Basics of bookkeeping for sole proprietorships: simple explanations for entrepreneurs

Accounting and Taxes for FOP in 2026

FOP accounting is not just a declaration once a quarter or once a year. An entrepreneur must correctly choose a taxation system, maintain records of income and, in certain cases, expenses, store primary documents, timely pay the single tax, military levy, and USC, apply RRO/PRRO for settlement operations, and if there are employees, also fulfill labor and salary requirements. For e-commerce, rules for electronic commerce, consumer rights protection, and personal data protection are added, and for specific goods — special licensing and product rules. (Law of Ukraine)

Which taxation system a FOP can choose

In 2026, for most entrepreneurs, the simplified taxation system (single tax, groups 1–3) or the general system are relevant. Separately, there is Group 4 for family farming enterprises under special conditions. (kh.tax.gov.ua)

The indicated limits are calculated based on the minimum wage as of January 1, 2026 — 8,647 UAH, and the maximum fixed rates for Groups 1 and 2 — from the subsistence level for able-bodied persons 3,328 UAH and the minimum wage 8,647 UAH respectively. For Group 1, the maximum ST rate is 332.80 UAH per month; for Group 2 — 1,729.40 UAH per month. The actual rate within these maximums is set by the local council, so an entrepreneur may pay less if such a decision is made in their community. (Law of Ukraine)

For Group 1, two key conditions are mandatory: no hired employees and activities exclusively in the format of retail sale of goods from trading places at markets and/or provision of household services to the population. For Group 2, up to 10 employees are allowed, and the group itself covers services to the population and/or single tax payers, production and sale of goods, and the restaurant business. For Group 3, the number of employees is not limited. (tax.gov.ua)

Group 4 operates separately for FOPs working exclusively within a family farming enterprise, who do not use hired labor, work at their tax address, and own or use a total of 0.5 to 20 hectares. This is a special regime for the agricultural sector, not a universal alternative for ordinary small businesses. (kh.tax.gov.ua)

What exactly does a FOP pay

Single Tax

FOPs of Groups 1 and 2 pay the single tax via advance payments no later than the 20th of the current month. FOPs of Group 3 submit a declaration quarterly within 40 calendar days after the end of the quarter and pay the tax within 10 calendar days after the deadline for submitting the declaration. For Groups 1 and 2, the declaration is submitted annually — within 60 calendar days after the end of the year. (cv.tax.gov.ua)

For Group 3, the ST rate is 5% of income if the FOP is not a VAT payer, or 3% of income if the FOP is a VAT payer. If an entrepreneur exceeds the income limit of their group, a 15% rate applies to the excess amount, and they must then switch to another system or group according to TCU rules. (cv.tax.gov.ua)

Group 1 and 2 payers who do not use hired labor may not pay the single tax for one calendar month per year during vacation, as well as for the period of illness if it lasts 30 or more calendar days and is confirmed by an extract from the Electronic Register of Sick Leaves. To do this, an application is submitted in free form. (tax.gov.ua)

Military Levy

In 2026, FOPs of Groups 1, 2, and 4 pay the military levy in a fixed amount — 10% of the minimum wage, i.e., 864.70 UAH per month. Group 3 FOPs pay 1% of income. For Groups 1 and 2, the payment deadline is also no later than the 20th of the current month; for Group 3 — within the period tied to the quarterly declaration. (tax.gov.ua)

Group 1 and 2 payers without employees have the right to exemption from the military levy for the period of vacation and long-term illness according to the same principle as for the single tax. Additionally, Group 1 and 2 FOPs whose tax address is located in combat zone territories or temporarily occupied territories have a special right not to pay the military levy for the corresponding period. (tr.tax.gov.ua)

USC (Unified Social Contribution)

The minimum USC in 2026 is 1,902.34 UAH per month, or 5,707.02 UAH per quarter. The obligation to pay USC for oneself applies to FOPs on both the simplified and general systems, unless the law directly provides an exemption. Payment is made by the 20th of the month following the quarter for which the contribution is paid. (rv.tax.gov.ua)

Exempted from paying USC for themselves are, in particular, old-age or years-of-service pensioners, persons with disabilities provided they receive a pension or social assistance, FOPs for whom an employer has already paid the minimum insurance contribution for the corresponding month, as well as certain categories of mobilized entrepreneurs and FOPs registered in temporarily occupied territories. For mobilized FOPs, special rules apply regarding exemption, submission of documents, and deferral of payment without penalties after demobilization. (kherson.tax.gov.ua)

General System

On the general system, a FOP pays 18% PIT and 5% military levy from net taxable income, i.e., the difference between income and documented expenses related to economic activity. USC is paid at a rate of 22%, but not less than the minimum insurance contribution. Without proper documents, expenses are not included in the calculation. (rv.tax.gov.ua)

What accounting must a FOP maintain

FOPs of Groups 1 and 2, as well as Group 3 FOPs without VAT, maintain accounting in a free form by monthly reflecting received income. Group 3 FOPs with VAT maintain accounting of income and expenses according to a standard form. Such accounting can be kept on paper, in electronic form, or via the electronic cabinet. (dp.tax.gov.ua)

On the general system, the object of taxation is net income, so all expenses that a FOP wants to account for must be supported by documents. Supporting documents can include, in particular, payment orders, receipts, fiscal checks, acts of work performed, or other primary documents certifying the fact of payment for goods, works, or services. (od.tax.gov.ua)

The period for storing documents is no longer automatically reduced to "three years." For documents related to the calculation and payment of taxes and fees, in many cases, the minimum period is 1825 days. For other documents, as well as for documents related to the fulfillment of requirements of other legislation supervised by tax authorities, including permit documents, the minimum period is 1095 days. The countdown starts from the day of submission of the corresponding reporting or from the deadline for its submission, and for certain permit documents — from the day their validity ends. (lg.tax.gov.ua)

If primary documents cannot be removed or are lost due to combat operations or temporary occupation, the TCU provides for a special procedure for notifying the tax authority. If this procedure is followed, the submitted reporting indicators cannot be questioned solely due to the absence of documents, and special guarantees against audits apply to the relevant periods.

When are RRO or PRRO needed

If a FOP conducts settlement operations in the field of trade, catering, or services, the Law on RRO applies. The general rule is: in cases where the law requires the application of RRO/PRRO, the entrepreneur must conduct settlements through a fiscalized RRO or PRRO and issue a settlement document to the buyer in paper or electronic form. This also applies to internet sales if a settlement operation occurs. (Law of Ukraine)

Single tax payers of Group 1 do not apply RRO/PRRO. For other FOPs, specific norms of the Law on RRO and the Tax Code apply rather than general everyday perceptions. Therefore, the rule "I am in Group 2 or 3, so RRO is not needed" cannot be used in 2026 without checking the specific settlement model and type of product. (rv.tax.gov.ua)

Article 9 of the Law on RRO contains a list of exceptions where RRO/PRRO and settlement books are not applied. But these are special exceptions, not a universal exemption for any small business. Rules should be checked especially carefully if the entrepreneur sells technically complex household goods, medicines, medical devices, jewelry, or excisable products. (Law of Ukraine)

For failure to conduct a settlement operation through RRO/PRRO, conducting it for less than the full amount, or failing to issue a settlement document, a fine is applied: 100% of the value of goods, works, or services for the first violation and 150% — for each subsequent one. For the sale of goods not reflected in the inventory records, or without documents confirming their recording at the place of sale, the financial sanction is equal to the value of such goods at selling prices, but not less than 10 untaxed minimum incomes of citizens. (Law of Ukraine)

Inventory records, product documents, and storage

If your business is subject to the obligation to maintain inventory records, you can only sell products reflected in such records. Primary documents for such records can include, in particular, invoices, waybills, purchase acts, customs declarations, fiscal checks, and other documents confirming the receipt, movement, sale, return, or write-off of goods. (Law of Ukraine)

In practice, this means that an entrepreneur must not only "know the balance in the software" but also have documentary proof of the product's origin. For businesses working through RRO/PRRO, with a warehouse, delivery, or multiple points of sale, the internal procedure for goods movement must be set up so that a product document can be shown at the inspection site. (Law of Ukraine)

Employees: what a FOP must do

An employee cannot be allowed to work without proper registration. A labor contract is concluded, as a rule, in writing, and a notification of employment is submitted to the STS before the employee starts working. The notification can be submitted electronically or on paper in cases provided for by Cabinet of Ministers procedures. (Law of Ukraine)

Wages are paid at least twice a month, and the interval between payments cannot exceed 16 calendar days. 18% PIT and 5% military levy are withheld from the employee's salary, and the employer accrues 22% USC. (Law of Ukraine)

For the simplified system, personnel limits of the group must be remembered: Group 1 — no employees, Group 2 — up to 10 persons, Group 3 — no limit on the number of employees. Violation of group conditions means the risk of losing the right to the corresponding group and the need to switch to another taxation system or group according to the TCU. (tax.gov.ua)

Online store, delivery, cash on delivery

For online sales, just a website or a social media page is not enough. The Law on Electronic Commerce must be fulfilled: the seller must be properly identified, and the electronic contract is concluded according to the rules of this law. If you work with delivery, cash on delivery, or online payment, questions regarding the settlement document, contract terms, returns, and communication with the buyer must be settled in advance. (Law of Ukraine)

The buyer has the right to return or exchange non-food goods of proper quality within 14 days. For distance trading, it is also important to correctly record the date of receiving the goods, as it affects the calculation of the period for exchange or return. A settlement document must be issued to the consumer even in distance sales. (Law of Ukraine)

If a business collects phone numbers, delivery addresses, e-mails, order history, or other personal data of clients, it must act within the Law on Personal Data Protection. This means that data cannot be collected "just in case" and used outside the stated purpose. (Law of Ukraine)

When licenses and special permits are needed

Not every FOP encounters licensing. But if a business works with alcohol, tobacco, liquids for electronic cigarettes, fuel, or other types of activities for which the law requires a license, acting without it is prohibited. For such spheres, not only taxes matter, but also the place of trade, special circulation conditions, product documents, separate storage requirements, and special grounds for license revocation defined by relevant laws. (Law of Ukraine)

Therefore, for an entrepreneur selling excisable goods or working in another licensed field, correctly paying the single tax is not enough. It is necessary to separately check the relevant law for their type of activity: it defines whether a license is needed, for which place of activity it is issued, which documents are attached, in which cases it can be revoked, and what special fines apply. (Law of Ukraine)

Most common financial risks for FOP

For failure to submit or late submission of a tax declaration, a fine of 340 UAH is provided for each case, and 1,020 UAH for a repeated violation within a year.

For non-payment or incomplete payment of advance single tax payments by Group 1 and 2 FOPs, the fine is 50% of the single tax rate. For non-payment or incomplete payment of the military levy for Group 1, 2, and 4 FOPs, tax authorities also explain the application of a fine in the amount of 50% of the levy amount. (kyivobl.tax.gov.ua)

If a FOP exceeds the income limit of their group, conducts activities not provided for this group, or otherwise violates the conditions of applying the simplified system, this leads either to an increased rate of 15% on certain amounts or to a mandatory switch to another taxation system. If state registration is terminated or the registration of a ST payer is revoked, obligations to pay the single tax are accrued until the last day of the month in which termination or revocation occurred. (tax.gov.ua)

What a FOP should set up now

An entrepreneur should have not a "formal package of documents," but a working system: a chosen and verified taxation group, a payment calendar for ST, ML, and USC, monthly income records, an archive of primary documents, a clear procedure for goods movement, properly formatted labor documents, and for online sales — published terms of sale, return, delivery, and personal data processing. Such a system reduces the risk of fines, loss of single tax payer status, problems with RRO/PRRO, and disputes with buyers. (Law of Ukraine)

Official Sources

• Tax Code of Ukraine, No. 2755-VI — Art. 44 (storage of documents), Art. 49 (deadlines for submitting declarations), Art. 120, 122 (fines), Art. 167, 177 (general system), Art. 291–299 (simplified system), item 16-1 of subsect. 10 of sect. XX (military levy), sub-item 69.28 of subsect. 10 of sect. XX (loss/impossibility of removing primary documents). (Law of Ukraine)

• Law of Ukraine "On the State Budget of Ukraine for 2026", No. 4695-IX — Art. 7, 8 (subsistence level and minimum wage for 2026). (Law of Ukraine)

• Law of Ukraine "On Collection and Accounting of the Unified Contribution to Mandatory State Social Insurance", No. 2464-VI — Art. 4, 7, 8, 9, 25. (Law of Ukraine)

• Law of Ukraine "On the Application of Registrars of Settlement Operations in the Field of Trade, Public Catering, and Services", No. 265/95-VR — Art. 3, 9, 17, 20. (Law of Ukraine)

• Order of the Ministry of Finance dated 03.09.2021 No. 496 — Procedure for maintaining inventory records for FOPs and the form of such records. (Law of Ukraine)

• Resolution of the CMU dated 17.06.2015 No. 413 — procedure for notifying the STS of employee recruitment. (Law of Ukraine)

• Labor Code of Ukraine — Art. 24 (formalization of the labor contract), Art. 115 (deadlines for wage payment). (Law of Ukraine)

• Law of Ukraine "On Electronic Commerce", No. 675-VIII — Art. 7, 11 and other norms regarding the seller and the conclusion of an electronic contract. (Law of Ukraine)

• Law of Ukraine "On Consumer Rights Protection", No. 1023-XII — Art. 4, 9, 12 and other norms regarding buyer rights, distance contracts, and product returns. (Law of Ukraine)

• Law of Ukraine "On Personal Data Protection", No. 2297-VI — general rules for the lawful processing of clients' personal data. (Law of Ukraine)

• Law of Ukraine "On Licensing of Types of Economic Activity", No. 222-VIII — general rules regarding licensed types of activities. (Law of Ukraine)

• Law of Ukraine "On State Regulation of Production and Circulation of Ethyl Alcohol, Alcohol Distillates, Alcoholic Beverages, Tobacco Products, Liquids Used in Electronic Cigarettes, and Fuel", No. 481/95-VR — special rules for excisable trade. (Law of Ukraine)