Адміністрування приватного підприємця

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Reasons to use private entrepreneur management

The use of sole proprietors (Private Entrepreneurs or FOP) is a very cost-effective way for foreign companies to engage individuals for the provision of services in Ukraine.

Common areas of use for private entrepreneurs in Ukraine are the IT sector, import-export trade representatives, and business consultants.

Advantages of Private Entrepreneurs

  1. Easy to setup
  2. Possibility of simplified taxation of 5% income tax and 22% of the minimum wage for social contributions (as of 2021 the minimum wage is 6000 UAH with 22% = 1320 UAH)
  3. Individual service contract terms without labour law requirements
  4. No need for a legal entity in Ukraine for employment reasons
  5. No administrative overhead cost in Ukraine for HR management, accounting and payrolling

 

Many customers of FOP services assume that the setup, administration and documentation of the Private Entrepreneur status should be the problem of their new team member.

This assumption, however, is very dangerous for legal, tax and business confidentiality reasons.

Why should you control the setup, audit and management of your Private Entrepreneur?

  1. Tax deductability abroad in the country of tax residency of the client – many tax jurisdictions require prove of legal and tax status of the private entrepreneur in order to accept tax deducatabilty of business expenses. Some tax jurisdictions may consider even the FOP as employee of the FOP client with consequent tax and social fund payment obligations.

  2. Control over business activities of the FOP – The FOP is allowed to provide services to other clients as independent business. The FOP client needs to control the accounting and bank account transactions of the FOP to prevent the FOP working in parallel for other companies.

  3. Time savings for client and FOP – The setup and management of a FOP is time consuming in dealing with regularly changing requirements by Ukrainian tax authorities, central and local banks.

  4. FOP Compliance – We found very often old FOP setups in none compliant status with open tax obligations, administrative penalties and missing documentations. Our services make sure that the FOP status is compliant to Ukrainian tax and administrative requirements. We clarify and clean-up FOP none-compliance issues before contract signature with our clients.