Registration as a VAT payer on the single tax system

VAT Registration for Sole Proprietors (FOP) on the Unified Tax: Procedure, Deadlines, Documents, and Consequences

A Sole Proprietor (FOP) on the simplified taxation system can operate with VAT, but not in all groups and not at any unified tax rate. The combination of the unified tax and VAT is possible for taxpayers of the third group who have chosen a rate of 3% of income. If a FOP is in the first, second group, or the third group with a 5% rate, they are not a separate VAT payer. This follows directly from the Tax Code: for the third group, a 3% rate is established if VAT is paid, and 5% if VAT is included in the unified tax. (ZIR)

For FOPs on the unified tax, VAT registration does not occur automatically simply because the volume of taxable transactions has been exceeded. The rule on mandatory VAT registration after reaching the established volume of taxable transactions does not apply to persons who are taxpayers of the unified tax of the first to third groups. Therefore, a FOP on the unified tax can remain without VAT if they work at a rate that does not provide for the payment of VAT. (ZIR)

At the same time, the law allows for voluntary VAT registration. If an entrepreneur believes that it is profitable for them to work with a tax credit, issue tax invoices to counterparties, or import goods taking into account VAT rules, they can register as a VAT payer upon their own application. For a FOP on the unified tax, this means a transition specifically to the third group with a rate of 3%. (ZIR)

Who exactly can combine the unified tax and VAT

The following can work on the unified tax with VAT:

• FOPs in the third group who have chosen a 3% rate;

• FOPs transitioning from the first or second group to the third group and simultaneously choosing a 3% rate;

• FOPs transitioning from the general taxation system to the third group with a 3% rate.

FOPs in the third group with a 5% rate are not separate VAT payers because, in this mode, VAT is already "inside" the unified tax, without independent VAT registration. Separately, special restrictions must be taken into account: electronic residents and FOPs who produce, supply, or sell jewelry and household products made of precious metals, precious stones, and semi-precious stones cannot apply the 3% rate and must work at a 5% rate. (ZIR)

Which application is submitted

For VAT registration, a registration application is submitted using Form No. 1-PDV. Its form is established by the Regulations on the Registration of VAT Payers, approved by Ministry of Finance Order No. 1130. Submission is made in electronic form. The tax authority also allows for the indication of a desired registration date, but it cannot be earlier than the date from which the taxation system or rate providing for the payment of VAT actually changes. The tax authority has the right to request supporting documents if it is impossible to verify compliance with the requirements of the law from the submitted application. (Law of Ukraine)

If a FOP is already in the third group with a 5% rate and wants to switch to 3% + VAT

This is the most common option for existing simplified system taxpayers. In this case, the entrepreneur changes the unified tax rate from 5% to 3% and simultaneously undergoes VAT registration.

The application for changing the unified tax rate must be submitted no later than 15 calendar days before the start of the quarter from which the new rate will be applied. For the VAT registration itself, the deadline is no later than 10 calendar days before the start of the month from which the person will be considered a VAT payer. Since the 3% rate for the unified tax is applied from the beginning of the quarter, in practice, both applications are submitted well in advance of the beginning of such a quarter. VAT payer status begins on the first day of the corresponding month from which the 3% rate is applied. (Law of Ukraine)

If a FOP transfers from the first or second group to the third group with a 3% rate

Voluntary transition

If a FOP of the first or second group decides to switch to the third group with a 3% rate, the application for VAT registration must be submitted no later than 15 calendar days before the start of the quarter from which the new group and rate will apply. It can be submitted simultaneously with the application for changing the unified tax group. VAT registration becomes effective from the first day of the quarter in which the 3% rate begins to apply. (Law of Ukraine)

Forced transition due to exceeding income

If a unified tax payer of the first or second group has exceeded the income volume allowed for their group and, in connection with this, transitions to the third group, they can choose the 3% rate with VAT payment. To do this, a registration application using Form No. 1-PDV must be submitted simultaneously with the application for switching to another unified tax rate no later than the 20th day of the month following the calendar quarter in which the excess occurred. If Form No. 1-PDV is not submitted within this period, the entrepreneur will not be able to apply the 3% rate with VAT: in this case, they switch to the unified tax rate that does not provide for the payment of VAT, or refuse the simplified system. For the third group, the rate without VAT is 5%. (Law of Ukraine)

If a FOP transfers from the general system to the third group with a 3% rate

If an entrepreneur is already registered as a VAT payer and switches to the simplified system choosing the third group at a 3% rate, there is no need to register separately as a VAT payer again: the existing VAT registration is maintained, as the new regime also provides for the payment of VAT. If at the time of the transition the entrepreneur did not yet have VAT status, Form No. 1-PDV must be submitted no later than 15 calendar days before the start of the quarter from which they want to switch to the simplified system with a 3% rate. (Law of Ukraine)

If a FOP transfers from the simplified system without VAT to the general system

Two options are possible here.

Mandatory VAT registration

If, upon switching to the general system, the entrepreneur already meets the criteria for mandatory VAT registration, the application must be submitted no later than the 10th day of the first calendar month in which the transition to the payment of other taxes and fees was made. If the entrepreneur was required to register but did not submit an application, they are liable as a registered VAT payer, but without the right to a tax credit and budget reimbursement. (ZIR)

Voluntary VAT registration

If the criteria for mandatory registration are not met, but the entrepreneur wants to become a VAT payer voluntarily, the application is submitted no later than 10 calendar days before the start of the tax period from which they wish to become a VAT payer. For VAT, the tax period is a calendar month. (ZIR)

If the FOP has just registered

A newly created FOP cannot simultaneously become a third-group unified tax payer at a 3% rate and a VAT payer from the day of state registration. The tax authority explicitly clarifies: upon state registration, a newly created FOP can choose the third group with a 5% rate, and only then switch to the 3% rate after separate VAT registration in the general procedure. That is, first — simplified system without VAT, then — change of rate and separate registration as a VAT payer. (ZIR)

When the tax authority may refuse VAT registration

The tax authority may refuse if:

• the person does not meet the requirements of Articles 180, 181, 182, or 183 of the TCU;

• the application was submitted late;

• the application contains inaccurate or incomplete data;

• information about the person is missing or not confirmed in the EDR;

• there are grounds for cancellation of VAT registration under Article 184 of the TCU.

If it is impossible to verify the grounds for registration from the submitted application, the tax authority may suggest providing additional supporting documents. (Law of Ukraine)

What changes after VAT registration

After acquiring the status of a VAT payer, a FOP in the third group with a 3% rate works under the rules of Section V of the TCU.

The tax period for VAT is a calendar month. The VAT declaration is submitted within 20 calendar days after the end of the reporting month, and the amount of tax liability is paid within 10 calendar days after the deadline for filing the declaration. (ZIR)

The entrepreneur must draw up and register tax invoices and adjustment calculations in the Unified Register of Tax Invoices (URTN) within the timeframes established by the TCU. For VAT operations, an account is automatically opened in the electronic VAT administration system. (ZIR)

If the entrepreneur uses a cash register (RRO) or software-based cash register (PRRO), the fiscal receipt for a VAT payer must display VAT details, in particular, the individual tax number of the VAT payer, the VAT rate designation, and the amount of VAT by product items or by document — depending on the type of operation and form of the document. (Law of Ukraine)

When VAT registration is cancelled

For a FOP on the unified tax, the most common reason for cancellation is the transition to a regime that does not provide for the payment of VAT. This could be:

• transition from the third group 3% to the third group 5%;

• transition from the third group to the first or second group;

• another change in the taxation system in which VAT is not paid separately.

In such cases, VAT registration is subject to cancellation. If a third-group unified tax payer loses or cancels VAT registration, they must switch to a 5% rate or refuse the simplified system. The application for changing the rate or refusing the simplified system is submitted no later than 15 calendar days before the start of the quarter following the quarter in which the VAT registration was cancelled. (ZIR)

Other common grounds for cancellation are defined by Article 184 of the TCU. Among them are voluntary cancellation if the person has been a VAT payer for at least 12 months and for the last 12 months has taxable transactions less than the established threshold, termination of business activities, as well as cases when declarations are not filed for 12 consecutive tax months or "zero" declarations are filed without supply or purchase transactions. The tax authority draws special attention: the absence of supply itself is not always a ground for cancellation if there were purchases in such periods that formed a tax credit. (tax.gov.ua)

What to look for before switching to 3% + VAT

VAT registration is not appropriate in every business. It is usually justified when:

• the main buyers are VAT payers;

• there are significant purchases with input VAT;

• import is planned;

• tax invoices are needed for B2B counterparties.

If sales go mainly to the final consumer, purchases are small, and you want to simplify administration, the 5% rate without VAT is often a simpler model. But after the transition to 3% + VAT, the entrepreneur receives not only the benefits of a tax credit, but also a full array of VAT duties: monthly reporting, registration of invoices, control over deadlines, correct execution of receipts, and work through an electronic VAT account. (ZIR)

Official Sources

1. Tax Code of Ukraine of 02.12.2010 No. 2755-VI — clause 14.1, art. 180–184, art. 200¹, clause 291.4, clause 291.5.1, clause 293.3, art. 298, art. 299. (Law of Ukraine)

2. Order of the Ministry of Finance of Ukraine of 14.11.2014 No. 1130 "On approval of the Regulations on the registration of value added tax payers" — Form No. 1-PDV, sec. III, in particular clause 3.6. (Law of Ukraine)

3. ZIR STS: clarifications on VAT registration of unified tax payers — deadlines for submitting an application when moving between groups, changing rates, moving to the general system, newly created FOPs, consequences of failing to submit an application. (ZIR)

4. Order of the Ministry of Finance of Ukraine of 21.01.2016 No. 13 — Regulations on the form and content of settlement documents / electronic settlement documents. (Law of Ukraine)

5. Law of Ukraine "On the use of settlement transaction registers in the field of trade, public catering and services" of 06.07.1995 No. 265/95-VR — general rules for RRO/PRRO. (ZIR)

6. ZIR STS: clarifications on the cancellation of VAT registration — art. 184 of the TCU, grounds, procedure, consequences for unified tax payers of the third group. (ZIR)