On 26 July 2023, the President of Ukraine signed Law No. 3219-IX (Draft Law No. 8401) on Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Peculiarities of Taxation during the Period of Martial Law (the «Law»). The Law came into force on 1 August 2023. We will consider the tax changes in a series of articles that will focus on various taxes and fees affected by these changes. Today’s topic will focus on the single tax and, in particular, the cancellation of the single tax with special features.
Transitional features of the abolition of the single tax with taxation peculiarities (2%)
Starting from 1 August, the third group of the single tax with the 2% tax rate will be cancelled. The 2% refund was regulated by the legislator in the transitional provisions of the Tax Code, which provide for a number of options for further actions of the taxpayer:
- Taxpayers that have not independently opted out of the simplified taxation system with its specific features as of 31 July 2023 will automatically switch to the taxation system they were in before the date of transition by 2% starting from 1 August 2023;
- Newly established business entities that have chosen the simplified taxation system with taxation features from the date of state registration are automatically considered to be single tax payers of the third group with a rate of 5%. This provision cancels out the position of the State Tax Service, which envisaged a transition to the general system after the cancellation of the 2% tax rate for those newly established business entities that applied for the use of taxation features within 10 days from the date of state registration;
- Taxpayers who used the taxation features in 2023 but refused to use them or lost the right to do so may reapply for the simplified taxation system, including in case of repeated state registration as an individual entrepreneur in 2023. If such an application is submitted before 1 September 2023, such a person will be considered a single tax payer from 1 August 2023 (except for single tax payers at the VAT rate, if such a person is not registered as a value added tax payer as of 1 August 2023).
Single tax income limit
For the purposes of determining the income limit during the reporting year 2023, the amount of income received by the taxpayer during the period of the 2% tax rate will not be taken into account. This means that if a taxpayer under the simplified taxation system exceeds the income limit for its group during the period of using the taxation features, it will not lose the right to continue to be under the simplified taxation system. At the same time, the amount of income after the cancellation of 2% will be determined in proportion to the number of calendar months of the current calendar year during which the single taxpayer did not apply the taxation features. Thus, for the period from 01.08.23 to 31.12.23 (5 months), the income limit will be as follows:
1 group – 466 208,33 UAH.
2 group – 2 328 250 UAH.
3 group – 3 257 875 UAH.
Resumption of single tax payments
The obligation to pay the single tax for individual entrepreneurs of groups 1 and 2, except for those whose tax address is located in the territories of hostilities or in the territories of Ukraine temporarily occupied by the Russian Federation, which are included in the list in accordance with Order of the Ministry of Reintegration No. 309, is restored. In this case, re-registration of the location of such an individual entrepreneur to a territory other than the one specified in the List No. 309 restores the obligation to pay the single tax from the first day of the month following the month of the change.
Persons entitled not to pay the single tax – do not complete a declaration for such periods.
It is also worth noting that the «technical» single tax debt that arose in the taxpayer’s electronic office for the period from 1 April 2022 to 31 July 2023 is not considered a tax debt.
The Smartsolutions team will continue to keep abreast of current changes in legislation. If you need a more detailed analysis of tax regulations or have any questions regarding the interpretation of a particular provision of the Law, you can always contact the experts of the Smartsolutions team, who will promptly provide a qualified answer to your questions.
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