LLC taxation in Ukraine

What tax systems are available for LLC in Ukraine

There are 2 tax systems in Ukraine: general and simplified. Both are available for LLC. They differ in types and rates of taxes, restrictions, reporting features, etc. There are also special conditions for residents of Дія.City and technology parks, but this is a separate story, which you definitely should not go into on your own without a qualified accountant and lawyer.

General taxation system

• not all income is taxed, but only net profit. That is, income minus expenses. The remainder is subject to tax;
• there are no restrictions on the types of activities. You can choose this system regardless of your KVEDs (types of economic activity);
• there are no restrictions on the number of employees, and in general there are practically no restrictions.

Income tax

The basic income tax rate on the general system is 18%

* In addition, there may be rates: 0, 3, 9, 10 or 30%. It depends on the type of activity and category of taxpayer.

It is profit = income – expenses that is taxed. You can attribute almost everything that is needed for the operation of the enterprise to expenses, rent, wages, payment to suppliers and for services, costs of materials, etc. But keep in mind that income tax is calculated not on payments to suppliers, but on documents from suppliers (receipt notes, certificates of work performed, etc.). Even if you do not pay the supplier, but you have such a document, this will increase your expenses. The same applies to your income. You may not have received the money yet at the end of the reporting period, but if you have shipped the goods or provided the service, this is your income.

The annual income tax return and financial reporting for a turnover of up to UAH 40 million are submitted once a year, after UAH 40 million per year, once a quarter.

Simplified taxation system for LLC

Under this system, LLC pay only a single tax (ЄП), military tax (MT) and sometimes VAT. Other taxes such as excise, transport, etc. – only if necessary.  

The size of the UT rate depends on the selected group of the single tax. There are 4 UT groups in total.

However, for a company in the form of an LLC, only the third and fourth groups are available. An LLC cannot choose the first and second. But there is also a nuance with the fourth group: it can only be chosen by an enterprise engaged in agricultural activities, so here we are considering the most common case of LLC on a simplified taxation system, on a single tax of group 3.

Single tax

So, the main option for LLC remains the third group of the single tax. 

Single tax rates for the third group of single tax:
3% if with VAT
5% if without VAT

+ 1% military tax from income

* tax is calculated from total income (turnover), reporting period is a calendar quarter, i.e. tax is paid quarterly.

Please note that single tax payers have restrictions. 

Your annual income should not exceed UAH 9,336,000

* 1167 minimum wages established as of January 1 of the current year. 

in figures:
9,336,000 UAH (222,285 USD) maximum turnover per year
560,160 UAH (13,340 USD) single tax 5% +1% military tax on maximum turnover per year

* calculated at the rate of 42.

What happens if you receive income over this amount?

You will have to switch to the general taxation system and register as a VAT payer. You will also pay double the single tax of 10 or 6% on the difference that exceeds the annual limit. You can become a single tax payer only 12 months after this violation.

An LLC cannot be registered on the simplified taxation system if your activities are included in this list: gambling; currency exchange; production, sale, export, import of excisable goods; extraction, production and sale of precious materials; extraction and sale of minerals; acting as financial intermediaries; assistance in the management of other enterprises or organizations; postal services (except courier) and communication (except for activities subject to licensing); sale of art objects, antiques, organization of auctions; organizing tours.

Reporting on the single tax is submitted quarterly. The reporting deadline is 40 days after the end of the quarter.

Value Added Tax (VAT)

You must register separately as a payer of the value added tax. This decision is voluntary, but depends on the turnover. It depends on whether it is profitable for you to be a VAT payer.

Focus on who you will be working with. If your suppliers and customers are registered as VAT payers, then you will also need to obtain this status, otherwise it will be expensive and inconvenient to work with you for those who pay VAT. If there are no VAT-holders among them, then you do not need to register until you reach the income/turnover limits, more on that below.  

VAT rate for LLC on the general or simplified taxation system 20%

* there may also be VAT rates:  0, 7% and 14% depend on the goods and types of activities.

VAT on the general system

On the general system after 1 million UAH registration as a VAT payer is mandatory if over the last 12 calendar months the total amount from the sale of products or provision of services is 1 million UAH or more for deductions this amount of VAT (Article 181 of the Tax Code of Ukraine.)

And there is also an exception to this exception If you provide services exclusively to non-residents of Ukraine listed in pp. 186.3 p. 186 of the Tax Code then there is no need to register as a VAT payer, even when the income exceeds 1 million. After all, such services are not subject to VAT.

VAT on a simplified system

For payers on a simplified tax system, registration as a VAT payer is also voluntary. The main thing is not to exceed the annual income limit for the simplified system.

Reporting

VAT tax return is submitted monthly before the 20th day of the following month. But if you apply for a quarterly report, you can submit a VAT report quarterly.

Before registering as a VAT payer, the choice should begin with finding out whether it is profitable for the company to become a VAT payer. To answer this question, you need to decide: are our main buyers and suppliers of goods / services VAT payers? If a company purchases goods from VAT payers (or imports) and simultaneously sells to VAT payers, then being a VAT payer is mandatory. If both buyers and suppliers are non-VAT payers, then it is not profitable for the company to be a VAT payer. If there are both payers and non-payers among buyers and suppliers, then the task becomes somewhat more complicated and it is necessary to calculate the projected turnover and VAT amounts.

You should also pay attention to the fact that if you provide only the services listed in clause 186.3 clause 186 of the Tax Code to non-residents, then you do not need to register as a VAT payer, even if the income exceeds 1 million, since such services are not subject to VAT.

And according to p. 180.2 of the Tax Code by the person responsible for calculating and paying VAT to the budget in the event of provision of services by non-residents, including their permanent establishments that are not registered as VAT payers.

Wages — taxes

If your company has officially registered employees, each of them will need to be paid wages twice a month, and taxes will also need to be paid for each of them. 

• Personal income tax (PIT) – 18%
• Unified social contribution (USC) – 22%
• Military tax (MT) – 5%

How much is it in money?

For the calculation, we take the minimum wage established on 01.01.2025 – 8000 UAH.

The current minimum wage can be checked here.  

* we do not recommend paying less than the minimum wage, this attracts the attention of tax authorities and will be a reason for an audit.

Wage costs per employee on the minimum wage

UAH 1,440 Personal income tax 18% (from employee’s salary)
UAH 400 VZ 5%  (from the employee’s salary)
UAH 1,760 Unified social contribution 22% (the employer pays on top of the salary)

UAH 6,160 the employee receives “In hand”

from 01.01.2025, the consolidated salary reporting is submitted monthly within 20 days after the end of the month.

  please note: all the above taxes for LLC are basic. Others may be added to them. For example, real estate tax, land tax, transport or excise tax. These taxes depend on the activities and specifics of the LLC. The more complex and different types of activities, the more different taxes arise. 

Reporting

Main taxes and reporting of LLC:

Income tax – the report is submitted in the financial statements of LLC within 60 days after the reporting year.

• VAT – the report should be submitted monthly before the 20th of the following month (VAT tax return), if you submit an application for choosing a quarterly report, you can submit a VAT report quarterly.
• Report on personal income tax, VZ and unified social contribution (Combined reporting) is submitted jointly for the period of the month within 20 days after the end of the month.
• Single tax – reporting quarterly 40 days after the end of the quarter – the deadline for filing.
• Single tax – paid within 10 days following the last day of filing the declaration (or within 50 days following the reporting quarter)
• Financial statements— for those who report for the year, the deadline for submission is no later than February 28 of the year following the reporting year, for those who reports  quarterly – no later than the 10th day of the month following the reporting quarter.

If the income is up to 40 million UAH per year, then we submit a profit declaration and a financial report annually, if the income is 40 million UAH. and more than once per quarter.

An annual income tax return and financial statements are submitted by all taxpayers within 60 calendar days after the new year.

A quarterly income tax return + financial statements are submitted within 40 days after the end of each quarter.

Income tax is paid within 10 days after the end of the income tax return filing period.

For reporting, accounting and document flow you will also need

1. Electronic taxpayer account— the account of the state tax service of Ukraine
2. Key of the electronic digital signature (EDS):
   • PrivatBank
   • GNSU
   • M.E.Doc
   • Vchasno
3. may be needed
   • M.E.Doc– a program for reporting and document exchange ntami
   • Vchasno — electronic document management, online document exchange
   • Dilovod — Ukrainian online service for management, accounting and reporting, in our opinion, it covers only simple tasks

How to withdraw income from an LLC

The income of an LLC belongs to the enterprise. Not to the director or the founder. And it is the LLC that can dispose of these assets: buy real estate, cars, equipment, etc. The founder owns this income indirectly through the LLC. And theoretically cannot use it for his own needs. 

But what if you need to withdraw funds and spend them at your own discretion? There are two ways.

1. Dividends to the founder

Withdraw funds as dividends to an individual founder. However, you will have to pay taxes in the amount of 10 to 14% of this amount, namely:

• LLC on the general system 5% as personal income tax (PIT) + 5% military tax.
• LLC single taxpayers on the simplified system will pay when paying dividends to the founder, they will pay 9% PIT and 5% military.

(p. 167.2, 167.5.4 PKU)

If a foreigner withdraws dividends to a foreign account, taxes are paid in the country of his tax residence. But you will have to pay in any case. The tax authorities will definitely notice such an operation. And before paying dividends, you will have to pay all the taxes that the LLC must pay, and they will be higher than for a resident.

2. Sole Proprietorship (FOP)

Withdraw income to Sole Proprietorship. We will warn you right away: this is an incorrect method and a violation. You cannot do this. But we will tell you how many enterprises in Ukraine work.

Income is withdrawn through payment to FOP for services and supported by a package of documents.

For an enterprise, these are expenses that reduce the amount of income taxes on the general system. For FOP, this is income on which 5% + 1% military tax is paid on the 3rd group and even less on the 2nd. This method saves at least the difference in taxes between 10% and 6%.

But it is worth knowing that the tax authorities understand this “scheme” perfectly well. They regard it as tax and personal income tax evasion, or as labor relations. If you abuse this method and use it carelessly, you can receive additional personal income tax, profit tax and fines. Don’t do this without an accountant.

Why choose LLC

Limited Liability Company or LLC is the most common form of legal entity (company) in Ukraine. 

A company in the form of LLC is an independent entity, a “fictitious person”. This means that the owners and participants of LLC are not liable for the company’s obligations. The company is independently liable for the property contributed to the authorized capital. An LLC can own movable and immovable property.

Why choose an LLC:

• this form is available to both Ukrainian and foreign owners;
• LLCs can be owned by Ukrainian or foreign companies;
• investors, foreign clients, tenders, creditors and “big” partners are more willing cooperate specifically with the LLC;
• the number of participants and their composition is unlimited;
• the minimum size of the authorized capital is not established;
• liability is on the LLC, and not on the individual.

Everything is flexible and at your discretion.

The authorized capital is not subject to taxation 

You should know: the authorized capital can be contributed with the first (and not only the first) funds for LLC expenses, you can even replenish it from abroad. This amount will not be considered profit and will not be taxed if the company needs to buy something or pay for something, and there is no money, then replenishing the authorized capital is exactly the working tool you need.

If you contribute these funds in some other way (not as a contribution to the authorized capital), then it is almost guaranteed that such a replenishment amount will be considered income and will be taxed. 

The authorized capital is the total amount of the contribution of all participants in the company. This is the amount that creditors will collect if the company “gets into debt”. At the same time, the participants do not risk their personal funds or property at all. The authorized capital can be used for the needs of the enterprise, wages, services, equipment or materials.

Is it possible to contribute 100 UAH to the authorized capital and calm down? Yes, it is possible.

An understated authorized capital may affect the company’s reputation. Counterparties, and especially investors or tenders, may be reluctant to cooperate with small businesses. In addition, the size of the share of each participant in the LLC determines his share in the company’s profit. And it can also affect the rights and obligations according to the charter.

What should you pay attention to?

How to choose the right tax system for an LLC? To do this, define:

• What types of activities will you have
• What will be the turnover
• How many employees will there be
• Methods of receiving payments from clients, who, where and how pays you
• Income and expense structure, who are your suppliers and customers, what taxes do they pay
• Describe the main financial and accounting business processes for the supply of services, goods or production

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