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Working as a PE on the Simplified Tax System in 2020
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PE (FOP) Operation on the Simplified System in 2020: Limits, Rates, and Key Legislative Changes
Operating as a PE (FOP) under the simplified system in 2020 requires special attention to updated income limits and tax rates, which directly depend on minimum wage indicators. Following the implementation of the National Revenue Strategy, rules for private entrepreneurs have become more structured, and transaction control more transparent.
In this article, Law Business Association (LBA) lawyers have prepared a detailed analysis of all legislative changes that will directly affect your business activities this year.
Table of Contents:
Legal Framework: Law No. 466-IX and Amendments to the TCU
The basis for many modern administration procedures was Law No. 466-XI “On Amendments to the Tax Code of Ukraine regarding the Improvement of Tax Administration.” This document eliminated a number of technical and logical inconsistencies in the legislation.
Law No. 466-XI dated 16.01.2020 (Bill No. 1210) introduced significant adjustments to the Tax Code of Ukraine (TCU), concerning business transparency and taxpayer responsibility.
Updated Income Limits for PE Groups 1-3
One of the most important indicators for “simplified” taxpayers is the maximum income volume. Exceeding these limits forces the entrepreneur to switch to the general system or choose another tax group.
Current Income Limits:
- Group 1: Income volume must not exceed 1,000,000 UAH.
- Group 2: Permitted income is limited to 5,000,000 UAH.
- Group 3: The maximum income volume is 7,000,000 UAH.
Tax Period and Reporting Specifics
Different groups and categories of taxpayers have their own reporting rules. Specifically, for Group 3 unified tax payers who are also VAT payers, the tax (reporting) period is one calendar month according to Art. 294 of the TCU.
Rules for Group 4 (agricultural producers) were also clarified. The tax base for them is determined as of January 1 of the reporting year according to the procedure established for land payment.
Changes in Unified Tax Rates
The legislation has become more flexible regarding changes in the tax regime. Group 3 entrepreneurs using a 5% rate have the right to change it voluntarily.
To do this, a corresponding application must be submitted. The deadline for submitting such an application has been shortened: it must now be done no later than 10 calendar days (instead of the previous 15) before the start of a new calendar quarter.
Restriction of Benefits and Real Estate Rental
An important innovation is the revision of land tax benefits. Group 1-3 unified tax payers who rent out land plots or real estate are required to pay land tax on a general basis. This rule is intended to level the playing field in the commercial real estate market.
Electronic Registration and Cancellation of Taxpayer Status
The state continues its course toward digitalization. Now, the transition to the simplified taxation system can be carried out entirely remotely.
Key Procedural Changes:
- Electronic Form: The application for transition can be submitted via electronic communication using an EDS (para. 298.1.1 of the TCU).
- Tax Debt: Registration of a unified tax payer can be automatically canceled if the entrepreneur incurs a tax debt exceeding 1020 UAH.
Compliance with these rules will help avoid penalties and preserve the right to use the preferential tax regime.
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