Primary documentation for payers of the 3rd group of single tax in Ukraine

We have previously written about source documents for entrepreneurs using the simplified taxation system. Today, we would like to pay more attention to the documentation management of entrepreneurs, which chose the Group III of the Single Tax.

The source documents for such entrepreneurs will have its own nuances, as the Group III of the Single Tax provides for the possibility to work with buyers - VAT payers, provided that the supplier is also a VAT payer.

The Group III of the simplified taxation scheme allows being a VAT payer and paying income tax at 3%. Let’s talk about organizing entrepreneur's accounting in this case.

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Why is it so important to properly keep your source documents?

This taxation scheme can be chosen by both sole proprietors and legal entities. However, their accounting will differ as follows:

  • Sole proprietors are obliged to fill in the income and expenditure ledger, on the basis of which they pay the tax. The data for filling in the ledger are taken from source documents. 
  • Legal entities using Group III, VAT included, keep records on the basis of source documents - i.e. they do not keep an income and expenditure ledger, but during the inspection, they shall submit the general ledger. 

Source documents are the basis for both completing the ledger and keeping records of companies. It is important to understand that the correct accounting of your activities depends on their proper maintenance of the documents, which also helps to avoid problems with the tax authorities.

The document for determining income may be either a bank statement, or a receipt\cash receipt. Withdrawing the amount from your income is unlikely, as tax is paid on the amount of income and tax authorities benefit from the following situation: the more income, the better. 

But the documents on expenses (such as: incorrectly issued delivery notes, work completion certificates, receipts) may be not taken into account, and you may face fines. At least for improper record keeping - from UAH 510, then the fine will increase to UAH 1,020 for each detected misconduct. And if there are no documents for the receipt of goods, they may consider the goods received for free, and in this case you must include them in the income and pay tax on this amount. 

However, an experienced accountant may help you in this case. This specialist will monitor the correctness, timeliness and completeness of the completed source documents, on the basis of which the record is kept.

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What is important to keep in mind when organizing the maintenance of source documents for Group III of single tax?

Document details. 

It is extremely important to take into account and check all mandatory details, both in the issued documents and those received.

A common mistake is to release goods other than “received”. For example, the goods receipt specifies the name “pen blue, ball-point” unit of 100 pcs, quantity 1. When selling, we necessarily need: 

  • To specify a full name; 
  • To supply the product code according to the receipt tax invoice; 
  • To comply with the units of measurement. 

In our example, when selling 20 pens, you need to release a quantity of 0.2 with a unit of 100 pcs. However, you can make an internal document where you can either “rename” a pen or change the unit of measurement. These and other documents are monitored by an accountant.

Tax invoice issue.

The simplified accounting for Group III, VAT included, includes, in addition to other mandatory documents (receipt, delivery document, agreement, waybill) the tax invoices for goods or services.

VAT administration is performed electronically by means of specialized software. All tax invoices, both outgoing and received from suppliers, are kept in electronic form with observance of clear terms and procedures of their completion. Therefore, you can’t “correct”” anything or make retroactively without penalties. 

When registering a tax invoice with a delay of 15 days, you will have to pay a fine in the amount of 10% of VAT. And if the delay exceeds 30 days - a fine of 15% of VAT. Such penalty may reach the amount of maximum 50% of VAT (in the absence of registration) and does not release from paying the obligations.

In addition, it’s worth remembering that income for tax payment is calculated on received payments in the period, and tax invoices are issued regardless of payment, and on the first event. Identifying events and not getting confused is an important part of accounting.

Thus, for example, in our case, when working with Clients, an accountant usually helps give a clear formulation of the type of service, pick up the service code, which is mandatory when issuing a tax invoice. When monitoring incoming source documents, an accountant also checks the correctness of their completion.

Types of entrepreneurial activity. 

When registering any entrepreneurial activity, the registration documents shall specify the types of activities that can be added or partially removed in the course of work. 

Single taxpayers are obliged to enter into transactions exclusively for their types of activities. Failure to comply with this rule may result in deprivation of simplified taxation and application of tax rates to this and subsequent transactions on general grounds.

When entrusting us with your accounting, you do not need to know the details of accounting. We will ensure the safety of your business and proper accounting for all transactions.

Publication date: 03/08/2020

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