If you are a freelancer, you are essentially engaged in entrepreneurial activity by providing services such as design, marketing, or development to your clients.
If you find clients independently, ideally, you should sign contracts, issue invoices, and receive payments directly to your FOP or through a payment system, later transferring them to your FOP account.
If you work with freelance platforms like Upwork, you receive payments under a contract signed within the platform, deposited into your platform account, and then transferred to your FOP account.
In both cases, you establish entrepreneurial relationships with clients and tax obligations with the DPS (State Tax Service of Ukraine).
From our experience, most freelancers seek our assistance when filling out tax forms required by platforms or when responding to DPS inquiries, particularly when the need for freelance income legalization becomes urgent.
Legalization of Freelance Income
According to Article 163.1 of the Tax Code of Ukraine, the taxable income of a Ukrainian resident includes:
- 163.1.1. General monthly (annual) taxable income
- 163.1.2. Income originating from Ukraine that is subject to final taxation at the time of payment
- 163.1.3. Foreign income—income (profit) received from sources outside Ukraine
If you receive payments for your services as P2P transfers to your personal bank card, do not report income, and do not pay taxes, you may be held liable under Article 164 of the Code of Administrative Offenses of Ukraine. Conducting business activities without proper registration may result in a fine of 8,500 UAH, along with the confiscation of assets and unlawfully obtained funds.
Even if you receive small, regular transfers—such as 10,000 to 15,000 UAH per month—the tax authorities may eventually request an explanation. The DPS has the right to access your financial information and collaborate with banks to identify unregistered business activities.
To minimize risks and step out of the gray economy, we recommend legalizing your freelance income through the simplest method: registering as a FOP. If you have a large volume of transactions, you may consider registering a LLC (TOV). If you live abroad and are not a tax resident of Ukraine, opening an Individual Entrepreneur (IE) or legal entity in your country of residence is an option. However, before registering abroad, we strongly advise consulting about double taxation agreements to avoid being taxed both in Ukraine and another jurisdiction.
