Who Can Choose Group 2 of the Single Tax System in 2025

According to the Tax Code of Ukraine, Group 2 includes individual entrepreneurs who carry out economic activities related to the provision of services—particularly household services—to other single tax payers and to the general population, as well as those involved in the production and sale of goods or operating in the restaurant business. However, this is subject to the condition that during the calendar year, such entrepreneurs meet a set of specific legislative criteria.

These criteria, also outlined in the Tax Code, are as follows: they must either not use hired labor or the number of employees in labor relations must not exceed 10 people at any given time; and their annual income must not exceed 834 times the minimum wage established as of January 1 of the tax year (UAH 6,672,000 for 2025).

Types of Activities Allowed for Group 2 Sole Proprietors

As mentioned above, Group 2 sole proprietors are allowed to engage in the production and sale of goods, restaurant business activities, and service provision, including household services. One key requirement is that Group 2 entrepreneurs may only provide services to other single tax payers and to the general population.

This category of activity encompasses many possibilities, such as: agriculture, plant cultivation, animal breeding; production of food products; manufacture of clothing and household items; provision of services in almost any field (to eligible subjects); trade, including online commerce, and more.

Income Threshold and Limits for Group 2 Sole Proprietors

The income limit for a Group 2 sole proprietor is set annually and is tied to the amount of the minimum wage as of January 1 of the tax year. If the minimum wage changes during the year, the amount used to calculate the limit remains based on the January 1 figure. As of now, the Law of Ukraine “On the State Budget” sets the minimum monthly wage at UAH 8,000 as of January 1, 2025. In turn, the Tax Code of Ukraine stipulates that the maximum income limit for Group 2 is 834 times the minimum wage.

Thus, based on the above, the universal formula for calculating the annual income limit is:
834 × minimum wage = annual limit,
which for 2025 is:
834 × 8,000 = UAH 6,672,000.

Tax Rates and Payment Deadlines for the Single Tax in 2025

The single tax must be paid in advance by the 20th day of each month. Additionally, Group 2 single tax payers may opt to pay the full amount in advance for the entire tax period, but not beyond the current calendar year. Failure to pay the required amount results in a fine of 50% of the tax rate, meaning 50% of the monthly single tax amount.

As with the income limit, the single tax rate is tied to the minimum wage as of January 1 of the reporting year. According to the Tax Code, the rate cannot exceed 20% of the minimum wage, which equals UAH 1,600 for 2025. However, the fixed rate is determined by village, township, and city councils for each calendar month. Typically, local councils set the maximum allowable rate.

Military Levy and Unified Social Contribution for Group 2 Sole Proprietors: What Will Change in 2025

Military Levy for Group 2 Sole Proprietors

Section XX of the Tax Code of Ukraine states that Group 2 sole proprietors are subject to the military levy. The rate is 10% of the minimum wage, making the amount fixed and calculated based on the minimum wage as of January 1. For 2025, this amount is UAH 800.

Unified Social Contribution (USC)

The legal norms regarding the Unified Social Contribution are set forth in the Law of Ukraine “On the Collection and Accounting of the Unified Contribution for Mandatory State Social Insurance.” According to the law, the USC rate is 22% of the minimum wage. Therefore, the USC is also fixed annually and amounts to UAH 1,760 for 2025.

Both the military levy and the USC, like the single tax, must be paid as advance contributions by the 20th day of each month.

Reporting and Accounting: What Forms to Submit and When

According to the Tax Code of Ukraine, Group 2 single tax payers must submit their tax declarations to the relevant tax authority once a year. The deadline is 60 calendar days after the end of the tax year. If the last day falls on a weekend or a public holiday, the deadline is moved to the next business day. The declaration includes total income, monthly advance payments, and amounts of the unified contribution.

Under certain circumstances, Group 2 sole proprietors must submit their tax declaration according to quarterly reporting periods. The Tax Code defines the situations requiring such reporting: exceeding the maximum income limit; voluntary transition to another single tax group; opting out of the simplified system and moving to the general taxation system. It is important to note that submitting a quarterly declaration exempts the taxpayer from submitting the annual one.

Additionally, the sole proprietor is required to file a report on the payment of the Unified Social Contribution. This report is submitted quarterly, by the 20th day of the month following the reporting quarter.

When a Group 2 Sole Proprietor Loses the Right to the Simplified Tax System

The Tax Code of Ukraine specifies the circumstances under which a single tax payer must switch to the general taxation system. According to the law, a sole proprietor loses the right to use the simplified tax system if they:

• Exceed the established income limits during the calendar year;
• Have outstanding tax debt for six consecutive months;
• Conduct activities not listed in the single tax payer register or engage in prohibited types of activity under the simplified system;
• Exceed the allowable number of hired employees.
  

It is also important to note that if a sole proprietor does not voluntarily transition to the general taxation system or is unaware of a violation, the tax authority has the right to remove them from the single tax payer register after detecting the violation during an audit. Deregistration takes effect from the first day of the month following the quarter in which the violation occurred.