How to correctly indicate the purpose of payment to a private entrepreneur in Ukraine in 2026: a practical guide

The author of the article: Denis Korablyov

Modified date: 19 January 2026

Financial transaction monitoring in Ukraine in 2026 has reached a new level. Thanks to digitalization, banks and the tax service track not only the sources of funds but also every payment purpose in real time.

Today, automated financial monitoring systems instantly check whether transactions match your KVED codes and whether you have supporting documents (invoices, completion certificates). Even a minor mistake or vague wording (“payment for services” without an invoice number) can lead to an account freeze, penalties, or, worst of all, the forced loss of your single tax status.

Why a sole proprietor should control the payment purpose

Many people think: “What difference does it make what’s written there – the main thing is that the money came in.” However, for an entrepreneur this is a critical mistake. The payment purpose is the main “document” based on which the bank and the tax office draw conclusions about the legality of your income.

An incorrect entry in the payment details can instantly lead to:

• Account blocking. The bank’s algorithms will flag the payment as “suspicious”.
• Losing the simplified tax system. If the purpose does not match your KVED codes, the tax office may switch you to the general taxation system with payment of 18% personal income tax and 5% military tax.
• Fines and inspections. Vague wording is a reason to request documents for the last 3 years of business activity.

Today, every bank in Ukraine operates under international standards KYC (Know Your Customer) and AML (Anti-Money Laundering). 

According tothe Law of Ukraine No. 361-IX, banks are required to perform financial monitoring of every transaction. This means that the bank must not only know your name, but understand the economic substance of the transaction:

1. What exactly did you receive the funds for? (Goods, services, invoice number).
2. Do you have the right to carry out this activity according to your KVED codes.
3. Does the payment amount match the scale of your business.

The detailed procedure for how banks must verify clients is defined in the NBU Board Resolution No. 65. 

Algorithm of safe payments for a sole proprietor

Be prepared that the bank may request documents confirming sources of income at any moment. This is a standard procedure of currency control and financial monitoring.

1. If you sell goods

The purpose must be as specific as possible so that the bank has no questions about where the money comes from. The correct formula: What exactly + supporting document (invoice/waybill) + number and date.

“Payment for goods (office furniture) according to invoice No. 245 dated 12.01.2026. VAT exempt.”

2. If you provide a service

Here it is important to specify the type of service in detail so that it matches your KVED code. Avoid the vague “Payment for services”.

Examples:

• “Payment for information and consulting services according to act No. 89 dated 15.02.2026”.
• “Payment for software development services according to invoice No. 12 dated 10.01.2026”.
• “Payment for online training services according to invoice No. 45 dated 20.01.2026”.

3. Transfer from a sole proprietor’s account to a personal card

This is a legal way to receive your “net” money after paying taxes.

Example: “Transfer of net income from entrepreneurial activity after tax payment to a personal card for personal needs”.

Attention! Do not use the key card to pay for personal purchases (supermarkets, cinema, gas stations). Although it is technically possible, the tax office may interpret this as misuse of funds or require proof that the bread you bought at “Silpo” is needed for your business. First transfer the money to a personal card, and then spend it.

4. If you pay another sole proprietor

In 2026, banks pay special attention to settlements between entrepreneurs.

Example: “Payment for design development according to contract No. 5 dated 14.01.2026, Sole Proprietor Petrenko O.O. (TIN 1234567890). VAT exempt.”

Do not forget that you act as a tax agent in terms of reporting. You must reflect this payment in Appendix 4DF (reporting calculation) under income code “157”.

5. Topping up your sole proprietor account with personal funds

If you need to add your own money to a business account (for example, for rent or taxes): “Replenishment of own working capital. VAT exempt.”

These funds are not your income and are not subject to 5% tax, but be sure to keep the top-up receipt so that during an inspection you can prove that this is your personal money, not hidden revenue.

Common mistakes in payment purpose that can cost you dearly

In 2026, the automated systems of the State Tax Service are configured to instantly detect inconsistencies. Here are the top mistakes you should avoid:

1. The payment purpose does not match your KVED codes

This is the most dangerous mistake an entrepreneur can make. 

The tax service uses automated algorithms that compare the text in the “Payment purpose” field with the list of your registered KVED codes in the Register of Single Taxpayers.

If the system sees a payment for an activity that is not listed in your extract, such income is automatically considered received outside the simplified taxation system.

What risks does this create?

• You are obliged to independently tax the amount of such a “mistaken” payment at an increased rate of 15% (instead of the usual 5% or a fixed rate).
• You lose the right to remain on the single tax from the first day of the month following the tax quarter in which the violation occurred.
• If the violation is discovered by the tax office during an inspection, the amount may be taxed as the income of an ordinary individual: 18% PIT + 5% military tax (a total of 23% taxes on turnover).

Often, sole proprietors make mistakes due to the carelessness of counterparties or the desire to “just accept the money”:

1. You have KVED 47.91 (retail trade via the internet), but the client writes: “Payment for consultation on equipment selection”. For the tax office, this is a service. If you do not have KVED 70.22 (business and management consulting) – this is a violation.
2. You are a programmer (KVED 62.01), but decided to sell an old laptop through your sole proprietor account. The client writes: “Payment for goods: Dell laptop”. If you do not have trade-related KVED codes – you were not allowed to sell goods as a single tax sole proprietor.
3. You rent out part of your premises, but you only have KVED codes for manufacturing. A payment with the purpose “Rent payment” will lead to immediate cancellation of your single tax status.

Before issuing an invoice, make sure the name of the service or goods in it matches, word for word, the essence of one of your KVED codes. If the client made a mistake in the payment purpose, be sure to ask them to send a letter clarifying the payment purpose – this is your only protection during an inspection.

2. No reference to the supporting document

Writing simply “Payment for goods” or “For services” is an invitation for bank financial monitoring. Without an invoice, act, or contract number, the payment is considered “anonymous”.

3. Using the same “template” for all clients

Copying the same payment purpose (“Payment for services under contract No. 1”) for different counterparties and different amounts looks suspicious. It creates the impression of fictitious activity.

4. Accepting payments to a personal card for business purposes

This is a classic trap for beginners. Any regular payment without a clear purpose to your individual card is easily identified by the bank. 

As a result – the personal card may be blocked until the source of funds is clarified, and there is a risk that the tax office will recognize these amounts as undeclared income.

Card-to-card transfers: key risks for sole proprietors in 2026

“Card-to-card” transfers (P2P) are the fastest way to pay, but for an entrepreneur they are a high-risk zone. Bank financial monitoring systems today operate based on AI that instantly highlights typical signs of business activity on personal accounts.

If you receive funds to a personal card (not a sole proprietor account), the bank may treat this as hidden income if:

• Incoming payments are regular (for example, every day or several times a week).
• Payments come from a large number of different people.
• Payment amounts often repeat or are similar in size.

How to safely receive personal transfers?

If a transfer is truly not related to business (for example, friends reimbursed you for lunch), teach your close ones to specify the purpose correctly: “Debt repayment”, “Gift”, “Financial assistance from a relative”.

Never write the product name, order number, or the word “thank you” (the latter is often treated by banks as hidden payment for a service).

Transfer by bank details (IBAN)

This is the most official, transparent, and safe way to accept funds. Banking apps allow such transfers in seconds, so the client’s argument “card is easier” no longer works.

1. Send full details: your sole proprietor account IBAN, your TIN (tax number), and full name.
2. Control the client: Ask them to обязательно indicate the invoice number or the product name in the payment purpose.
3. Use QR codes: In 2026, many banks allow generating a QR code for payment via IBAN. The client simply scans it – and all details and the correct payment purpose are filled in automatically.

Switching to payments via IBAN details gives an entrepreneur three strong advantages. First, you become an “ideal client” for the bank, since all your transactions are absolutely transparent and understandable for financial monitoring systems. Second, it ensures you have an impeccable reputation with the tax office. And finally, it is convenient for you: funds go directly to the official business account, which allows you to instantly and legally transfer net income to a personal card for personal needs without additional explanations.

Consequences of an incorrect payment purpose

An incorrect payment purpose is not just a remark from a bank clerk. It is a legal basis for sanctions:

• For sole proprietors on the simplified system: Forced cancellation of single tax status and transfer to the general system with начислением 18% PIT and 5% military tax on all questionable incoming payments.
• For everyone: Account blocking under the Financial Monitoring Law. Unblocking can take weeks and will require a pile of paper explanations.

Real case from practice: the “identical transfers” trap

One of our clients (a Group 2 sole proprietor) accepted payments for subscriptions to their service to a personal card. The amounts were small – UAH 200–500 each, but regular and from different people.

Result: The bank blocked the card due to signs of commercial activity. During the review, the tax office recognized these funds as hidden income. A fine of 25% of the total amount of all transfers + additional assessment of PIT and military tax. Loss of the right to remain on the simplified system for the next two years.

How to avoid problems with financial monitoring

Even if you are not a sole proprietor, you are under the supervision of the bank’s automated systems. Here is how to protect your transfers:

1. Specify the real purpose: Avoid empty fields or jokes in the comments (for example, “for weapons” or “for fun”). The best options are: “Gift”, “Financial assistance to a relative”, “Debt repayment”.
2. Keep proof: Messenger correspondence, receipts, or loan agreements. In 2026, the bank may ask you to explain a payment from two years ago.
3. Watch the amounts: Regular transfers approaching financial monitoring limits may trigger a request about the origin of funds.
4. Consult in advance: If you expect a large transfer (for example, from selling a car or real estate), it is better to ask the bank in advance which documents they will need.