Tax debt on the single tax

Tax debt complicates the life of any business entity, but for a single tax payer it also threatens to lose the status of a single taxpayer. We will discuss this in more detail in this article.

When can I lose my single tax payer status due to a tax debt?

The single tax payer status can be lost in the following cases tax debt in the amount exceeding UAH 1020, for two calendar quarters as of the first day of the month. If such criteria are met, the taxpayer is obliged to switch to the general taxation system at the end of the second quarter, i.e. there will be no automatic transition and deprivation of the single taxpayer status.

For example, as of April 1, May 1, June 1, July 1, August 1, and September 1, a single tax entrepreneur has a tax debt (of any kind) in the amount of UAH 1020.01 (i.e., the maximum permissible debt is 1 kopeck higher), in which case such an entrepreneur will be obliged to operate under the general taxation system from October 1. To switch to the general taxation system, an application for switching to the general taxation system must be submitted to the tax authorities 10 calendar days before the end of the quarter.

If a simplified taxation system entrepreneur does not switch to the general system on their own, the tax authorities will do it for them from the first day of the quarter following the quarter in which the violation was committed. Please note that this is not from the moment the tax authorities discover such a violation, but from the moment the violation occurs. That is, the fiscal authorities may make such a transition retroactively. Such a transition may result in fines and penalties for non-payment of the relevant taxes under the general taxation system.

What is included in the tax debt?

If an entrepreneur has a tax debt that arose from tax liabilities not related to the business activities of a single taxpayer, it cannot be a ground for deprivation of the simplified tax status and revocation of the single tax certificate.

In addition, not all tax arrears can be considered tax debt, as it consists of an agreed tax liability, a fine and a penalty. In order for tax liabilities and fines to become tax debt, they need to be agreed upon, but penalties do not require approval.

When does a fine become agreed upon?

Once an entrepreneur receives a tax assessment notice with the amount of the penalty, the penalty for late payment of tax becomes agreed upon. Without notification, the fine will not turn into a tax debt.

The time limit for paying the fine starts after the entrepreneur receives the tax notice-decision. If no notification was sent, then there is no delay in payment. If within 1095 days from the date of the debt, the tax authorities have not sent a notice with the amount of the fine for late payment of the tax liability, they no longer have the right to demand payment of such a fine from you.

What is an agreed tax liability?

An agreed tax liability is the amount that the taxpayer has independently calculated and indicated in the declaration or the liability calculated by the tax authorities but not appealed within the established time limit.

For Individual entrepreneurs in the third group, the tax liability is determined quarterly at the time of filing the declaration. Failure to pay what was accrued results in a tax debt.

For Individual entrepreneurs of the first and second groups, tax liabilities are determined by the tax authorities, as they are obliged to pay the single tax in advance every month by the 20th day.

However, the presence of a tax debt on the unified social contribution will not lead to the loss of the single tax payer status.

If an entrepreneur has an underpayment in his or her taxpayer card, it does not mean that he or she has a tax debt. In order to lose the status of a single tax payer, the fiscal authorities must conduct an audit and, based on the act, can revoke the certificate. If no audit is conducted within 1095 days, you will not be deprived of the simplified tax status, as the statute of limitations has expired. In this case, the entrepreneur is exempt from paying the tax debt and it is subject to write-off.

In the next article, we will discuss when a sole proprietorship may be prohibited from leaving the country if it has a tax debt.

The single tax payer status can be lost in the following cases