How to transition from the general taxation system to the simplified one - procedure and conditions for transition

Choosing a taxation system is one of the key decisions for an individual entrepreneur or a legal entity starting or continuing its economic activity. In Ukraine, there are two main taxation systems: general and simplified. 

The general system involves the payment of personal income tax (for individual entrepreneurs) or corporate profit tax (for legal entities), as well as a number of other taxes. The simplified system (single tax) is easier to maintain accounting and reporting, and often allows reducing the tax burden. As of 2026, transitioning from the general system to the simplified one is possible, but requires compliance with certain conditions and procedures. Proper understanding of the procedure and conditions of transition is critically important to avoid mistakes, penalties, and loss of the right to apply the simplified system. 

What are the general and simplified taxation systems

The general taxation system is the main system applied to taxpayers unless they choose a special taxation regime. For individual entrepreneurs, the general system requires the payment of personal income tax (PIT) at a rate of 18% of net income (income minus documented expenses), a military levy at a rate of 1.5%, as well as a single social contribution (SSC) of 22% of the minimum wage. 

For legal entities, the general system requires the payment of corporate profit tax at a rate of 18% of taxable profit, as well as other taxes. The simplified taxation system (single tax) is a special regime that provides for the payment of a single tax instead of PIT, corporate profit tax, VAT (except in cases where the taxpayer voluntarily registers as a VAT payer), and some other taxes. The single tax is divided into four groups depending on income volume, the number of hired employees, and types of activities. 

The first group is designated for individual entrepreneurs who do not employ hired workers and exclusively engage in retail sales or provide household services to the public. The second group is for individual entrepreneurs who provide services, including household ones, as well as produce and sell goods. The third group is for individual entrepreneurs and legal entities with an income volume of up to 5 million hryvnias per year. The fourth group is for agricultural producers.

Who can transition to the simplified taxation system

The question of how to transition from the general to the simplified taxation system is extremely relevant. The right to transition to the simplified taxation system is held by both individual entrepreneurs and legal entities, provided they comply with the legislative restrictions. Individual entrepreneurs can choose any of the first three groups of the single tax if they meet the criteria of the respective group. Legal entities can only choose the third group of the single tax. The criteria include: income volume; number of hired employees; types of activities. To transition to the first group of the single tax, the individual entrepreneur must not employ hired workers, and the income volume must not exceed 1 million 136 thousand hryvnias per year. 

To transition to the second group, the individual entrepreneur can have up to 10 hired employees, and the income volume must not exceed 5 million 680 thousand hryvnias per year. To transition to the third group, the individual entrepreneur can have an unlimited number of hired employees, and the income volume must not exceed 5 million hryvnias per year (for individual entrepreneurs) and 5 million hryvnias per year (for legal entities). It is important to note that transitioning to the simplified system is voluntary. No one has the right to force a taxpayer to switch to the single tax. Additionally, a taxpayer can refuse the simplified system at any time and return to the general system.

Conditions for transitioning from the general system to the simplified one

To transition from the general taxation system to the simplified one, it is necessary to meet a number of conditions. Firstly, the taxpayer must meet the criteria of the chosen group of the single tax (income volume, number of employees, types of activities). Secondly, the taxpayer must not have tax debt. Having tax arrears is a basis for refusal to register as a single tax payer. Thirdly, the taxpayer must submit an application for the application of the simplified taxation system to the controlling authority. 

Fourthly, the taxpayer must choose a single tax rate (for the third group - 5% or 3% plus VAT). Fifthly, the taxpayer must register as a single tax payer by providing the relevant data to the Register of single tax payers. Sixthly, the taxpayer must bring their activity in line with the requirements of the chosen group. For example, if the individual entrepreneur transitions to the first group, they cannot employ hired workers. If the taxpayer does not meet these conditions, the controlling authority has the right to refuse registration as a single tax payer. 

The refusal can be appealed in administrative or judicial order. It is important to remember that transitioning to the simplified taxation system is only possible from the beginning of the calendar year (for individual entrepreneurs) or from the beginning of the quarter (for legal entities). An exception is the case when a taxpayer changes the group of the single tax or restores the status of a single tax payer.

Restrictions and prohibitions for transitioning to the simplified system

Considering further how to transition from the general taxation system to the simplified one, it is worth mentioning the existing prohibitions. Ukrainian legislation establishes a list of restrictions and prohibitions for transitioning to the simplified taxation system. Entities that:  

• engage in gambling business; 
• exchange foreign currency; 
• produce, export, import excise goods (except for some exceptions); 
• extract, realize minerals; 
• provide services in the field of television and radio broadcasting; 
• engage in financial leasing; 
• provide intermediary services for buying and selling real estate; 
• engage in organizing gambling games. 

Furthermore, entities cannot be single tax payers if: their income exceeds the established limit for the chosen group; the number of hired employees exceeds the established limit; they engage in activities not specified in the application for the application of the simplified taxation system; there is a tax debt; they engage in the sale of excise goods. It is important to note that these restrictions and prohibitions apply to both individual entrepreneurs and legal entities. Violating these restrictions leads to the cancellation of the single tax payer's certificate and transferring the taxpayer to the general taxation system. Cancellation can occur either at the initiative of the controlling authority or at the request of the taxpayer. In the case of cancellation of the certificate, the taxpayer is obligated to pay taxes on general grounds for the entire period of applying the simplified system, as well as penalties.

Procedure for transitioning from the general system to the simplified one

The procedure for transitioning from the general taxation system to the simplified one is clearly regulated and includes several sequential steps. The first step is checking compliance with the criteria of the chosen group of the single tax. The second step is liquidating any tax debt (if any). The third step is submitting an application for the application of the simplified taxation system to the controlling authority. The application is submitted in person or sent by mail with acknowledgment of receipt. The application is accompanied by a calculation of income for the previous calendar year (to confirm compliance with the limit) as well as documents confirming the absence of prohibited types of activities. 

The fourth step is obtaining an extract from the Register of single tax payers. The controlling authority is obliged to include the taxpayer in the Register within 10 days from the date of receiving the application. The fifth step is the beginning of the application of the simplified taxation system. For individual entrepreneurs, the transition is possible from the beginning of the calendar year (if the application was submitted before the beginning of the year) or from the beginning of the quarter (if the application was submitted during the quarter). For legal entities, the transition is possible from the beginning of the quarter. The sixth step is maintaining accounting and submitting reports in accordance with the requirements of the simplified system. Single tax payers of the first and second groups submit a tax declaration once a year. Taxpayers of the third group submit a declaration quarterly. 

The seventh step is timely payment of the single tax. Taxpayers of the first and second groups pay the tax monthly by the 20th. Taxpayers of the third group pay the tax quarterly within 40 days after the end of the quarter. Violating the procedure for transitioning may lead to refusal of registration or cancellation of the certificate.

Deadlines for submitting applications for transition

Deadlines for submitting applications for transitioning from the general taxation system to the simplified one are critically important, as missing the deadline makes it impossible to transition to the next tax period. For individual entrepreneurs wishing to transition to the simplified system from the beginning of the calendar year, the application must be submitted to the controlling authority no later than 15 days before the beginning of the year. Thus, for a transition from January 1, the application must be submitted by December 15 of the previous year. 

If an individual entrepreneur missed this deadline, they can transition to the simplified system from the beginning of the next quarter. For this, the application must be submitted no later than 15 days before the beginning of the quarter. For example, to transition from April 1, the application must be submitted by March 15. For legal entities, the transition to the simplified system is only possible from the beginning of the quarter. The application should be submitted no later than 15 days before the beginning of the quarter. If the taxpayer missed the deadline for application submission, they lose the right to transition in the relevant tax period. The new transition is only possible in the next period. 

In the case of registering a new individual entrepreneur or legal entity, the application for transition to the simplified system can be submitted simultaneously with the registration or within 10 days after registration. In this case, the taxpayer is considered to have transitioned to the simplified system from the date of registration. It is important to remember that the application is submitted in person or sent by mail with acknowledgment of receipt. An electronic submission is also allowed if there is an electronic signature.

What documents are needed for transition

To transition from the general taxation system to the simplified one, it is necessary to prepare and submit a certain package of documents to the controlling authority. The main document is the application for the application of the simplified taxation system. The form of the application is approved by the order of the Ministry of Finance of Ukraine. The application should contain: 

• surname, name, patronymic (for individual entrepreneurs) or full name (for legal entities); tax number; 
• chosen group of the single tax; tax rate; 
• types of activities that will be carried out under the simplified system; details of VAT payer's certificate (if any). 

The following documents should be attached to the application: 

• calculation of income for the previous calendar year (for individual entrepreneurs who have already conducted activities); 
• copy of the passport and certificate of assigning a tax number (for individual entrepreneurs); 
• copy of the certificate of state registration (for individual entrepreneurs and legal entities); 
• copy of the founding documents (for legal entities); 
• certificate of absence of tax debt. 

For individual entrepreneurs transitioning to the first or second group, additional documents confirming the right to apply the respective group must be provided (for example, a certificate on types of activities). For legal entities transitioning to the third group, documents confirming the volume of income for the previous year must be provided. When submitting the application by mail, all copies of documents must be notarized. In the case of personal submission, it is sufficient to show the originals of the documents for review. The controlling authority has no right to demand documents not anticipated by law. Refusal to accept the application due to the absence of additional documents is unlawful and can be appealed.

Date of beginning application of the simplified system

The date of beginning application of the simplified taxation system depends on the date of submission of the application and the status of the taxpayer. For individual entrepreneurs who submit the application before the beginning of the calendar year (by December 15), the simplified system is applied from January 1 of the following year. For example, if the application was submitted on December 10, 2025, the simplified system is applied from January 1, 2026. 

If the individual entrepreneur submits the application during the calendar year (but no later than 15 days before the beginning of the quarter), the simplified system is applied from the first day of the next quarter. For example, if the application is submitted on March 10, 2026, the simplified system is applied from April 1, 2026. For legal entities, the simplified system is applied exclusively from the first day of the quarter following the quarter in which the application was submitted. For example, if the application is submitted on March 15, 2026, the simplified system is applied from April 1, 2026. 

If the application is submitted on March 16, 2026, the simplified system is applied from July 1, 2026. For newly established individual entrepreneurs or legal entities submitting the application within 10 days after state registration, the simplified system is applied from the date of registration. If the application is submitted after 10 days, the simplified system is applied from the first day of the month following the month of submission of the application. It is important to remember that until the date of application commencement of the simplified system, the taxpayer is obligated to pay taxes under the general taxation system. From the date of commencement of application of the simplified system, the taxpayer is obligated to pay the single tax and submit reports according to the selected group.

Typical mistakes when transitioning between taxation systems

When transitioning from the general system to the simplified one, taxpayers often make typical mistakes that can lead to refusal of registration, annulment of the certificate, or reassessment of taxes. The first mistake is submitting the application after the established deadline. This results in the transition being postponed to the next tax period. The second mistake is incorrect filling of the application. Most often, mistakes occur in indicating the KVED code, chosen group, or tax rate. 

The third mistake is the absence of necessary documents. For example, failing to submit the calculation of income for the previous year or the certificate of absence of tax debt. The fourth mistake is the presence of tax debt at the time of submitting the application. Even a minor debt is a basis for refusal. The fifth mistake is engaging in prohibited types of activities. For example, an individual entrepreneur in the first group cannot trade in excise goods. The sixth mistake is exceeding the income limit. 

If at the end of the year the income exceeded the established limit, the taxpayer loses the right to apply the simplified system. The seventh mistake is violation of accounting rules. Single tax payers are obliged to keep the Book of income and expenses. The absence of such a book or improper keeping of it may lead to cancellation of the certificate. The eighth mistake is the untimely payment of the single tax. Delaying payment even for one day results in penalties. The ninth mistake is not submitting tax reports. Single tax payers of the first and second groups submit a declaration once a year, but if it is not submitted, the certificate will be annulled. The tenth mistake is not accounting for the features of the transition for VAT payers. If the taxpayer is registered as a VAT payer, they must either refuse registration or choose the third group with a rate of 3% plus VAT.