LLC Taxation
Have you opened your own LLC? Congratulations! This is a bold step. But the most interesting part, as always, lies ahead — choosing a tax system. This seemingly boring decision determines how much money will be left in your pocket at the end of the year and whether dealing with the tax authorities will become your main headache. To prevent you from getting lost in the labyrinths of the Tax Code, we at “BuhalteriO” will help you sort everything out.
General Taxation System for LLCs
Imagine this as the classic of the accounting world. The main principle here is simple: you pay tax not on everything you earn, but only on the net profit. In other words, from all the income of your LLC, we subtract official, documented expenses (for purchasing goods, rent, salaries), and from this difference, we pay 18%. This option is a real find for businesses where expenses make up the lion’s share of turnover.
And what about VAT? As long as your annual turnover has not exceeded 1 million hryvnias, you can work calmly without VAT. Once that threshold is reached, registration becomes mandatory.
Simplified Taxation System for LLCs (Single Tax, Group 3)
The “simplified system,” as entrepreneurs affectionately call it, is a completely different story. Here, no one looks into your expenses. The tax is paid on the entire income that comes into your company’s accounts. This incredibly simplifies life for you and your accountant.
Here you have two paths, two options for an LLC in Group 3:
- Pay 5% of income and not worry about VAT.
- Pay 3% of income, but also be a VAT payer.
Of course, there are “buts” here — an annual income limit that cannot be exceeded. Therefore, this option is ideal for the service sector, IT companies, or trade with a high markup.
Comparative Table of Taxation Systems for LLCs
So that you can clearly see the key differences, we have prepared a simple comparative table. It will help you quickly get your bearings on the main parameters of each system.
| Criterion | General Taxation System | Simplified Taxation System (Group 3) |
| Tax Base | Profit (income minus expenses) | Income (total amount of receipts) |
| Main Rate | 18% | 3% (with VAT) or 5% (without VAT) |
| VAT | Mandatory for income >1 million UAH | Optional (affects the rate) |
| Income Limit | None | Established by law (changes) |
| Reporting | More complex, quarterly/annual | Simpler, quarterly |
As you can see, each system has its advantages and disadvantages. The general taxation system for LLCs is suitable for resource-intensive businesses, while the simplified taxation system for LLCs is better for the service sector or trade with a high markup.
How to choose a tax system for your LLC?
It’s no wonder, as your money is at stake. To get closer to the answer, just honestly answer a few questions.
- What annual income do you expect? Be realistic.
- Are your main clients large companies that are VAT payers?
- Will you be able to document most of your expenses? Will you have receipts, invoices, and acts?
- Does your type of activity even allow for being on the single tax?
Frankly, these questions are just the tip of the iceberg. To make an informed decision, a deep analysis of your specific situation is needed.
Don’t play tax roulette and hope for the best. A correctly chosen tax system is not an expense for a lawyer, but your first and most important investment in the stability and future profitability of your business.
The “BuhalteriO” team is ready to become your reliable navigator in the world of taxes. Call us or leave a request on our website. We will lay everything out, calculate both options, and find the solution that is perfect for your LLC.