How can you legally optimize taxation as a sole proprietorship?

First of all, I would like to emphasize that during the martial law, benefits are provided for individual entrepreneurs (PSOs) regarding the payment of the single social contribution (SSC) and the single tax. You can learn more about these benefits at the link - https://ua-lawyer.com/uk/questions/709/iakim-chinom-fop-mozhe-vikoristati-podatkovi-pilgi-ta-stimuli-iaki/#answer_635

Tax optimization in the field of business refers to the application of legal strategies to reduce the tax burden. This process consists in the use of all permitted methods, in accordance with the law.

The primary optimization strategy is the use of benefits that are directly provided for by legislation (it was discussed above). This may refer to certain fields of activity, features of the business structure or categories of citizens. Such benefits include the application of a simplified taxation system, a preferential rate of value added tax, as well as tax breaks for the agricultural sector. However, tax optimization involves a broader approach that requires creative interpretation of legislation, application of non-traditional approaches, as well as deep knowledge of accounting regulations and tax legislation.

One of the main ways to minimize taxes in Ukraine for FOP is a simplified taxation system.

The simplified system of taxation, accounting and reporting is a special mechanism for the settlement of taxes and fees, in which separate taxes and fees are replaced by the payment of a single tax (hereinafter referred to as the EP) and simplified accounting and reporting is conducted.

A sole proprietorship can independently choose a simplified system of taxation if it meets the requirements established for groups of EP payers:

1st group - FPOs that do not use the labor of hired persons, carry out exclusively retail sales of goods from trading places in the markets and/or carry out economic activities for the provision of household services to the population, and their income during the calendar year does not exceed 300, UAH 0 thousand;

2nd group - FPOs that carry out activities in the provision of services, including household services, to EP payers and/or the population, production and/or sale of goods, activities in the field of restaurant business, provided that during the calendar year meet the following criteria:

• do not use the labor of hired persons or the number of hired persons does not exceed 10 persons;

• the amount of income does not exceed UAH 1,500.0 thousand.

FOPs that provide intermediary services for the purchase, sale, rental and evaluation of real estate (group 70.31 KVED DK 009:2005) are engaged in the production, supply, and sale of jewelry and household products made of precious metals, precious stones, precious stones of organic formation and semi-precious stones stones cannot be on the 2nd group of the EP - they belong exclusively to the 3rd group, if they meet the requirements established for such a group;

3rd group - FPOs that do not use the labor of hired persons or the number of hired persons is not limited, and whose income during the calendar year does not exceed UAH 5,000.0 thousand;

4th group - agricultural commodity producers - FOP, which conduct activities exclusively within the boundaries of a farm (hereinafter - FG), registered in accordance with the Law of Ukraine "On Farming", provided that the following requirements are met:

• carry out exclusively cultivation, fattening of agricultural products, harvesting, catching, processing of such self-grown or fattened products and their sale;

• conduct business activities (except supply) at the place of tax address;

• do not use the labor of hired persons;

• only the members of his family in the definition of part 2 of Art. 3 of the Family Code of Ukraine;

• the area of agricultural land and/or water fund land owned and/or used by members of the FG is at least 2 hectares but not more than 20 hectares.