Entrepreneurship is not always about large turnover or complex accounting. For many, it’s about a small business that supports the family: a coffee kiosk, a small online handmade shop, or local services. Group 1 of the FOP system was created precisely for such entrepreneurs.
In 2025, Group 1 remains the simplest way to do business in Ukraine; with a fixed tax, no VAT, no cash register, and no complicated reporting. However, there are still some nuances: not all types of activity are eligible, and exceeding the income limit can be costly.
In this article, we explain who can work under Group 1, what taxes to pay and when, how to choose the right KVEDs and what to do if you want to switch to, or leave Group 1.
We also include useful links to our other materials about:
Who can work under Group 1?
Group 1 is a special regime for the smallest entrepreneurs. It is ideal for those who work for themselves, without employees, and provide services directly to final consumers, that is, to individuals.
- No hired employees. Even if you collaborate with contractors or get occasional help, officially hiring workers is not allowed.
- Services are only for individuals. For example, a hairdresser, seamstress, or takeaway coffee vendor. If you sell or provide services to legal entities or other FOPs, Group 1 is not applicable.
- Annual income must not exceed UAH 1,336,000. This is the limit for 2025. If you exceed it, you will have to switch to Group 2 or 3.
- manicurists and beauty professionals
- those selling goods at local markets
- handmade artists working directly with clients
- home bakers
- hairdressers, seamstresses, and repair workers
Important: Even if you work online, as long as you receive payments from individuals and stay within the income limit, Group 1 may still be suitable. However, there are specific nuances related to product delivery, online sales, and payment services. We recommend consulting Finevolution to avoid mistakes.
Tax rates for group 1 FOP in 2025
Group 1 offers the lowest tax burden among all groups of the simplified taxation system in Ukraine. That’s why it is often chosen by beginners, individual service providers, and local goods sellers.
|
Tax |
Rate in 2025 |
Comment |
|
Single tax |
Up to 10% of the subsistence minimum |
The rate is set by the local council. In 2025, the maximum is UAH 302.80 (based on a minimum of UAH 3028). |
|
Unified Social Contribution (USC) |
22% of the minimum wage |
The minimum monthly USC in 2025 is UAH 1,760. |
|
Military levy |
None (UAH 0) |
One of the benefits – Group 1 FOPs are exempt from the military levy if they comply with the allowed activity. |
Tax payment:
- You pay a fixed monthly amount of the single tax and USC – even if you have no income.
- You submit your tax declaration once a year – by March 1 of the following year.
If you exceed the income limit, you must switch to another group and recalculate your taxes. If you break the rules (for example, by working with legal entities), you lose the right to use the simplified system and must switch to the general taxation system.
What else you should know about group 1 FOP
Group 1 is truly a simple option for entrepreneurs, but it also comes with strict limitations. Violating the conditions may result in the loss of status or additional tax charges.
- Only individuals as clients. You may provide services or sell goods exclusively to individuals. If you serve companies or other FOPs – this is a violation.
- No hired employees. Official employment of staff is not allowed under Group 1.
- Specific types of activities only. The full list is defined in the Tax Code and includes: retail trade from stalls and markets, household services (repairs, hairdressing, cleaning, etc.), private workshops and personal services.
- Working with legal entities or other FOPs
- Running online stores with delivery across Ukraine
If you plan to grow your business, scale operations, or sell online – consider Group 3, which allows working with any clients and conducting international business.
How to register a group 1 FOP: step-by-step
At first glance, registering as a Group 1 FOP seems simple – but even with a straightforward process, mistakes are common.
Below is a step-by-step guide to safe registration:
Choose the correct KVED. Your activity must fall within the officially permitted list. For example:
47.81 – Retail trade from stalls and markets (food products)
95.29 – Repair of other household goods
96.02 – Hairdressing and beauty salon services
If you provide services or sell goods but select a KVED that is not on the list – your registration may be rejected.
Submit an application to register as an FOP. This can be done via the Diia portal or at an Administrative Service Center (CNAP). After registration, you will receive an extract from the Unified State Register (EDR).
Apply for the simplified taxation system (Group 1). This application must be submitted to the tax office within 10 days after state registration. If you miss the deadline, you will automatically remain on the general taxation system.
Open a separate bank account. Although not mandatory, opening a separate business account for your FOP is highly recommended – especially if you plan to keep your income on the account. Keeping personal and business finances separate helps avoid confusion.
How we at Finevolution help entrepreneurs
We work with FOPs of all groups – and we understand that even the simplest tax regime is not always as simple as it looks. Group 1 entrepreneurs often face the following challenges:
- Incorrect KVED selection, which may lead the tax office to switch you to the general system
- Late submission of the single tax application – resulting in paying 18% PIT + 1.5% military levy instead of the fixed rate
- Errors in reporting or USC payments – which may lead to fines or account freezes
To prevent this, we offer:
- Consultations on selecting KVEDs that fully comply with Group 1 requirements
- Full preparation and support during the FOP registration process
- Setup of the correct tax system and submission of all required documents to the tax office
- Assistance with opening a bank account and organizing payment tracking
- Ongoing bookkeeping and reporting – so that no payment is missed and no penalty is incurred
We don’t just register your FOP, we build a system where your business runs smoothly and stress-free.
Need a consultation or full support for Group 1 FOP?
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