Turnover Limit for Individual Entrepreneurs of Group 3.

More and more entrepreneurs in Ukraine are switching to individual entrepreneurship. This is not only beneficial, but also legal. Each group has its own limits and restrictions, and Group 3 of individual entrepreneurs is no exception.

It is necessary for everyone who belongs to this group to consider the turnover limit for Group 3 of individual entrepreneurs. The entrepreneur himself must keep track of this. In general, the 3 groups are quite large, and there are many such entrepreneurs in Ukraine.

A few words about individual entrepreneurs groups in Ukraine

In Ukraine, individual entrepreneurs (IE) can choose one of three groups of simplified taxation system. Each group has its own features, limitations, and tax rates.

The first thing to know about the differences between IE groups is their limits. What they are in 2024:

1. Group 1 IE - 1,118,900 UAH (167 minimum wages).

2. Group 2 IE - 5,587,800 UAH (834 minimum wages).

3. Group 3 IE - 7,818,900 UAH (1,167 minimum wages).

Therefore, the first group is considered the simplest. These are IE engaged in retail trade at markets and providing household services to the population. At the same Time, you cannot hire employees. This is a simple and convenient system for small entrepreneurs without employees.

The second group is engaged in production and sale of goods, provision of services to the population or other taxpayers of a single tax (except for intermediaries engaged in buying and selling goods). In this case, up to 10 employees can already be hired. The group is suitable for small businesses with a small number of employees.

There is a third group of IE. The type of activity is not so important in this case. The annual income is much more important. There are no restrictions on employees. This is the most flexible group that allows engaging in any activity and hiring any number of employees.

Who is the third group?

Understanding the turnover limit for IE 3 group, it is necessary to understand who can belong to this group. IE already imposes certain obligations and gives certain rights. It is not so easy to become an IE of the 3 group just like that.

IE Group 3 is a form of taxation for individual entrepreneurs (IE) in Ukraine, which provides certain tax conditions for doing business.

The main characteristics of IE Group 3 include:

1. Income limitation: IE Group 3 can have income up to 8,285,700 UAH (for 2024).

2. Tax rate. It is 5% of the income for those who are not VAT payers, and 3% of the income for those who are VAT payers.

3. Tax accounting. Entrepreneurs must keep records of income and expenses, as well as submit reports.

4. Number of employees. IE Group 3 can hire an unlimited number of employees.

5. Types of activities. IE Group 3 can engage in practically any activity, except for certain restrictions established by Ukrainian legislation.

This tax regime is popular among small and medium-sized businesses due to its relative simplicity and transparency.

Turnover limit for IE Group 3: the main points in brief

The turnover limit for IE Group 3 is the maximum income that an entrepreneur can receive in a calendar year while remaining on this tax regime. For 2024, the limit for IE Group 3 is 8,285,700 UAH. This is a fairly large amount, so the third group is not available to everyone.

How it works:

1. Profit determination. Income is considered the total amount of funds received in the entrepreneur's current account or cash register during the year from entrepreneurial activity.

2. Limit control. If the income of IE Group 3 for the calendar year exceeds the established limit (8,285,700 UAH), the entrepreneur is required to switch to the general tax system from the beginning of the next quarter. If the IE decides to remain on the simplified tax system, he must switch to IE Group 2 (if the activities meet the criteria) or reduce the turnover to the allowable limit next year.

3. If the excess of the limit remains, then there will be some consequences. If the limit is exceeded, the entrepreneur loses the declaration for the application of the simplified tax system and must switch to the general system with a higher tax burden. Also, there may be penalties from the tax authorities.

IE Group 3 must carefully control its income throughout the year in order not to exceed the established limit and avoid the need to switch to another tax system. The turnover limit for IE Group 3 is the same for everyone in this group.

What to do if the IE Group 3 limit is exceeded

If the IE Group 3 has exceeded the income limit (8,285,700 UAH for 2024), the following steps are necessary:

1. Transition to the general tax system. It is necessary to switch to the general tax system from the first day of the month following the quarter in which the limit was exceeded. To do this, you need to submit an application to the tax inspection for the transition to the general tax system.

2. Tax recalculation. On the general tax system, income is taxed on general principles. This includes personal income tax (18%), military fee (up to 5%), and unified social tax (UST). IE on the general system must keep more complicated accounting and submit tax reports in the prescribed form.

3. Payment of penalty sanctions. If the excess of the limit is detected by the tax authorities, penalty sanctions may be imposed. Fines depend on the amount of the excess and the time that has elapsed since the excess.

4. There is an option to switch to another group. In some cases, it is possible to switch to IE Group 2 (if the type of activity and conditions meet the requirements), where the income limit is lower, but the tax rate is also different. To do this, you also need to submit an application to the tax inspection for the transition to another group by the 20th of the month following the quarter in which the excess was recorded.

In extreme cases, it is worth considering other options. For example, reducing the income. If the excess of the limit happened accidentally and is insignificant, it may be worth considering the possibility of temporarily reducing the turnover to return to the simplified system next year. In general, IE must carefully monitor their income and plan their financial operations to avoid such situations and minimize tax risks.