As we have already mentioned in our post last week, there are two kinds of tax systems in Ukraine for entrepreneurs and businesses: general and simplified. We explained how it works for solo entrepreneurs. Today we will explain what taxes does a limited liability company (LLC) have to pay.
We will start with the general tax system.
If you choose a general tax system when registering your LLC, you will have to pay only one kind of taxes - the profit tax, it’s 18% of the profit. But if your profit is more than 1 million UAH per year - you will have to pay also the VAT.
Now about the simplified tax system for an LLC.
Unlike for solo entrepreneurs, who are divided into three groups when they choose the simplified tax system, LLCs are automatically placed into the third group. This means that LLCs pay 5% taxes from their turnover and in case they voluntarily agree to pay the VAT - they pay 3% taxes from their turnover. There is also a maximum amount of turnover an LLC can have if it chooses the simplified tax system - 5 million UAH per year.
Therefore, if your LLC has less than 10-12% profit - the general tax system will be more profitable. But in case it makes more than 25-30% profit - you should choose the simplified system.
Also, if your profit is 15-20% but you do not pay the VAT - the general tax system will be better. But if your profit is more than 1 million per year and it’s 15-20% of your turnover - the simplified tax system will be more suitable.