How affiliate can work as a Physical Person Entrepreneur
According to the current legislation, any income must be declared and taxes paid on it. This way, the specialist can work officially without fear of blocking bank accounts and possible fines.
Most of the affiliates in SalesDoubler are PPEs (Physical Person Entrepreneur). We will figure out why it is necessary, how to properly register your activity and what taxes are provided for.
What is PPE, and why does an affiliate need it?
A specialist who provides services can receive payment under a Civil Law Agreement as an individual. In this case, there are no income limits, but you need to pay the following taxes:
- 18% of profits as a single tax;
- 1.5% goes to the military collection;
- 22% unified social tax from turnover.
However, if the income is regular, it makes sense to register as a business entity. You can choose one of the forms of doing business:
- PPE (Physical Person Entrepreneur) is a simple form of business registration.
- LLC (limited liability company) – as a legal form, it has much narrower restrictions on the use of funds than PPE and provides for more complex accounting and reporting.
An LLC is required under the following conditions:
- the necessity to separate the responsibility that may arise in connection with the introduction of a business (obligations under contracts, additional charges of taxes and fines) from you personally, since the legal entity is independent.
- the necessity to regulate relations between several partners within the framework of one project.
- requirements of contractors for cooperation with the LLC;
- if the turnover exceeds UAH 5 million per year – therefore, it is no longer possible to be on a simplified taxation system.
Simply put, an LLC makes sense if the cost of maintaining this structure is appropriate. In other cases, we recommend paying attention to the PPE.
The practice has shown that this option is optimal for our affiliates since simpler business processes are associated with it.
PPE groups, limits and deductions
There are two taxation systems for PPE: general and simplified. The first one practically does not provide for limits – you can freely hire employees, and there are no restrictions on income, but the tax burden is also higher.
For individual entrepreneurs in the general taxation system, the following deductions are provided:
- 18% of tax on income of physical persons;
- 1.5% military tax;
- 22% unified social tax of the minimum wage in the country.
Income limits here are absent.
Physical Person Entrepreneurs on the simplified taxation system are divided into groups, depending on the type of activity and the amount of profit.
An annual income limit cannot be exceeded to remain on the simplified system. If it was nevertheless exceeded, the entrepreneur is obliged to switch either to a new group or to the general taxation system from the new quarter. All income above the limits is taxed at 15%.
Taxes and limits for 1-3 groups of Physical Person Entrepreneurs are given in the table.
There is also a fourth group, but it is connected with agriculture, so we do not consider it.
|PPE 1st group||PPE 2nd group||PPE 3rd group|
|Uniform tax||up to 248.1 UAH per month (10% of the living wage)||1300 UAH (20% of the minimum wage)||5% of income or 3% + VAT|
|Income limits (per year)||UAH 1,085,500||UAH 5 421 000||UAH 7 585 500|
In 2022, the minimum wage will increase (from UAH 6,000 to UAH 6,500), so the Consolidated social tax will also increase to UAH 1,430 per month. This contribution must be paid in any case, regardless of the taxation system, group, and regardless of whether received income for a particular period.
PPE: Where and how to register?
To register a PPE, you can:
- apply to the state registrar (free of charge);
- contact a notary (about 1500 UAH);
- register yourself on the website https://diia.gov.ua/
- apply to buhgaltera (1000 UAH).
What are the deadlines for registration of PPE
In normal mode – two or three days, in a leisurely mode – up to a week, in very rare cases (errors of the registrar, failure of the tax office, up to 10%) – up to 10 working days.
Registration and maintenance through buhgaltera.com.ua
Registration of an PPE by buhgaltera for your needs costs 1000 UAH. The subscription fee for servicing PPE (submitting quarterly and annual reports, keeping a book of income records, controlling, calculating and paying taxes) is 1000 UAH / month. There is no transaction fee for producing documents and recording transactions with SalesDoubler. For transactions with other companies, the payment is 50 UAH per transaction (invoice, act, payment).
Benefits of working as a PPE
Many specialists are afraid to officially conduct entrepreneurial activities, even though this has several advantages:
- Taxes on received income for PPEs are much lower than for individuals: for PPEs (group 3), the single tax is 5% of income, and for individuals, both personal income tax and military tax are provided.
- Elimination of significant risks of criminal, administrative and fiscal prosecution.
- Obtaining official income for financial monitoring when buying a car, real estate, or placing funds on an account.
- PPE is an official place of work. Therefore, there will be no problems in situations where you need to confirm employment and/or income (for example, when applying for a visa)
- Official income for a loan.
- Accounting for the period of entrepreneurial activity in the total length of service
That is why it is better to register as a PPE to ensure your comfort in cooperation with counterparties.
We have collected answers to the questions that most often arise when registering a PPE.
Can someone register PPE instead of me?
Yes, any accountant or lawyer can do this. The registration cost through buhgaltera is 1000 UAH and includes a consultation on starting a business as a PPE.
You can make an electronic digital signature (EDS) key online or issue a notarized power of attorney to transfer the right to register.
Can I use a friend’s PPE?
Yes, you can agree with your friend who has a PPE so that we transfer the payment of the remuneration due to you to his account.
To do this, you need to conclude an agreement between PPE SalesDoubler and the PPE of your friend.
What NACE needs to be added for the affiliates to work?
Required NACE 73.11 and 73.12.
Is it possible to switch from PPE 2nd groups to PPE 3rd groups?
The transition from one group to another is carried out only by applying a paper form to the tax office at the registered address. It is not possible to do this online, and the procedure is free.
You can only move from one group to another from a new quarter. The application must be submitted no later than 15 days before the start of the new quarter. Therefore, if your limit runs out in the middle of the quarter, you will need to suspend payments.
Consultation and preparation of necessary documents through the company buhgaltera — 500 UAH.
If you are registered in Kyiv, you can also issue a power of attorney for the employees of the buhgaltera company. They will submit this application and collect the documents from the tax office instead of you (UAH 200). It requires a notarized power of attorney (about 600 UAH); it makes sense for those affiliates who plan to continue to be served by buhgaltera.
How to order SalesDoubler payouts for PPE?
Existing affiliates need to fill out the form and specify the details for concluding a contract. Payments will be made as usual – upon request, through the affiliate’s office. In the comment on the payment, you indicate that the payment is for PPE.
Do I need a bank account as a PPE?
Yes. You can open an account in any bank convenient for you.
What reports should you submit and where?
Depending on the chosen taxation system, you need to:
- submit an annual (if you have chosen the second group of a single tax) or a quarterly report on a single tax;
- keep a book of income accounting (record each payment);
- pay a single tax once a month (if you have chosen the 2nd group of uniform tax) or once a quarter (if you have chosen the 3rd group of uniform tax);
- submit a Consolidated social tax report once a year
What should I do if I do not receive income but the PPE is open?
Individual entrepreneurs on a single tax must pay Consolidated social tax, regardless of whether they have income or not.
Is it possible for payments for one account to be divided into several PPEs?
Yes, it is possible.
Can I receive payments from other countries and affiliate programs when working with PPE?
Yes, but only for PPE 3rd groups.
How to report payments from another country?
There are no differences from the point of view of reporting (submitted reports, their content and form). However, you will need a foreign currency account (you can open it for free at any bank) and properly executed documents (agreement/invoice/act).
How to withdraw webmoney to PPE so that everything is official?
What is the procedure for closing a PPE?
An application to stop activities can be submitted online and processed within one day. After that, the accrual of taxes on your PPE will be stopped. After that, the tax service must conduct an audit of your sole proprietorship. It can take from 3 to 24 months before the check appointment (this is from practice). There is no statutory deadline for the tax.
You can reopen PPE at any time.
Can the PPE of the 3rd group send money for services to the account of the PPE of the 2nd group?
Can Google Adwords expenses be deducted from taxable income?
No. The display of expenses incurred to generate income occurs only for entrepreneurs in the general taxation system. Their object of taxes is net taxable income (i.e., the difference between total taxable income and documented expenses associated with his entrepreneurial activity).
It means that an individual entrepreneur on a simplified taxation system cannot display expenses to reduce his income, from which tax will be paid.
According to the Tax Code of Ukraine, article 292.1, income for an individual, a taxpayer of VAT, is: Income received during the tax (reporting) period in cash, tangible or intangible form.
Thus, PPE 3rd groups are the best option for affiliates. If you have any questions, don’t hesitate to contact our affiliate managers.