Tax and Accounting Aspects of the Activities of Individual Entrepreneurs

Abstract

Small business is the driving force of the economy. The main part of it is occupied by individual entrepreneurs. In Ukraine, all types of activities are divided into twenty-one sections. In some of them there are from 1 to 7 types of activities, and in one – 24. However, the variety of activities is not related to the number of entrepreneurs who plan to run their business in them. The main sections chosen by business entities in 2022 are trade and information technology. Both activities do not require significant investments. Entrepreneurs are more sensitive to changes in the economy than legal entities, which have formed certain reserves to work in an unfavorable period. Since 2021, there has been a downturn in the economy due to quarantine and subsequent military actions, which has led to a decrease in business activity of business entities. Having analyzed the statistical data, it was found that most entrepreneurs choose the simplified taxation system without VAT registration. This is due to the simplicity of calculating the single tax (or payment of a fixed amount set by local AHs for different types of activities) and reporting, which shows only income without taking into account expenses. The amount of the single social contribution depends only on the minimum wage and the rate of this fee, which has not changed for a long time. Despite the chosen system of taxation, the current legislation provides that reporting is based on accounting data. Therefore, entrepreneurs are obliged to keep records of their activities in an arbitrary or legally approved form. The orders of the Ministry of Finance in 2021 approved the forms of inventory accounting for VAT payers (single tax at the rate of 3%) and entrepreneurs who sell medicines, goods for which a guarantee in use and jewelry. Also, the form of accounting of income and expenses is provided for entrepreneurs on the general taxation system and persons engaged in independent professional activities. The advantages of the general system of taxation for entrepreneurs is the possibility not to pay the unified social tax in unprofitable months, but such a month will not be counted when determining the length of service. Entrepreneurs on the simplified taxation system have restrictions on the number of employees. Regulation of their remuneration for both entrepreneurs and legal entities is the same. In the general system of taxation, the availability of primary documents for their purchase and payment is required to confirm the expenses incurred in the activity. The calculation of the financial performance of entrepreneurs only by the balance of funds on the account is considered incorrect, as it does not take into account the main economic categories – income and expenses.