Andrii has been working as a designer under an FOP for several years. His main clients are Ukrainian businesses and freelance platforms. Recently, he received an offer from a large IT company: to cooperate under a gig contract with fixed payments and social guarantees. However, Andrii started wondering – can one combine an FOP and a gig contract without breaking the law? And how should taxes be paid in such a case?
Let’s break down how this works in practice.
What is a gig contract and how does it work?
A gig contract is a special form of cooperation introduced for the gig economy in Ukraine. It suits platforms and companies that hire specialists not full-time but for certain tasks.
The specialist signs a contract with a gig platform (company) and receives payment for the completed work. A gig specialist does not issue invoices or submit tax declarations – all accounting is handled by the company. A gig contract provides certain social guarantees, such as sick leave and accident insurance.
This format looks attractive for those who want to simplify administration and receive “net” income. However, if you are already registered as a private entrepreneur (FOP), it is important to understand how to combine these two statuses to avoid problems with the tax authorities.
Can an FOP work under a gig contract?
Ukrainian legislation does not prohibit combining the status of an FOP and working with a gig platform.
The entrepreneur remains a private individual and therefore can sign a gig contract as a private person and receive income under this scheme.
- Taxes under a gig contract are withheld and paid by the gig platform – this includes 5% personal income tax (PIT), 5% military levy, and 22% single social contribution (SSC) calculated from the minimum wage or, optionally, from the amount of remuneration. The specialist receives the “net” amount on their account.
- Taxes under the FOP must still be paid separately (single tax or general taxation system, SSC). A gig contract does not exempt from FOP obligations.
- If income under a gig contract is significant, it is important to account for it when calculating the total personal income to avoid additional tax risks.
Thus, combining the two formats is possible but requires attention to recordkeeping and detail.
What risks does combining FOP and a gig contract carry?
If the income under the contract is substantial, the tax authorities may become interested in whether it is related to the entrepreneurial activity of the FOP. It is important to clearly separate these two sources of income.
For example, under the contract, the single social contribution (SSC) is paid by the company, but as an FOP you are obliged to pay it separately. Even if the income amount is small, you cannot be exempt from both contributions.
Such a contract also provides certain benefits (insurance, sick leave), but they do not apply to income received as an FOP. If you plan to receive such payments, it is worth considering this in your work strategy. If the gig contract provides for payments from a foreign company, you should check the conditions for receiving funds and the currency law.
How to avoid questions from the tax authorities
Now you know that it is possible to combine an FOP and a gig contract, but it is important to properly organize your work to avoid double taxation and unpleasant questions from controlling authorities.
- Keep income records separately. Clearly separate FOP income and gig contract income. This will help prove that the gig contract is not part of your entrepreneurial activity.
- Pay taxes on time. Even if the company withholds taxes, do not forget about your own obligations as an FOP: single tax, military levy, and SSC.
- Analyze the risks. If the income is significant, it is worth planning your work structure to avoid exceeding the limits and losing FOP status under the simplified system.
- Get a consultation. Legislation changes quickly, and tax nuances may differ depending on the field of activity.
At Finevolution, we help entrepreneurs work without risks and unnecessary expenses. We analyze your situation and offer the optimal cooperation scheme, support FOPs in preparing reports and paying taxes, and provide advice on how to properly combine different work formats.
Contact our specialists – and you will be able to work calmly without worrying about tax issues.
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