How can individual-entrepreneur – single tax payer (except for e-resident) refuse to apply simplified taxation system and in what cases is such refusal obligatory?

Press service of the State Tax Service of Ukraine, published 18 June 2024 at 11:24 Chapter: News

Paragraph 298.2 Article 298 of the Tax Code of Ukraine (hereinafter – Code) stipulates that refusal of the simplified taxation system by taxpayers of the single tax Groups I – III  is carried out according to procedure specified in Sub-paragraphs 298.2.1 - 298.2.3 Paragraph 298.2 Article 298 of the Code.

In order to refuse of the simplified taxation system, the business entity has to submit application to the controlling body not later than 10 calendar days before the beginning of new calendar quarter (year) (Sub-paragraph 298.2.1 Paragraph 298.2 Article 298 of the Code).

Single tax payers can independently refuse of the simplified taxation system in connection with transition to payment of other taxes and levies determined by the Code, from the first day of month following tax (reporting) quarter in which refusal application of the simplified taxation system was submitted in connection with transition to payment of other taxes and levies (Sub-paragraph 298.2.2 Paragraph 298.2 Article 298 of the Code).

Sub-paragraph 298.2.3 Paragraph 298.2 Article 298 of the Code stipulates that the single tax payers, in particular, individuals-entrepreneurs are obliged to switch to paying other taxes and levies, determined by the Code, in the following cases and within the time limits:

1) in case of exceeding set amount of income during calendar year by taxpayers of the single tax Groups I – II and failure of such taxpayers to switch to application of different rate – from the first day of month following tax (reporting) quarter in which such excess occurred;

2) in case of exceeding during the calendar year amount of income established by Sub-paragraph 3 Paragraph 291.4 Article 291 of the Code, taxpayers of Groups I – II who have used a right to apply other rates established for Group III – from the first day of month following the tax (reporting) quarter in which such excess occurred;

3) in case of exceeding during the calendar year set amount of income by the single tax payers of Group III (except for Group III single tax payers – electronic residents (e-residents)) – from the first day of month following tax (reporting) quarter in which such excess occurred;

4) in case that the single tax payer uses different calculation method than those specified in Paragraph 291.6 Article 291 of the Code (except for the single tax payers of Group III – electronic residents (e-residents)) – from the first day of month following tax (reporting) period in which this calculation method is allowed.

At the same time, Paragraph 291.6 Article 291 of the Code provides that the single tax payers of Groups I – III must make payments for shipped products (performed work, provided services) exclusively in monetary form – cash or non-cash (including using electronic money);

5) in case of performing activities that do not give a right to apply simplified taxation system, from the first day of month following tax (reporting) period in which such activities were performed;

6) in case of exceeding number of individuals who are in labor relations with single tax payer – from the first day of month following tax (reporting) period in which such excess was allowed;

7) in case of activities not specified in register of the single tax payers (except for single tax payers of Group III – electronic residents (e-residents)) – from the first day of month following tax (reporting) period in which such activities were carried out activities;

8) if there is tax debt in amount exceeding amount specified in Clause 3 of Paragraph 59.1 Article 59 of the Code, for each first day of month during two consecutive quarters – on the last day of second of two consecutive quarters.

It should be noted that Clause 3 of Paragraph 59.1 Article 59 of the Code it is determined that tax demand is not sent (not served), and measures aimed at repayment (collection) of tax debt are not applied, if the total amount of taxpayer's tax debt does not exceed one hundred and eighty of the non-taxable minimum citizens’ income;

9) in case that payers of Group I or II carried out activities, which are not provided for in Sub-paragraphs 1 or 2 of Paragraph 291.4 Article 291 of the Code, respectively, from the first day of month following tax (reporting) quarter in which such activity was carried out.

At the same time, according to Paragraph 293.8 Article 293 of the Code, rates established by Sub-paragraphs 293.3 – 293.5 Article 293 of the Code, are applied taking into account the following peculiarities:

1) single tax payers of Group I, who in the calendar quarter exceeded amount of income defined for such payers in Paragraph 291.4 Article 291 of the Code, from the next calendar quarter, upon application, switch to application of the single tax rate determined for the single tax payers of Group II or III, or refuse to apply simplified taxation system.

Such payers are required to apply 15 percent single tax rate to the excess amount.

Application is submitted not later than the 20th day of month following the calendar quarter in which income was exceeded;

2) single tax payers of Group II, who exceeded in tax (reporting) period amount of income determined for such payers in Paragraph 291.4 Article 291 of the Code, in the next tax (reporting) quarter, upon application, they switch to application of the single tax rate determined for the single tax payers of Group III, or refuse to apply the simplified taxation system.

Such payers are required to apply 15 percent single tax rate to the excess amount.

Application is submitted not later than the 20th day of month following the calendar quarter in which income was exceeded;

3) single tax payers of Group III (individuals-entrepreneurs) who exceeded in tax (reporting) period amount of income determined for such payers in Paragraph 291.4 Article 291 of the Code, 15 percent single tax rate is applied to the excess amount, and they are also obliged according to procedure established by Chapter 1 "Simplified system of taxation, accounting and reporting", Section XIV of the Code, switch to payment of other taxes and levies established by Code.

Application is submitted not later than the 20th day of month following the calendar quarter in which excess of income was admitted.