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FOP for IT. What is group 5?

News for the Ukrainian IT sector from the Verkhovna Rada
Taxes, FOP

 

Last week, a shocking draft law No. 10094 of February 26, 2019 was registered under the title “On Amendments to the Tax Code of Ukraine (regarding the development of creative industries in Ukraine)”.

According to this draft law, it is proposed to create a separate, fifth, group of single tax payers specifically for entrepreneurs working in the IT industry.

 

 

What it the FOP Group 5?

 

The main criteria by which IT professionals will be on the 5th group will be as follows:

 

  1. The single tax rate will gradually increase from 5% to 10% of the income received starting from 2020;
  2. Double rate of single tax “for oneself”;
  3. The maximum amount of income for a calendar year cannot exceed UAH 7,500,000;
  4. Only entrepreneurs without employees can qualify for Group 5

One should perhaps be glad that the IT sphere has grown to such a level that they are allocated a separate single tax group, as it was with agricultural producers. But at the same time, they are not happy with the prospects for the growth of contributions to budget. After all, entrepreneurs with low income level have to pay up to 10% of the single tax and not 22% of social tax but rather 44% – it is a real tax burden. And all because they decided to provide services in the IT sector. Moreover, this is the area that brings the state a significant input for the treasury.

At the same time, the government sees positive changes in case this law is adopted, namely:

 

  • IT professionals with FOP status will remain subject to the single tax. After all, until recently, they government could have forced IT pros to switch to the general taxation system and pay significantly larger amounts of taxes by adopting a high profile law on business entities;

 

Let’s remember that this law stated that the majority of Sole Entrepreneurs (FOPs) who work in IT fall under the category of “employees”

 

  • entrepreneurs will get protection from regulatory authorities regarding the unjustified transition to a single tax. After all, it is not a secret that FOPs are often registered for the 3rd group of the single tax for the purposes of minimizing taxes. If there is a fifth group, then taxes for IT people will be more than enough;
  • and most importantly: the state treasury will be replenished due to the annual increase in the tax burden. The opportunity to become a competitive country with great potential in the IT industry.

 

So, this is it. Let’s see what will happen next and how much the new law will get off the ground.

 

If you have any questions on this matter or need advice – please contact us.

All the best!

 

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