“Project management”, “management consulting”, “operational support” and “business coordination” are familiar terms in commercial contracts. For businesses and individual entrepreneurs using Ukraine’s single tax regime, however, the actual scope of these services requires careful legal assessment.
Under Article 291(291.5)(291.5.1)(7) of the Tax Code of Ukraine, businesses engaged in enterprise management activities are ineligible for the single tax regime in Groups 1, 2 and 3.
The Tax Code does not define precisely what constitutes “enterprise management activities”. This creates a practical question for consultants, service providers and their clients: which responsibilities amount to advisory or organisational support, and which may be treated as direct management of another enterprise?
Does KVED 70.22 Affect Eligibility for the Simplified Tax System?
A common concern relates to KVED 70.22, “Business and other management consultancy activities”, a Ukrainian classification code for economic activities. Because its title includes the word “management”, the code is sometimes assumed to be incompatible with the single tax regime.
However, that is not the case.
KVED 70.22 covers a wide range of advisory services and organisational support, including management advice, strategic and operational planning, change management, and financial, marketing and human resources policies. Registration under this code does not, by itself, establish that the service provider manages another enterprise.
This distinction is reflected in the approach taken by Ukraine’s State Tax Service (STS). In Individual Tax Consultation No. 1139/ІПК/99-00-04-03-03/ІПК dated 27 February 2026, the STS explains that KVED is a statistical classification tool and does not itself confer rights or impose obligations. Where a registered code covers both permitted and prohibited activities, a taxpayer may remain under the simplified tax regime if it does not actually perform the prohibited activities.
Accordingly, an assessment must focus on the services actually delivered and the powers exercised by the provider.
How to Distinguish Advisory Support from Enterprise Management
Providing advice, organising meetings, coordinating communication among project participants, monitoring deadlines, maintaining records and preparing reports or recommendations do not automatically constitute enterprise management. The decisive consideration is the service provider’s authority.
Where the provider collects information, reports on project progress, facilitates cooperation and makes recommendations while the client retains decision-making authority, the arrangement has the characteristics of advisory, informational or organisational support.
The position changes if the provider independently assigns duties to the client’s employees, issues binding instructions, approves expenses or budgets, makes staffing decisions, controls funds, enters into transactions on the client’s behalf, or effectively performs the functions of the enterprise’s director. Such powers may indicate enterprise management activity.
The STS therefore considers the material facts of each arrangement and the supporting primary accounting documents when assessing its nature.
Why the Description of Services in the Contract Matters
The title of a contract cannot alter the substance of the relationship. Calling services “information and consulting services” will not resolve the tax risk if the provider is effectively managing the client’s enterprise. Conversely, when the work is genuinely advisory or organisational, describing it as “management of the client’s business” may create unnecessary uncertainty.
More accurate descriptions for consulting and project support may include “organisational and communication support”, “monitoring deadlines and implementation progress”, “coordination between participants”, “preparation of recommendations” and “collection and organisation of information”.
The agreement should make clear that management, staffing and financial decisions remain with the client and that the provider does not replace the client’s governing bodies. The scope of work, statements of work, service acceptance documents, reports and actual authority should describe a consistent working arrangement.
What Are the Potential Tax Consequences?
If a single tax payer actually engages in enterprise management activities, the consequences may be significant.
The applicable treatment depends on whether the taxpayer is an individual entrepreneur or a legal entity.
| Consequence | Individual entrepreneur (FOP) using the single tax regime | Legal entity in Group 3 |
| Transition to another tax regime | The taxpayer must switch to the payment of other taxes and charges from the first day of the month following the tax reporting period in which the prohibited activity was carried out, under Article 298(298.2)(298.2.3)(5) of the Tax Code of Ukraine. | |
| Tax rate applicable to income from prohibited activities | A 15% single tax rate applies to income from such activities under Article 293(293.4) of the Tax Code of Ukraine. | A double single tax rate applies under Article 293(293.5) of the Tax Code of Ukraine. |
If the taxpayer fails to switch to the general taxation system and the tax authority identifies the violation during an audit, its single tax registration is cancelled by a decision of the authority under Article 299(299.11) of the Tax Code.
What to Check Before Entering into a Services Agreement
Registration under KVED 70.22 does not automatically disqualify a taxpayer from the simplified tax system. The actual scope and nature of the services remain decisive.
Consulting, recommendations, communication coordination, monitoring, and administrative or project support differ in substance from an arrangement in which the provider is entrusted with actual authority to manage the client’s enterprise.
Before signing, a single tax payer should review the entire working relationship: the registered KVED activities, the contractual scope, decision-making powers, primary accounting records and how the services are performed in practice. Consistency across these elements is essential for reducing tax exposure.
If your business provides consulting, management-related, administrative or project services and you are concerned about your eligibility for the simplified tax system, contact Smartsolutions. Our team can review the services performed, KVED classification, contract terms and supporting documents, assess potential tax risks and help structure the engagement in line with Ukrainian law.
FAQ
Can an individual entrepreneur on the single tax system have KVED 70.22?
Yes. Having KVED 70.22 “Business and other management consultancy activities” does not automatically prevent an individual entrepreneur from using the simplified tax system. The decisive factor is the actual substance of the activity. If the entrepreneur provides consulting, information or organisational services and does not actually manage an enterprise, the KVED code itself does not disqualify them from the single tax regime.
Is KVED 70.22 considered enterprise management activity?
Not necessarily. Class 70.22 covers a broad range of consulting services and organisational support related to management, strategic and operational planning, change management, and financial, marketing and HR policies. Tax consequences should be assessed based on the contractor’s actual actions and powers rather than the name of the registered KVED code alone.
What services under KVED 70.22 can a single tax payer provide?
Consulting and organisational support may include collecting and systematising information, preparing recommendations, organising working meetings, coordinating communication, monitoring deadlines, maintaining documentation and preparing reports. Management, HR and financial decisions should remain with the client, while the contractor should not replace the client’s governing bodies.
What is considered enterprise management for single tax purposes?
Indicators of actual management may include independently allocating tasks among employees, giving binding instructions, approving expenses or budgets, making HR decisions, disposing of funds, entering into transactions, or effectively performing the functions of the enterprise’s manager. The key criterion is the scope of the contractor’s authority and their right to make management decisions independently.
What tax consequences may prohibited activities have for a single tax payer?
According to the article, the taxpayer must switch to the payment of other taxes and charges in the manner prescribed by the Tax Code of Ukraine. For an individual entrepreneur, a 15% single tax rate applies to income from prohibited activities; for a legal entity in Group 3, a double single tax rate applies. Registration as a single tax payer may also be cancelled following a tax audit.
How should consulting and organisational services be described in an agreement?
The wording of the agreement should correspond to the contractor’s actual activities. For consulting and project support, the article uses wording such as “organisational and communication support”, “monitoring deadlines and implementation status”, “coordination of interaction”, “preparation of recommendations”, and “collection and systematisation of information”. Management, HR and financial decisions should remain with the client.
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