Business always follows the basic economic principle being that of maximizing revenue and minimizing expenses. Governments are always interested in the development of business via the creation of new jobs, higher productivity, GDP as well as taxation implemented via special tax regimes widely used around the world. Ukraine offers a unique 4 tier system of taxation for small and medium-sized enterprises (SMEs) through which SMEs can minimize expenses and maximize their revenues.

The special taxation system, known as the individual entrepreneurs’ system or “FOP”, consists of 4 groups and is regulated by §297.1 Article 297 of The Tax Code of Ukraine. Each group is focused on a different population category and has its own requirements. Entrepreneurs included in the FOP groups “1 through to 3” must pay the quarterly single tax instead of paying personal income tax. In some cases, the general taxation system may be much more effective rather than that of the 3rd group, since it deducts 18% from the revenue (not net income) and allows for expenditure deduction. Also, each group, including the “general” group, must pay a single social contribution for themselves and employees as well.

Overall, the FOP system grants an extensive list of benefits such as lower taxation, minimum paperwork, official rights, social insurance, fewer reporting requirements, and more flexibility. It is very easy to set up and register employees without costly bureaucratic procedures. Alongside the benefits, there are some requirements for each group.

The Ukrainian “FOP” system allows individual entrepreneurs to register themselves in less than a week and enter the market under fair and transparent conditions.

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