FOP for Designers: Business codes, taxes, and client work

So, which to choose: the 2nd or 3rd group?

• The 2nd group may be beneficial for designers who work exclusively with individuals or sole proprietors under the simplified taxation system in Ukraine.
  However, it is not suitable for those planning to collaborate with foreign clients or legal entities under the general taxation system.
• The 3rd group provides more opportunities for business growth, as it allows you to work with any clients, including foreign ones, and places no limit on the number of employees. Although reporting is quarterly, it is not complicated, and many entrepreneurs manage it successfully on their own or with minimal accounting support.

If you plan to expand your client base, work with foreign customers, or legal entities under the general taxation system, the 3rd group is a more flexible and advantageous option.

Example of Tax Calculation on the 3rd Group with 50,000 UAH income

Total taxes per month:
2,500 UAH (single tax) + 500 UAH (military tax) + 1,760 UAH (USC) = 4,760 UAH

Net income after taxes:
50,000 UAH – 4,760 UAH = 45,240 UAH

Thus, with an income of 50,000 UAH, the designer pays 4,760 UAH in taxes, which is approximately 9.5% of the total income.

What else matters: optimal activity codes (KVED) for designers

When registering as a Sole Proprietor (FOP), it is also important to choose the correct activity codes (KVED) that match your specialization.

Can a designer work under multiple KVEDs, for example, combining graphic and UI/UX design?

If a designer provides services not listed under their registered KVEDs, it may lead to serious consequences. Specifically, the tax authorities may require payment of taxes under the general taxation system, which includes: 18% personal income tax,  5% military tax, 22% Unified Social Contribution (USC)

These rates would apply to all income received from unregistered activities. Additionally, there is a risk of losing the single tax payer status and being transferred to the general taxation system starting from the first day of the month following the tax period in which the violation was identified. To avoid such issues, it is important to carefully select KVEDs when registering as a Sole Proprietor and to regularly check their relevance to your actual business activities. In case of any changes in your services, you should promptly update your registration documents.

What If a designer works with foreign clients or platforms like Upwork?

Registering as an FOP allows designers to legally receive income from foreign clients through platforms like Upwork, avoid problems with banks and tax authorities, and secure legal protection in case of disputes. The third group of the simplified taxation system allows you to work with both individuals and legal entities, including foreign clients, with an annual income limit of up to 9,336,000 UAH. Upwork offers several withdrawal options, including payment systems like Payoneer or direct bank transfer (SWIFT) to your FOP account. It is important that the name in your bank details matches the name in your Upwork profile.

Working without official entrepreneur status may lead to: bank account blocks, fines from tax authorities, loss of client trust.  That is why freelancers should remember to legalize their activities.

Do you need to register for VAT if you work only with foreign clients?

If your annual income does not exceed 9 million UAH, VAT registration is not mandatory. However, if you plan to work with large companies or your clients require invoices with VAT, it might be worth considering registering as a VAT payer.

Self-registration or expert assistance?

You can register as a sole proprietor (FOP) independently using online services such as the Diia portal. However, the process can be challenging for those unfamiliar with legal and tax requirements.

The Finevolution team offers professional assistance with FOP registration and ongoing support, including:

• Consultations on choosing the optimal tax group and activity codes (KVEDs)
• Preparation and submission of all required FOP registration documents
• Support in opening a business bank account
• Explanation of tax obligations and assistance with bookkeeping

All of this can be done remotely, which is especially convenient for freelancers and designers who work online. Turning to experts helps you avoid mistakes and focus on growing your design business.

Legalizing your business activities is a key step for designers who aim to formalize their work, expand their client base, and ensure financial stability. By working with Finevolution’s specialists, you will receive qualified support at every stage of the registration process, allowing you to focus on your creativity without being distracted by bureaucratic tasks.

We work Monday to Friday from 9:00 AM to 7:00 PM. To get a consultation, send us a request using the form below, or contact us via Telegram, Viber, or WhatsApp.