As of the end of 2023, the number of individual entrepreneurs in Ukraine exceeded 2 million. At the same time, even compared to pre-war times, there has been a significant increase in small and medium-sized businesses in recent years. At the same time, there are sad statistics on the number of closed sole proprietorships, as one in three sole proprietorships ceases to exist in the first year of operation.
Therefore, it is important for every entrepreneur to understand what offences and under what conditions they may be held liable in the form of a fine in order to avoid unwanted expenses. Read about the most common offences among sole proprietors for which they may be fined, as well as the amount of fines, in this article.
What sole proprietors can be fined for in 2024
The most common offences for which sole proprietorships may be fined include the following types of actions:
- Failure to register employees;
- Failure to submit reports on time;
- Late payment of the single tax;
- Failure to submit a combined report in a timely manner;
- Failure to keep records of primary documents;
- Ignoring a tax request, i.e. failure to provide a response or documents;
- Violations regarding the use of cash registers/PTRs;
- Failure to keep records of inventory (for sellers of risky goods);
- Failure to provide customers with the opportunity to pay for purchased goods using a POS terminal.
Liability of an individual entrepreneur for an unregistered employee
If an individual entrepreneur (IE) of the first, second or third group allows an undocumented employee to work for the first time, he or she will be issued a warning. If a similar violation is repeated over the next two years, the entrepreneur will be fined UAH 240,000 for each unregistered employee.
For sole proprietors operating under the general taxation system, other penalties are imposed. For the first violation, they pay a fine of UAH 80,000, and for subsequent violations – UAH 240,000.
In addition, administrative liability is provided for failure to register an employee. For the first offence, the fine can range from UAH 8,500 to UAH 17,000, and for the second offence, from UAH 17,000 to UAH 34,000.
Penalties for late payment of the unified social tax (UST)
For sole proprietors of the first and second groups, a fine of 50% of the single tax rate is provided, which in 2024 is UAH 151.40 for the first group and UAH 710 for the second group. The penalty will be imposed even in case of a minor underpayment or a one-day delay in payment. In addition, the amount of the debt will be automatically charged with a penalty, which will be added to the next payment, which may lead to a recurrence of the debt and new penalty charges. Therefore, it is important for entrepreneurs to keep track of unpaid debts and penalties through the Payer’s Electronic Account.
For sole proprietorships of the third group, a fine of 5% of the unpaid tax is imposed for delays of up to 30 days, and 10% for delays of more than 30 days.
Liability of sole proprietors for failure to submit reports on time
Individual entrepreneurs may be fined for late submission of reports. Such an offence is subject to a fine of UAH 340. If the violation is repeated within a year, the fine will increase to UAH 1,020.
In this case, the offence is considered repeated if the entrepreneur has already been fined and a relevant act has been drawn up. If several similar violations, such as the failure to submit several reports, are detected during one inspection, each of these cases is considered a first offence and is punishable by a fine of UAH 340.
Penalties for late submission of a combined report
In case of late submission of the combined report (Annex 4DF), a fine of UAH 1,020 is provided for the first violation. If such a violation is detected again, the fine will increase to UAH 2040.
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Additional tax assessment based on the results of an audit
If the tax authorities find violations related to tax evasion during an audit, additional tax charges may be imposed on the entrepreneur. An unintentional violation is subject to a fine of 10% of the additional amount. In the case of a deliberate violation, the fine will be 25%, and if the violation is repeated within three years, 50%.
Typically, entrepreneurs commit tax violations due to inattention, and in such cases, the amount of additional tax should be minimal. However, it can be difficult to prove to the tax authorities that the violation was unintentional. This requires preparing explanations to the audit report or challenging the additional tax charge in court, which often forces entrepreneurs to agree to pay a 25% fine.
Liability for failure to keep records of primary documents
Entrepreneurs may be fined UAH 1,020 for failing to keep records of primary documents for the first offence. If a similar violation is detected again within one year, the fine will increase to UAH 2040.
Penalty for ignoring a tax request (failure to provide a response or documents)
Failure to comply with the tax authorities’ request to provide the necessary documents or failure to respond to the request may result in a fine of UAH 7100. It is important to note that the fine will be imposed even if the tax request is returned as undeliverable.
Liability of a sole proprietor for violations regarding the use of cash registers/PTRs
If a sole proprietor does not have or does not use a payment transaction recorder (PTR) during an audit, although its use is mandatory, the entrepreneur faces a fine. For the sale of goods or services without fiscalisation, the fine will be 25% of the value of the goods or services in the case of a first offence. In case of a repeated violation, the fine increases to 50%.
It is worth noting that any offence detected after the first one is considered a repeat offence. For example, if during one inspection 5 cases of sale of goods without fiscalisation are detected, the first product will be fined 25% (for ordinary goods) or 100% (for risky goods such as excisable goods, medicines, machinery, etc.), and the remaining 4 products will be fined 50% or 150% for repeated violations, respectively.
Fines for not providing the opportunity to pay using a POS terminal
Fines are imposed for failing to provide customers with the opportunity to pay for goods through a POS terminal. For the first violation, the fine ranges from UAH 1,700 to 3,400, for the second and each subsequent violation within a year – from UAH 8,500 to 17,000.
In addition, the State Service of Ukraine on Food Safety and Consumer Protection may additionally impose a fine of UAH 8,500 on a sole proprietor for such an offence.
Liability of individual entrepreneurs for failure to keep records of inventory (risky goods)
For entrepreneurs trading in risky goods, failure to keep inventory records may result in a fine of 100% of the value of such goods.
Therefore, in order to avoid the possibility of fines, entrepreneurs should take a responsible approach to fulfilling their obligations under the applicable law. In particular, failure to comply with the requirements for hiring employees, paying taxes, submitting reports and using payment transaction registers may result in significant financial penalties. Understanding the possible risks and taking timely measures to minimise them will help entrepreneurs avoid fines and ensure the stable development of their business.
Author: Olya Yushko
