Title: Mandatory ESV for Ukrainian FOP Returns in 2025: A Surge in Taxes and Obligations
In 2022, the mandatory payment of Edined Social Venture (ESV) for Ukrainian FOP ( физичні особи-підприємці, or physical persons engaged in entrepreneurial activities) was made voluntary. However, starting from 2025, this obligation will be reinstated, even for those with no actual income. This decision resembles a scenario from a few years ago, when ESV payment was also voluntary in the absence of income.
Increasing Tax Burden in 2025
2025 promises a significant increase in taxes for FOP, especially for those on the first group of the unified tax. While the unified tax rate remains unchanged at 302.80 UAH, FOP will now have to mandatorily pay ESV and military tax – changes that will significantly impact their financial obligations.
ESV Reinstated for All FOP
From 2025, ESV will be compulsory for all FOP, not just those with income. This reinstatement marks a return to the pre-2022 arrangement, where ESV was paid even in the absence of income. This exogenous change in policy will affect FOP’s liquidity and overall financial planning.
Increased Quarterly Tax Burden
FOP on the first group will see their quarterly tax burden rise by 7,680 UAH, and their annual payment increase by 30,720 UAH. For those on the second group, these numbers jump to 12,480 UAH per quarter and 49,920 UAH annually. Meanwhile, FOP on the third group will face additional tax burdens due to the mandatory military tax, ESV contributions, and the necessity of operating a POS-terminal for cashless transactions.
Military Tax: New Obligations and Compliance Challenges
The military tax, introduced in 2021, will apply to all FOP, except those operating in active combat zones. This tax, calculated as 1.1 % of revenue and paid quarterly, presents new challenges in compliance and record-keeping. Non-compliance can lead to severe penalties, including a 50% surcharge on the outstanding tax amount.
New ESV Reporting Obligations
Starting in 2025, ESV will be reported and paid on a quarterly basis, with submission deadlines falling after the end of each quarter. Annual reporting will remain mandatory, with deadlines set for March for second group FOP and February for third group FOP. Additionally, FOP with employees will need to submit monthly reports on their staff, beginning in February 2025.
Increased ESV Liability and Exceptions
The maximum monthly ESV liability will increase to 35,200 UAH from 2025, up from 26,400 UAH in 2024. This rise is due to the increased tax-exempt minimum wage from 8,000 UAH to 16,000 UAH. However, some FOP are eligible for ESV exemptions, including pensioners, disabled individuals, and FOP operating in occupied territories or conflict zones.
Revised Turnover Limits for FOP
Starting from 2025, turnover limits for FOP will be revised as follows: I group – 1,336,000 UAH, II group – 6,672,000 UAH, and III group – 9,336,000 UAH. Failure to comply with these limits may result in mandatory transition to the general tax system or a change in group.
The reinstatement of mandatory ESV, increased taxes, and new reporting obligations present significant challenges for Ukrainian FOP. As they adjust to these changes, FOP can look for opportunities to optimize their tax liabilities and maintain their competitiveness in the market.
