FOP on military service: taxes, reporting and employees

Sole Proprietorship (FOP) on military service: do you need to close down, what to do with employees, taxes, and reporting

As of April 2026, the rules for entrepreneurs who have been mobilized or who have signed a contract for military service apply within the framework of a special period and martial law. For a Sole Proprietor (FOP), the key question right now is not whether there is a formal obligation to "close the business", but rather how to correctly choose a course of action: temporarily suspend activities, operate through an authorized person, or voluntarily terminate the Sole Proprietorship. (Legislation of Ukraine)

Is it mandatory to close the Sole Proprietorship

No. Closing a Sole Proprietorship is not an automatic consequence of mobilization or a contract. The termination of business activities occurs by the decision of the entrepreneur themselves and is completed from the date the entry is made in the Unified State Register. That is, military service itself does not liquidate the Sole Proprietor status and does not force one to submit an application for closure. (Legislation of Ukraine)

In practice, an entrepreneur has three working scenarios:

If the Sole Proprietorship is not closed and activity is suspended

For mobilized Sole Proprietors and persons serving under a contract, the Tax Code provides for an exemption during the period of service from calculating, paying, and reporting on personal income tax, the single tax, and the military charge. This rule applies from the first day of the month in which the person was mobilized or signed a contract, but no earlier than February 24, 2022, and until the last day of the month of demobilization or discharge from military service. (Legislation of Ukraine)

The basis for such an exemption is the data that the State Tax Service receives from the Unified State Register of Conscripts, Persons Liable for Military Service, and Reservists. This means that in the basic scenario, the benefit should trigger without a separate application from the entrepreneur. If the tax authority has not received this information, the Sole Proprietor has the right to submit an application and a copy of the military ID or other conscription document, and for contract soldiers — also a copy of the contract. (Legislation of Ukraine)

For the Unified Social Contribution (USC), the rule is more nuanced. The law directly exempts those Sole Proprietors who are not employers from fulfilling their USC payment obligations for the entire duration of their service. Therefore, the complete exemption from the USC "for oneself" is explicitly written specifically for entrepreneurs without hired employees. If employees remain, a different mechanism applies — through an authorized person and a deferment after demobilization. (Legislation of Ukraine)

If the Sole Proprietorship has hired employees

When an entrepreneur goes to serve but does not want to close the Sole Proprietorship and does not terminate labor relations, the law allows transferring part of the duties to an authorized person. The Tax Code explicitly stipulates that such a person, during the Sole Proprietor's service, calculates and deducts personal income tax and the military charge from employees' salaries and other payments. The USC from employees' salaries can also be administered through an authorized person according to the special rules of the Law on the USC. (Legislation of Ukraine)

At the same time, the demobilized Sole Proprietor then completes the deferred obligations:

To formalize such representation, civil legislation allows acting through a power of attorney. This is the basic legal instrument if it is necessary to transfer authority for salary, tax, or other organizational actions. It is best to specify the scope of authority as specifically as possible: paying salaries, submitting reports, corresponding with the State Tax Service, interacting with the bank, and signing primary documents within the permitted limits. (Legislation of Ukraine)

Is it possible to dismiss employees if the Sole Proprietor goes to serve

Yes, but the basis is different from what is often written in old publications. The current Labor Code stipulates the termination of an employment contract in the event of conscription or enlistment in military service of an employee or an employer — a natural person. This is point 3 of part one of Article 36 of the Labor Code. That is, this specific norm is dedicated to the situation when the employer-Sole Proprietor goes to serve. (Legislation of Ukraine)

In this case, the employee is entitled to severance pay in an amount not less than two minimum wages. In addition, the employer is obliged to issue a copy of the dismissal order, a written notification of the accrued amounts, and make the final settlement. If the employer-Sole Proprietor was called up for military service, these obligations under Article 47 of the Labor Code can be fulfilled within one month after discharge from military service without the application of sanctions and fines. (Legislation of Ukraine)

Thus, for a Sole Proprietorship with personnel, there are two legal options: either keep the employees and ensure administration through an authorized person, or terminate employment contracts under point 3 of part one of Article 36 of the Labor Code with the payment of severance pay. (Legislation of Ukraine)

Tax risks and important special rules

In 2026, for mobilized Sole Proprietors, not only the right to exemption is important, but also the technique of its application.

First, the controlling authority should not accrue advance payments for the single tax and the military charge from the month in which it received information about mobilization or a contract. If such amounts, fines, or penalties were still accrued during the period of service, they are subject to cancellation within the statute of limitations. (Legislation of Ukraine)

Second, if during the service the State Tax Service canceled the registration of the Sole Proprietor as a single tax payer on the basis of sub-clause 8 of sub-clause 298.2.3 of the Tax Code, the tax authority must restore such registration from the date of cancellation. This is an important guarantee for those who effectively fell out of current administration during their service. (Legislation of Ukraine)

Third, for the USC, there is a separate mechanism for canceling fines and penalties for the period of mobilization or the duration of the contract. The Law on the USC explicitly provides for the annulment of such sanctions and the postponement of reporting and payment deadlines after demobilization. (Legislation of Ukraine)

If the Sole Proprietorship decided to close down

Closure is possible voluntarily. An application can be submitted online through Diia or using the form approved by the Ministry of Justice, for the state registration of the termination of a Sole Proprietor's business activity by their own decision. The status of the entrepreneur is terminated from the date the entry is made in the Unified State Register. (Legislation of Ukraine)

Closing a Sole Proprietorship can be advisable if the business stops entirely, there is no need to preserve contractual relations, and it is easier for the entrepreneur to complete activities than to organize representation. But the closure itself does not replace the settlement of issues with employees, salaries, taxes, and reporting for the period that has already occurred. (Legislation of Ukraine)

What documents to prepare immediately after conscription or before leaving for service

Practical minimum for a Sole Proprietorship:

Short example

Conclusion

For a Sole Proprietorship in 2026, mobilization or a contract does not mean mandatory business closure. The law allows either not conducting activities and taking advantage of tax benefits during the service, operating through an authorized person, or voluntarily terminating the Sole Proprietorship. Most attention should be paid to three things: employer status, proper execution of representation, and compliance with post-demobilization deadlines for reporting and paying deferred payments. (Legislation of Ukraine)

Official sources

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