укр eng рус est


Recent news
Chambers Europe

“The team was recently visible advising on a number of pharmaceutical cases. Sources agree that the team is “moving in the right direction” and are particularly impressed by its work in the pharmaceutical sector”.


Unified Social Tax for Entrepreneurs in 2017: “Tax for Air”


Iryna Kuzina, attorney, Head of Kharkiv office at Ilyashev & Partners Law Firm
Source: Ekonomichna Pravda

The state being a partner of business has once again proved its unpredictability and high-handedness. And a nice social promotion of State Fiscal Service on TV will hardly change this situation.

“After we had imposed the tax on air, we began to breathe less”

Gianni Rodari, Adventures of Cipollino

On January 1, 2017, the Law of Ukraine was adopted, which created a nationwide storm due to the new obligations of the so-called “sleeping” individual entrepreneurs.

The amendments were introduced into Art. 7(2,1) of the Law of Ukraine “On Collection and Accounting of Unified Social Tax”:

The unified social tax is imposed… 2) for taxpayers indicated in paragraphs 4 (except the individual entrepreneurs who chose the simplified taxation system) and 5 of part 1 Art. 4 of this Law, – for the amount of profit (revenue) received from their business activities and liable to personal income tax. At the same time, the amount of the unified social tax cannot be lower than the amount of minimal insurance contribution per month.

At first glance, these minor changes mean that the entrepreneurs shall pay the unified social tax regardless of whether they gained actual revenue in the reporting month or not.

The amount of this social tax is quite tangible for small businesses, especially taking into account the increase of minimal wage.

Thus, starting from January 1, 2017, the entrepreneurs shall pay “for themselves”: UAH 3200 * 22% = UAH 704. For unified tax payers of the 1 group the amount of the unified social tax shall be twice less – UAH 352.

These changes shall hit first of all the entrepreneurs who do not conduct any activities, or conduct them from time to time. Usually, these are people who occasionally have some side jobs, for example, mothers taking care of their children.

The good news is that the businessmen-pensioners who received an old age pension from the state are still exempt from the unified social tax “for themselves”.

The State Fiscal Service of Ukraine has already provided the corresponding explanations.

Nevertheless, the introduced changes greatly surprised the business, as the Law was officially published on December 27, 2017, three days prior to its enforcement. Who had not managed to close their business within these three days should pay UAH 704 at least for January.

The entrepreneurs not interested in the further conduct of their activities under the new conditions made a streak to state registrars. There were great lines at the centers of administrative services, and the spots in these lines were illegally sold for UAH 250 in Kharkov.

The notaries increased their fees for the registration of business activities termination up to UAH 700, despite the fact that under the law such registration act should be free of charge.

The state registrars of the Registration Department of Kharkov City Council received overtime and probably well paid work. In the hottest days the lights in the cabinets of the Registration Department were on till late night.

No wonder that such novelties attracted such a great public attention.

The attempts are undertaken to solve this situation. Thus, the Draft Law No. 5633 dated January 4, 2017, was registered in Verkhovna Rada. This Draft Law proposes to set the transitional period by April 1, 2017. Within this period, the entrepreneurs are liable to submit their applications on the termination of business activities.

And in the first quarter of 2017 such entrepreneurs will not be charged with the unified social tax for the months in which they did not gain any revenues. Nevertheless, this initiative should go through a long journey of all legislative procedures.

According to the latest news, about 130 thousands of entrepreneurs have already registered the termination of their business activities and this number continues to increase.

But do not think that all these “closed” entrepreneurs do not conduct any business activities at the moment and do not plan to do this starting from 2017. Many businesses will just go into “the shadow” working without the documents for cash, and definitely without the registration of labor relations with the hired personnel.

This situation, first of all shall worsen the legitimacy of overall business conduct in the country. Secondly, it shall lead to the increase of citizens’ labor rights infringement and their social vulnerability.

As for the level of contributions to pension fund and social insurance fund, it is hard to predict which tendency shall prevail – the increase of contributions at the expense of the unified social tax or the decrease due to business transfer into “the shadow”. Let the economic analysts consider this.

However, this is evident that the contributions from the unified social tax shall not meet the expectations of the Government.

In addition, it is clear that the state being the partner of business has once again proved its unpredictability and high-handedness. This destroys the citizens’ tax discipline – today you finally made a decision to start your own business, and the game rules changed overnight.

Moreover, a nice social promotion of State Fiscal Service on TV will hardly change this situation.

© 2019 Ilyashev & Partners / Mobile version