How to start as an individual-entrepreneur in Ukraine: a 2024 step-by-step guide

An individual entrepreneur is the most popular form of business in Ukraine. According to the YouControl service, almost 315,000 Ukrainians registered as individuals-entrepreneurs in 2023.

With the digitization of business, this procedure is becoming increasingly easier. Today, you can register and liquidate an individual entrepreneurship online without leaving your home. In this article, we will cover how to start as an individual-entrepreneur in Ukraine in 2024.

Registering as an individual-entrepreneur — where to start?

Any citizen of Ukraine who has reached the age of 16 can become an individual-entrepreneur. He/she will pay taxes at the place of registration or at the officially registered place of residence.

IDPs from the temporarily occupied Ukrainian territories may register as an individual-entrepreneur at a different place of residence. First, they need to obtain a temporary registration document from the State Migration Service of Ukraine.

Documents required to open an individual-entrepreneur

The following documents are required to register as an individual-entrepreneur:

• a copy of the passport;
• a copy of the Registration number of the taxpayer’s registration card;
• an application for registration;
• a single tax application (for the simplified taxation system).

The application form for the registration of an individual-entrepreneur is approved by Order No. 3268/5 of the Ministry of Justice. You can download the template here.

Step 1. Choose the KVED

KVED is a classifier of types of economic activity. It can be found on the website of the State Statistics Committee. The codes are structured by economic sectors. An individual-entrepreneur has the right to carry out business activities only in accordance with the codes specified in his/her registration documents.

The tax authorities require individuals-entrepreneurs to enter KVED codes in the State Register and run their business according to them. Single taxpayers need to indicate the KVED in the register of single taxpayers.

You can only receive income from your business activities within the framework of the registered KVED. Otherwise, the tax authorities may revoke the status of a single taxpayer and charge additional taxes.

The KVED affects the single tax rate for groups I and II. For these groups, the rate is set by local councils, and its amount depends on the type of activity the individual-entrepreneur is engaged in.

According to Art. 293.6 of the Tax Code of Ukraine, if an individual-entrepreneur works under several KVEDs at once, the maximum single tax rate for his group is used.

When you submit registration documents, you must specify which KVED will be the main one. It describes the main line of your business. This is the business activity that will be the source of the individual-entrepreneur’s major income.

An individual-entrepreneur can indicate only one main KVED. In paper documents, the KVED indicated first in the list is considered the main one.

Things to consider when choosing a KVED

Before registering as an individual-entrepreneur, you should think about all types of business activities and specify additional KVEDs. They can be added at any time. Also, an individual-entrepreneur can change KVEDs if he or she changes the field of activity or needs a specific code to obtain a license (for example, to sell alcohol, tobacco products, etc.).

The tax legislation does not prohibit doing business in several areas at once (such as, for example, trade and services), so the number of KVEDs that can be registered is unlimited. However, banking institutions may perceive a large number of unrelated KVEDs as a sign of a fictitious business and refuse to open an account. Unrelated KVEDs may also attract the attention of the tax authorities.

The current classifier may not include certain types of modern services. In such cases, the individual-entrepreneur should choose a KVED that is adjacent to his or her industry. For example, codes 63.99 “Provision of other information services” and 73.12 “Agency in advertising in the media” are appropriate for SMM specialists.

Step 2. Choose a group for an individual-entrepreneur

After choosing a KVED, you need to choose a taxation system — general or simplified (single tax).

The general system is used by large companies employing a large number of workers. The tax amount is determined by a percentage of the net profit for the month.

The simplified system is suitable for small businesses. Entrepreneurs who operate under this system pay a single tax (ST) — a fixed amount or a percentage of their income.

The Tax Code of Ukraine (TCU) defines four groups of single taxpayers (STP):

IEs of Group 1 are entrepreneurs without employees who are engaged in the retail trade in markets or the provision of household services to people. Their annual income must not exceed UAH 1.11 million per year. Partnerships with legal entities are prohibited.

IEs of Group 2 are small businesses with higher revenues than in the previous group. Entrepreneurs can be engaged in the production of food and non-food products, forestry and fishery, animal breeding, restaurant business, trading in markets and shops, providing household services, manufacturing goods, freelancing, etc. The number of employees is limited to 10 people. The maximum annual income is UAH 5.9 million per year. Group 2 individual entrepreneurs are allowed to cooperate and enter into agreements with legal entities.

IEs of Group 3 are entrepreneurs who can work independently or hire an unlimited number of employees. During a calendar year, their income is limited to UAH 8.2 million. They can cooperate with legal entities.

IEs of Group 4 are entrepreneurs engaged in agricultural activities. This category has special taxation systems and no maximum annual income limit. Group 4 IEs are allowed to cooperate with legal entities.

Group selection guidelines for an individual-entrepreneur

When choosing a group for IE, an entrepreneur should take into account the following features of their business:

1. Business scope. For small businesses, the 1st group of IEs is best suited, for medium and large businesses — the 3rd one.
2. Expected profit. If it does not exceed UAH 500,000 per month, you should choose Group 2, if you expect a higher profit, you should choose Group 3.
3. Business scaling. Group 3 of IE provides the most opportunities for business expansion.

Step 3. Open a bank account

In some banks (Privatbank, Monobank, Raiffeisen Bank Aval), you can open an account online. To open an account, an entrepreneur should open a card in a mobile application and register it as an individual-entrepreneur. You can also open an account at any bank branch.

According to clause 69.4 of the Tax Code of Ukraine, expense transactions under the account can only be initiated after the bank receives a notification from the controlling authority that the account has been registered.

An individual-entrepreneur must notify the bank of his/her business status (clause 69.7 of the Tax Code). It is not necessary to notify the tax authorities when the account is opened.

Step 4. Obtain a qualified electronic signature

An entrepreneur needs a qualified electronic signature (KEP) to register as an individual-entrepreneur online. Having a qualified electronic signature, an entrepreneur can solve many issues related to e-commerce:

• register a PRRO;
• sign electronic documents;
• submit tax reports in electronic form, etc.

Step 5. Choose a way to register as an individual-entrepreneur

Entrepreneurs can register IE online using the Diia service, go to an ASC or state registrar, or use the services of lawyers. Let’s consider each method.

How to register IE in the Diia service

The easiest way to open IE is online through the Diia service. For this, an entrepreneur needs a qualified electronic signature.

Registration is automatic and requires no involvement of the state registrar. The following steps are required:

• log in to your account in the Diia service;
• go to the “Services” menu — “Start a business”;
• click the “Open in 10 minutes” button;
• indicate the citizenship and registration address of the individual-entrepreneur;
• select the KVED from the list;
• choose a taxation system (general or simplified);
• specify contact details; confirm the completed application with an electronic signature.

It takes up to 2 business days to receive the results of the IE registration. During the period of martial law, registration of IEs with the tax authorities may require more time.

How to open an IE via ASC or state registrar

For offline registration, an entrepreneur needs to fill out an application for registration of IE and make an appointment at the ASC or with the state registrar at the place of registration.

The following documents are required for registration at the ASC:

• passport;
• original of the tax identification number;
• application for registration of IE (it can be filled in at the place of registration);
• if necessary, an application for switching to the simplified taxation system.

Within a day after submitting the documents, the entrepreneur will be able to get an extract from the Unified State Register. It can be obtained in the personal account of the Diia service.

If there is no ASC in the locality where the entrepreneur lives, he/she can contact an accredited state registrar. Registration of IEs follows the same procedure.

How to register IE with the help of lawyers

An individual-entrepreneur can also use the services of a law company — its employees will prepare all the necessary documents. The cost of such services will depend on the timeframe for registration.

Step 6. What should an individual-entrepreneur do after registration?

To start a business, after registering as an individual-entrepreneur, you need to additionally obtain the following documents:

An Extract of state registration of an individual-entrepreneur is required for cooperation with contractors, banking institutions, carriers, etc.

After registration, the Extract is automatically sent to your email. You can also download it in your Diia personal account within 24 hours after registration.

An Extract from the Register of Single Taxpayers is required for an individual-entrepreneur to avoid additional taxation. You can order the Extract in your personal account on the website of the tax service and download it in 4-5 days.

An agreement with NovaPay is required for online store owners and all entrepreneurs who send goods by Nova Poshta. The agreement will enable you to tax the received cash at the IE rate, and not the individual rate. You can get the agreement form on the NovaPay website or at any Nova Poshta branch.

Step 7. Register the RRO/PRRO

According to the current legislation, an individual-entrepreneur must use an RRO/PRRO for all settlement transactions with clients. If an entrepreneur fails to comply with this rule, he or she will be fined by the tax authorities.

The best solution for online commerce is the PRRO from Vchasno.Kasa. On the marketplace, it can be combined with a cash register and issue electronic receipts to customers. The entrepreneur sends them via messenger, e-mail, or any other convenient way.

After registering with Vchasno.Kasa, an individual-entrepreneur can connect an acquiring service. This will allow him/her to accept non-cash payments and simplify settlements with customers.