This article has been prepared for the owners of online stores on the territory of Ukraine with their own legal framework and the Tax Code. Perhaps it will be of interest to you if you decide to register your business in Ukraine. Enjoy reading.
If you already have an offline business with a certain legal form of ownership and you decide to additionally open an online store, there will be no problems with the choice of legal registration. But what if you just decided to try yourself in e-commerce and create an online store from scratch?
You may be thinking that selling through an online store is possible without legal registration. You can, if you are not afraid of high fines. There are two options for the legal registration of an online store: Entepreneur or Limited Liability Company (LLC).
Perhaps this is the best option for small businesses with low cash turnover (from UAH 1.5 million to UAH 5 million per year).
Benefits of registering an individual entrepreneur:
• Possibility to choose a simplified taxation system;
• There is no need to order a stamp and open a current account;
• Simple and fast registration form;
• In case of late submission of reports, the fines will be low;
• Simple form of bookkeeping and reporting;
• Low taxes (under the Simplified Taxation System);
• Simple form of liquidation;
• Withdrawal of earned funds from a personal account and disposal of income at your own discretion;
• No need to register a legal address.
Disadvantages of individual entrepreneur registration:
• Low trust, both on the part of clients and on the part of partners and investors;
• An individual entrepreneur in the event of bankruptcy is liable for his property;
• Restrictions on annual revenue and hiring employees (when choosing the Simplified Taxation System).
Advantages of LLC registration:
• If you open an Online Store (OS) with a partner or several co-founders, then the conditions and size of the share of each founder will be prescribed during registration; upon receipt of profit, each founder receives a percentage, which is registered in the authorized capital;
• Allowable number of co-founders - up to 100 people;
• Attractiveness for investors;
• Co-founders are liable only within the authorized capital, nothing more;
• Subsequently, the possibility of a profitable sale of the business;
• There are no restrictions on the hiring of employees and the annual revenue (when choosing the General System of Taxation);
• Large courier services are more willing to cooperate with companies that have a checking account.
Disadvantages of LLC registration:
• Lengthy registration procedure;
• The need to open a current account and order the stamp;
• High fines in case of violations or late submission of reports.
Regardless of the form of ownership, you have the right to receive a certificate of property rights to the site and to all content (which must be copyrighted). This gives the right to further declare plagiarism and copyright. For legal reasons, the copied material must be removed from the site that uses your content (video, media, text). You can get a certificate from the Ministry of Economic Development, Trade and Agriculture of Ukraine.
For an online store, the taxation system should be chosen according to the same principle as for an offline business. Individual entrepreneurs can choose a simplified or general taxation system.
Individuals in the simplified tax system pay the Single Tax, but first you need to decide on the group:
1) The 1st group can be chosen if you DO NOT hire employees, and the amount of annual revenue does not exceed UAH 300 thousand per year. If you carry out retail trade only from outlets in the market and / or provide household services to the public. This group is not suitable for an online store.
2) You can choose the 2nd group if you do not hire employees or their number does not exceed 10 people and if the amount of annual revenue does not exceed UAH 1.5 million per year. On the Second Group of the simplified tax system, you can provide services to the population and payers of the Single Tax, engage in the production and / or sale of goods; to conduct business activities in the direction of the restaurant business.
For group 2, there are some restrictions on the types of activities, such as buying / selling, renting and appraising real estate, activities related to precious metals and stones. More details can be found in the Tax Code of Ukraine, since the listed activities are not related to online stores, we decided not to dwell on them.
3) The 3rd group is chosen if the annual income does not exceed UAH 5 million. There can be an unlimited number of employees.
4) The 4th group is given preference by entrepreneurs who produce agricultural goods. More details can also be found in the Tax Code of Ukraine.
This is the simplest form of registration of an individual entrepreneur, in which you must submit an application to the state registrar. At the same time, an application for registration of the sole proprietor himself is submitted, if not already open. Please note that if you do not declare that you are choosing the Simplified Taxation System, you will be automatically registered with the General.
Individual entrepreneurs on Common Taxation System (CTS) keep records of both income and expenses. On the General System of Taxation, it is necessary to pay income tax - 18% on the difference between the total taxable income and documented expenses.
When choosing an CTS for an LLC, you will need the services of an accountant, since the accounting and reporting form are quite complex, and the fines can be high. On the General Taxation System LLC pays the following types of taxes in Ukraine:
1) Income tax of 18%
2) Value added tax 20%;
3) Tax on dividends - 5%;
4) Military Tax 1.5%;
5) Single social contribution, personal income tax - payroll taxes.
LLC can also choose the simplified tax system and pay the Single Tax, which is calculated according to the following scheme:
• If the income of the company is up to 5 million UAH per year, then you can choose 3 group. In this case, the Single Tax is calculated according to the formula: income x 3% (if VAT is paid separately) or income x 5% (if VAT is included in the Single Tax)
• IV group is selected when conducting agricultural activities. The Single Tax is calculated as follows: income x tax rate per hectare of land.
When choosing a simplified tax system for an LLC, there are also restrictions on the types of activity, so for a start it is better to consult with lawyers.
In 2019, it was decided to create a bill that states that all online stores must use Registrar of Settlement Transactions (RST). Entry into force for the bill is planned for January 1, 2021 and will concern sole proprietorship in groups II-IV.
Online store owners will have to choose one of two types of RST: classic or software. Electronic receipts will appear, which must be sent along with the goods to the buyer. It is not yet clear how the clearance should take place for returns, partial payments or prepayments.
According to the bill, if the online store does not provide a check to the buyer, the buyer has the right to report this to the fiscal service and receive a refund (cashback) in the amount of the full cost of the goods. In this case, the entrepreneur pays a fine - 150% of the value of the goods for the first violation (for the subsequent penalty rate increases).
1. Determine which type of RST is suitable for your business: cash register, fiscal recorder or mobile fiscal recorder, software RST. All types of RST except software are included in the State Register of RST. Software RSTs are not included in the State Register of PPOs and are registered on the official website of the tax service of Ukraine. An entrepreneur can purchase software from both private development companies and government ones. This eliminates monopoly.
2. Conclude an agreement with the Service Center, which will carry out registration, installation and maintenance of RST.
3. After each purchase, issue a receipt to the buyer along with the goods.
In what cases RST is not required:
• When selling "virtual" goods and services: software, service package, subscription, provision of a web server, etc.
• In the event that the goods are paid by bank transfer through the bank's cash desk and to the current account (bank account) of the enterprise (in this case, an invoice must be issued with the official details of the company; the card account is not a current account); also payment through a bank terminal falls under this case;
• When paying for goods from the buyer's account to the seller's account;
• When sending goods by cash on delivery through the logistics, courier or postal service. In this case, payment for the goods is made through an intermediary and there is no direct payment for the goods. The online store receives payment for the goods by bank transfer from the courier service.
• Payment is carried out by means of cryptocurrencies (until this moment is detailed in the bill).
Payment through the payment system LiqPay, Portmone, WayForPay, Privat24 does not apply to a non-cash form of payment and requires registration of a RST.
Also, registering a RST is necessary if the online store has its own courier service that delivers goods and accepts payments (both in cash and through a POS terminal).
Such keen interest from the tax authorities in online shopping proves once again that e-commerce is a profitable business for entrepreneurs. The most important thing is to organize the whole process correctly and immediately worry about the legal registration of the business.
This article was prepared for informational purposes only. In any case, before legalizing your business, choosing a taxation system, registering a RST, you should consult with lawyers.
Perhaps you will be interested in our article: "How and where to find suppliers for your online store."
Leave your review