The income ledger has been canceled

Recently, the President signed a law that abolishes the mandatory maintenance of an income ledger for sole proprietorships of the first, second and third groups that are not VAT payers, and from January 1, 2021, for sole proprietorships of the third group of VAT payers. We will discuss the pros and cons of this abolition in this article.

What do entrepreneurs do with the Income Book today?

Now they are entrepreneurs:

• groups 1, 2, and 3 (excluding VAT) record their income in the Income Book;
• group 3 (VAT payers) use the Income and Expense Ledger;
• under the general taxation system, use the income and expense ledger approved for them.

In the Accounting Book, all sole proprietors record the total income received for the day, while sole proprietors who are VAT payers and use the general system also record expenses for the day. In the absence of income or expenses, no entries are made.

Before you could start keeping records in the Book, you had to register it with the tax authorities. It is possible to use the book in paper form or electronically (although how to register it with the tax authorities has not yet been figured out).

The income ledger has two main functions:

• helps to keep records of income, which means it allows you to calculate profits and fill out reports based on it;
• helps entrepreneurs generate cash.

What will change for sole proprietors from January 1, 2021?

For all sole proprietors on the single tax (regardless of whether they are VAT payers or not) from January 1, 2021:

• you no longer need to register the Income Ledger and the Income and Expense Ledger with the tax authorities;
• starting from January 2021, sole proprietors can keep records of income and expenses in any form. That is, you choose where you will record the results of your activities: in a notebook, journal, excel spreadsheet, or continue to record everything in the Income Ledger - it's up to you. In addition, a sole proprietor is not obliged to inform the tax authorities how he keeps records;
• whether to keep records in paper or electronic form is up to the sole proprietor to decide. Please note: if you decide to keep records electronically, the personal account of taxpayers does not provide for such an option, i.e. you will need to create a spreadsheet on your computer;
• you no longer need to enter the total for the day, a monthly reflection of income is sufficient. That is, the document where you will keep records of income must contain at least 12 entries per year - 1 per month. However, no one prohibits you from recording daily totals for the day, as before;
• the tax authorities will no longer impose fines for improper record keeping.

What will be the consequences for sole proprietors due to the abolition of the Income Accounting Book?

The abolition of the Income Ledger is a logical step. However, the life of entrepreneurs will not become easier, as from January 1, 2021, most sole proprietors of groups 2-3 will be required to use a cash register or a payment transaction recorder, meaning that tax authorities will be able to check the income of entrepreneurs without a ledger.

The tax authorities will be able to easily track your payments to the current account using bank statements, and cash payments will be shown in the fiscal receipts of the ECR and ECR, as well as in Z-reports that you will send daily to the tax server.

Despite the fact that the Income Accounting Book has been canceled, single tax entrepreneurs will still be required to keep it:

• fill out and submit single tax reports;
• provide tax authorities with primary documents confirming the receipt of income;
• keep and, if necessary, provide tax inspectors with primary documents confirming the accounting and origin of the goods you trade.

What will change for sole proprietors on the general taxation system?

For sole proprietors of the general system, the accounting principle will not change from January 1, 2021, although the income and expense ledger will no longer need to be registered with the tax authorities.

Such individual entrepreneurs will continue to have to keep records of income and expenses and have primary documents for the purchased goods. The goods will have to be accounted for in the form approved by the Ministry of Finance, which will have to be approved by January 1, 2021.

Individual entrepreneurs on the general taxation system will be able to choose whether to keep records in paper or electronic form using the taxpayer's account (although it is not yet known how this will be implemented).