A Ukrainian sole trader invoicing a foreign company across a border, with the payment returning

Paying Ukrainian sole traders (FOP) from abroad: groups, currency rules and the risks

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Rules checked on 22 September 2026. Amounts follow the minimum wage of UAH 8,647 a month, set from 1 January 2026 by Article 8 of the State Budget Law for 2026 and unchanged for the rest of the year — every figure below moves with it.

A FOP (фізична особа-підприємець) is a Ukrainian sole trader: an individual registered to carry on business in their own name, taxed separately from employees, invoicing clients and paying their own taxes. Most Ukrainian specialists who work for foreign companies — developers, designers, marketers, accountants, engineers — are registered as a FOP on the simplified tax system. For a foreign company it looks like the simplest possible arrangement: a contract, an invoice, a bank transfer, no Ukrainian entity, no payroll.

It is simple, and it is lawful. But three separate rule sets decide whether it stays that way: which tax group the contractor is in, what the National Bank requires of the money, and whether the relationship is a contract or employment in disguise. Getting the first one wrong costs the contractor their tax status. Getting the third one wrong can give the foreign company a taxable presence in Ukraine.

1. The group trap: not every FOP may invoice you

The simplified system has four groups. Only one of them can take money from a foreign company without breaking its own rules.

Group Who it is for Who they may supply Income cap in 2026
1 Retail from market stalls, household services to the public, no employees The public only UAH 1,444,049
2 Services, production, restaurants; up to 10 employees Single-tax payers and the public only UAH 7,211,598
3 Any activity not on the prohibited list; no limit on employees Anyone, including non-residents UAH 10,091,049
4 Agricultural producers — Area-based, not relevant here

The line that matters is in Tax Code, 291.4(2): a Group 2 payer may supply services only to single-tax payers or to the public. A foreign company is neither. The consequence has two halves and both are in the Code: that income is taxed at 15% instead of the group rate (293.4(5)), and the FOP must leave the simplified system from the first day of the month following the quarter in which it happened (298.2.3(9)).

So: your contractor must be in Group 3. The rate there is 5% of income, or 3% plus VAT registration (293.3). Almost every contractor working for foreign clients uses the 5% option.

Three further checks before the first invoice:

  • The registered activity. A Group 3 FOP who earns from an activity not listed in the single-tax register loses the simplified system from the first day of the month after that quarter (298.2.3(7)). If you ask a contractor registered for software development to also run your recruitment or hold your stock, you may be the reason they lose their 5% rate. Ask which KVED codes they hold and keep the contract inside them.
  • Money only. Settlements must be in money, cash or cashless (291.6). Set-off against costs you carried, netting against another invoice, or paying in kind breaks this: the income is taxed at 15% (293.4(3)) and the FOP must move to the general system. Pay the invoice in full and invoice your costs back separately.
  • “Country manager” is a risk word. The simplified system is closed outright to some activities (291.5.1) — currency exchange, excisable goods, gambling, extraction and sale of precious metals and stones, financial intermediation, and the activity of managing enterprises (291.5.1(7)). A contractor engaged to run your Ukrainian operation, rather than to deliver defined services, may fall inside that last one. If the role is managerial, take advice before treating it as a FOP contract.

2. What your contractor actually pays in 2026

Three separate charges, all on the contractor, none withheld by you.

Charge Rate On UAH 1,200,000 a year
Single tax, Group 3 without VAT 5% of income UAH 60,000
Military levy 1% of income UAH 12,000
Single social contribution (SSC) 22% of the minimum wage a month, regardless of income UAH 22,828.08
Total UAH 94,828.08 — 7.9% of receipts

The military levy on Group 3 is 1% of income under Article 292 (Tax Code, subsection 10 § 16-1 of the Transitional Provisions, points 1.1(3) and 1.3(3)). It applies from 1 January 2025 until 31 December of the third calendar year after martial law ends. Groups 1, 2 and 4 pay a flat 10% of the minimum wage a month instead — UAH 864.70 in 2026.

The social contribution is the trap this year. From 1 March 2022, point 9-19 of section VIII of Law No. 2464-VI let sole traders stop paying the SSC for themselves. That relief has been suspended for 2025 and again for 2026 — for 2026 by the State Budget Law itself (Law No. 4695-IX of 3 December 2025, which suspends point 9-19 along with the definition of the maximum contribution base). So in 2026 a FOP owes the minimum SSC every month: 22% of UAH 8,647 = UAH 1,902.34, whether or not they invoiced anything. Guides written in 2023 or 2024 still say this is voluntary. It is not.

Two exemptions survive: a FOP who draws an old-age or long-service pension, or has a disability, does not pay for themselves (Art. 4(4)); and a FOP who also has a main job pays nothing for the months in which an employer — including a Diia City resident — paid at least the minimum SSC for them (Art. 4(6)). A foreign company paying an invoice is not such an employer, so this exemption does not come from you.

Deadlines the contractor has to meet. The single-tax declaration is due within 40 calendar days of the quarter end (49.18.2) and the tax within 10 calendar days after that (295.3) — 50 days in all. The SSC is due by the 20th of the month after the quarter (Law No. 2464-VI, Art. 9(8)). SSC figures for the year are reported in the declaration for the fourth quarter (296.3).

When the cap is passed. Income above UAH 10,091,049 in a calendar year is taxed at 15% on the excess, and the FOP must move to the general system from the first day of the next quarter (293.4(1), 298.2.3(3)). Income in foreign currency is converted at the official NBU rate on the day the money arrives (292.5, 292.6) — so a contractor close to the cap cannot manage it by dating invoices differently.

For what the same person costs as an employee instead, see our employer costs rate card and the salary calculator.

3. The money: what the National Bank requires

Paying a Ukrainian contractor is a foreign-exchange transaction, and the contractor's bank acts as the state's currency supervisor over it.

First, why services are caught at all. The rules speak of “goods”, and several guides conclude that services are outside them. They are not. In Ukrainian foreign-trade law a good is defined as “any production, services, works, intellectual property rights and other non-property rights intended for sale” (Law No. 959-XII, Article 1). NBU Instruction No. 7 of 2 January 2019, point 6(1), then puts the performance of works and the supply of services by a resident under the same currency supervision as an export of goods. Services are in.

  • The contract and the closing document. The bank needs a written contract and, when the work is done, an act or invoice confirming the services — supervision runs from the date the resident performs, so the bank has to see what was performed and when. A payment with no contract behind it will be queried.
  • 365 days. The settlement deadline set by the National Bank is 365 calendar days (NBU Resolution No. 5, section II, point 21). If your contractor delivers in January and you pay fourteen months later, the deadline is missed.
  • Who pays for a late payment. The penalty falls on the Ukrainian resident, not on you: 0.3% of the unpaid amount for each day of delay, capped at the amount itself (Law No. 2473-VIII, Art. 13(5)). Force majeure suspends both the deadline and the penalty (Art. 13(6)).
  • Small payments are outside it. The deadline does not apply where the transaction is below the threshold in Article 20 of Law No. 361-IX — UAH 400,000 — unless payments are split to stay under it (Resolution No. 5, point 22(1)). Most single contractor invoices fall below this. Splitting one engagement into slices to avoid the rule does not.

None of this obliges you to do anything in Ukraine. It does mean the contractor will ask you for paperwork that a purely domestic supplier would not need, and that late payment is expensive for them.

4. Where it turns into employment

This is the part with real money in it for the foreign company, and the part where published guidance is least reliable.

There is no statutory list of the signs of employment. A draft Labour Code that would have introduced one — bill No. 14386, registered on 15 January 2026 — was withdrawn on 5 February 2026 and removed from consideration on 16 July 2026, according to the Verkhovna Rada bill card. The 1971 Labour Code still governs. Its Article 21 defines an employment contract as an agreement under which the worker performs work defined by the agreement and the employer pays wages and provides working conditions. Courts and the State Labour Service apply that definition to the facts; they are not working from a checklist.

In practice the facts that point to employment are the familiar ones: the person works set hours under your instruction, at a workplace and on equipment you provide, on continuing duties rather than a defined result, is paid a fixed amount at fixed dates regardless of output, cannot send a substitute, and has no other clients.

Who actually bears the risk depends on whether you have a Ukrainian entity.

  • If you have a Ukrainian company or representative office and it pays the contractor, the fine under Article 265 of the Labour Code lands on that entity: UAH 86,470 per person for admitting someone to work without an employment contract, and UAH 259,410 if repeated within two years. The full table is in our employer costs rate card.
  • If you pay from abroad with no Ukrainian presence, the State Labour Service has no Ukrainian employer to fine. Your exposure is different, and larger: a permanent establishment.

5. The permanent establishment risk

A foreign company that operates in Ukraine through a permanent establishment must register with the Ukrainian tax authorities and pay Ukrainian profit tax on what that establishment earns. Operating through one without registering carries a fine of UAH 100,000 (Tax Code, 117.4) — before any tax and interest.

Two limbs of the definition in 14.1.193 catch arrangements built on contractors:

  • Services through people you engage. Supplying services in Ukraine — consultancy included, staff-supply services expressly excluded — through employees the non-resident engaged for that purpose, within one project or connected projects, for more than 183 days in any twelve-month period. The Code says “employees hired by it”; whether an independent FOP contractor counts as such is not settled in the text, and we have found no published position of the tax service on it. Treat it as a risk to test, not a rule to rely on.
  • The dependent agent. A person who, under a contract or in fact, habitually negotiates the material terms of deals that the non-resident then signs without substantial change, or signs contracts in the name of the non-resident — where that person acts exclusively for one non-resident or its related parties.

The Tax Code then lists what may evidence such authority in fact. Among the items: the non-resident giving binding instructions, including by electronic means; the person holding and using a corporate email address of the non-resident for communication with the non-resident or with third parties it contracts with; the person controlling the non-resident's stock or assets in Ukraine; and the person renting premises in their own name for the non-resident's purposes.

There is a carve-out for genuine intermediaries — an agent acting within their own ordinary business and on ordinary terms is not a permanent establishment. But the same paragraph closes it: where the intermediary acts exclusively or almost exclusively for one non-resident or a group of related non-residents, they cannot be treated as acting in the ordinary course of their business, and they are a permanent establishment.

Read those two together and the shape of the risk is clear. A Ukrainian contractor who works only for you, uses your email address, follows your instructions and talks to your customers is close to the statutory description of a permanent establishment — whatever the contract is called. A contractor with several clients who delivers a defined result on their own equipment is not.

6. What to do instead, when the work is really a job

Option What it is Main costs in 2026 Fits when
Group 3 FOP contract Independent supplier invoices you Contractor pays 5% + 1% + SSC; you pay the invoice Defined deliverables, other clients, own equipment
Your own Ukrainian company You employ directly 18% income tax and 5% levy withheld, 22% SSC on top Long-term team, you want the entity anyway
Employer of record A Ukrainian company employs the person for you Employment costs plus a fee You need employees now without an entity
Diia City gig contract A Diia City resident engages a gig specialist 5% income tax (Tax Code 167.2 via 170.14-1.2), 5% military levy, SSC at the minimum insurance contribution per person — UAH 1,902.34 a month whatever the pay (Law No. 2464-VI, Art. 8(14-1)) IT and digital work through a Diia City resident

The Diia City route is the one most often misunderstood: the 5% rate belongs to the Diia City resident's specialists, not to anyone who signs a gig-style contract. A foreign company cannot use it without a Ukrainian Diia City resident in the structure. Two conditions sit in the fine print: both the 5% rate and the capped social contribution apply only from the month after the company obtains Diia City status, and both are switched off for a resident that also holds Defence City status (Law No. 4577-IX of 21 August 2025). Our briefing on employing people in Ukraine under martial law covers what an employer takes on.

7. A checklist before you pay the first invoice

  1. Ask for the extract from the state register and confirm the FOP is in Group 3.
  2. Check the KVED codes cover what you are actually buying.
  3. Put it in writing: scope, deliverables, price, payment terms, and who owns the intellectual property.
  4. Agree the act or invoice the contractor's bank will need at the end of each engagement.
  5. Pay in money, in full, within 365 days of delivery; keep single payments and the engagement genuinely separate rather than slicing one contract to stay under UAH 400,000.
  6. Do not give a contractor your corporate email address, authority to negotiate on your behalf, or control of your assets in Ukraine.
  7. If the person works only for you, on your schedule, on your equipment, treat it as a job and pick one of the routes in section 6.

How ClarusApex can help

We check contractor arrangements before they become a problem: group and KVED verification, contracts and acts that satisfy the contractor's bank, and an honest read on whether a role is a contract or a job. Where it is a job, we employ the person through APEX AV LLC so you have an employee in Ukraine without a Ukrainian entity. See Start up and stay compliant.

Sources

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