In today’s business environment, working with foreign contractors is becoming increasingly relevant for sole proprietors (individual entrepreneurs). However, every sole proprietor must strictly comply with the rules of foreign economic activity, financial discipline, and tax payment, but first things first.
Which taxation system to choose
If an individual entrepreneur’s expenses are significant, they can work under the general taxation system, which will allow them to optimize their tax burden. But when it comes to services or goods without added value, it is better to apply a simplified taxation system (single tax). In this case, the best option is the third group of single tax payers, which will allow the individual entrepreneur to work with both individuals and legal entities from foreign jurisdictions.
The tax rate in 2025 is 5% and 1% military tax on the amount of income.
How to receive funds
We accompany our clients during visits to banking institutions and help them choose the best service package and account opening option. We offer the best terms from banks, under which you will receive funds to your business account, and then you can transfer them to your card and spend them on your own needs. Of course, taxes and fees must be paid on all income. This will protect you from unnecessary checks by the tax authorities.
So, it is important to choose a modern bank that offers modern methods of working and receiving funds without any delays.
What documents are required when working with a foreign counterparty
Usually, the parties enter into an agreement that specifies the rights and obligations of the parties, the subject matter of the agreement, the procedure and terms of payment, delivery of goods, etc. The agreement must comply with the requirements of the current legislation of Ukraine and at the same time not contradict the legislation of the counterparty’s country. To this end, it is important to develop a draft agreement with the help of specialists in international and commercial law. We assist our clients in drafting various agreements. Our nearly 20 years of experience allows us to quickly and efficiently develop a draft agreement so that our client’s interests are protected and the agreement is implemented without any problems.
In some cases, it is possible to formalize an agreement in a simplified form by sending an invoice or bill to the other party. Upon receipt and subsequent payment of the corresponding amount, the contract is considered concluded, and the parties have agreed on its main terms. It is important that the invoice details are correct, indicating the details of the parties, the subject of the contract, the amount, and the terms of payment (delivery).
How to determine the amount of taxes
It should be understood that the amount of income must be calculated in hryvnia, as must the amount of tax. Therefore, if you have received funds in foreign currency to your account, you must transfer this amount in hryvnia equivalent at the NBU exchange rate on the date the funds were credited to the account. The amount received in hryvnia equivalent will be your base from which taxes are deducted.
To correctly determine the amounts of taxes and fees, we always recommend contacting our specialists, who will quickly, correctly, and accurately determine the amounts of tax liabilities, help prepare reports, and pay taxes. You will enjoy convenience and comfort, and most importantly, you will save time and nerves.
What are the risks of currency control
Our country has what is known as currency control. The essence of this is that if you have paid funds to a non-resident or sent goods or services, you must receive the purchased goods or services, or receive funds for the goods sold or services provided. The tax authority allows 180 days from the date of the first event for this. If the following action is not taken during this time (or the goods or services are not received, or the funds are not paid), the tax authority may conduct an audit and impose a penalty, which will be an additional negative consequence for you. However, currency control may not apply to all cases, so it is important to understand when to be concerned about it.
Our company has experience and is ready to provide the appropriate services so that you are not subject to the negative consequences of currency control and your business continues to operate without penalties and fines.
Conclusion
Working with foreign contractors as a sole proprietor is possible and profitable, but it is important to follow a number of rules, choose the right taxation system, draw up legal transactions correctly, and comply with tax and accounting regulations. If you want to relieve yourself of this burden, we are always ready to take on these tasks so that you have time to develop your business.
We have been helping clients from different countries do business for over 15 years, so our experience allows us to solve any complex tasks and offer the most profitable business development models.
Contact us and see what we can do for you.
Sincerely,
Managing Partner
Attorney, PhD Vitaly KULAKOV