the law, VAT may be additionally assessed for the entire period of work without registration, along with a fine of 25% of the amount. That is why it is worth monitoring turnover in advance, rather than waiting until the threshold has already been exceeded.

Tax calendar for a sole proprietor on the general system

Tax payments under the general system are made in stages. During the year – advance payments, and after filing the tax return a sole proprietor on the general system makes the final calculation.

When to pay PIT and the military levy

PIT and the military levy are paid in advance, by the 20th day of the month after each quarter. The deadlines are as follows:

• by April 20 – for Q1,
• by July 20 – for Q2,
• by October 20 – for Q3,
• after filing the annual tax return – for  Q4.

There is no advance payment for Q4. Instead, after the annual tax return is filed, the total net profit for the year is calculated, and the advance payments already paid for Q1-Q3 are deducted from it. This remaining amount is paid within 10 calendar days after the deadline for filing the tax return. 

And there is a risk here: if accounting is not set up from the first quarter, the advance payment may be calculated incorrectly or paid late. This already means a fine and penalty interest, even if the mistake was unintentional.

When to pay USC

USC must also be paid in advance, but not by the 20th day. It must be paid within 19 calendar days after the end of each quarter:

• by April 19 – for Q1,
• by July 19 – for Q2,
• by October 19 – for Q3,
• by January 19 of the following year – for Q4.

USC is paid for all four quarters, including the fourth. The final calculation is made within 10 calendar days after the deadline for filing the tax return.