A bill on the legalization of microbusinesses without individual entrepreneurship has been resubmitted to the Verkhovna Rada: what is being proposed
23 February 13:21
ANALYSIS 
A bill on the legalization of microbusinesses without registration as sole proprietorships has been resubmitted to the Verkhovna Rada for consideration. The aim of the bill is to establish the legal status of households as business entities and create conditions for their development as the basis for small and medium-sized businesses. But is there any chance that it will be passed by lawmakers?
In Ukraine, there is still no legislative definition of a household as a legal entity, although it is a basic economic unit, according to the authors of the bill, which was drafted and submitted for consideration back in October 2022.
The aim of the bill is to enshrine the legal status of households (home economies) in Ukrainian legislation, while providing tax and economic incentives, which will lead to increased economic activity among the population and growth in citizens’ incomes.
The bill proposes to allow households to engage in entrepreneurial (economic) activity without registering as individual entrepreneurs, provided that:
- submission of an annual tax return for the household;
- such entrepreneurial (economic) activity is carried out only by members of the household;
- the annual income from the economic activity of the household does not exceed UAH 8 million.
The types of entrepreneurial (economic) activity permitted without registering as an individual entrepreneur include:
- hairdressing and cosmetology services;
- legal advice;
- domestic services;
- care for sick or infirm persons;
- providing individual lessons (tutor);
- individual education of children (governess);
- services related to cleaning and tidying up premises according to individual orders;
- repair of shoes, clothing, household textiles and knitwear, carpets and carpet products, leather, haberdashery and travel goods, furniture, radio and television and other audio and video equipment, household appliances and other household and office appliances, watches, other items for personal use, household items, and metal products;
- maintenance and repair of musical instruments;
- laundry and ironing services for linen and other textile products;
- retail trade in food and non-food products from stalls and markets;
- passenger transportation services by road;
- freight transportation services;
- restaurant services;
- aesthetic cosmetology services, except those subject to licensing;
- other types of work involving members of the household, except for activities subject to licensing and belonging to independent professional activities in accordance with the law.
The draft law defines the principles for forming household budgets: expenses include the costs of entrepreneurial activity and the maintenance of each member (60% of the average salary for the previous year).
The concept of “social transfer” is introduced — to receive it, the household submits an annual declaration (except for pensioners and scholarship holders). This ensures targeted assistance to those in need and control of budget funds.
Income is recorded in a simplified form in accordance with the procedure established by the Cabinet of Ministers.
Not everyone is enthusiastic about the bill
After the first reading of the bill, the Verkhovna Rada Committee on Economic Policy noted that the bill would affect the budget (possible reduction in income and additional expenses to support households). If adopted, the law must be implemented in accordance with the requirements of the Budget Code.
According to the preamble, the bill defines the legal, economic, and organizational foundations of freedom of entrepreneurial (economic) activity of households in Ukraine. After its adoption and entry into force, it will be necessary to:
- define household members as individuals who live together in the same dwelling, run a joint household, and pool their funds (regardless of family ties, age, or legal capacity);
- allow activities without registering as a sole proprietor under the following conditions: annual income of up to UAH 8 million, activities carried out only by household members, submission of an annual tax return;
- establish types of income/expenses and the procedure for their accounting;
- introduce a rule that accounting data is the basis for receiving a budget refund (tax credit) from personal income tax;
- introduce the concept of “social transfer” — state support (goods, services, payments) at the expense of public funds;
- amend the Civil and Commercial Codes, as well as the Law on Social Assistance to Low-Income Families.
Most importantly, the Ministry of Finance does not support the project, noting the impossibility of assessing the impact on the budget due to the lack of calculations and specific parameters of the new taxation model.
A law for the elections
In short, there were many complaints about the bill even after its first reading. But today, the authors decided to rehabilitate it again. The idea of legalizing microbusinesses without registering as sole proprietors is progressive and in line with European approaches to supporting self-employment.
According to economic expert Yuriy Gavrilechko, this bill is very suitable for the election campaign, but until the elections are scheduled, there is little chance of it being adopted.
Even though it is very necessary in itself. This is not a business—it is self-employment. And it is regulated and has certain ceilings on income and types of activity. The state is interested in people working, not sitting on welfare. Therefore, self-employment is a compromise: people feed themselves, and the state does not spend money on social benefits. But if a self-employed person starts paying taxes, they should receive social protection (pension, sick leave, etc.) in return, otherwise they will choose to become an individual entrepreneur.
“This creates jobs and reduces the burden on the budget. Or taxes are paid on a general basis, just like for an employee — a percentage of income. In our circumstances, there is no point in not registering as an individual entrepreneur if the same amount will be paid from income as for an employee. For example, a self-employed person earns an average salary, which according to the State Statistics Service is currently almost UAH 30,000, and the tax is 23%. Meanwhile, an individual entrepreneur will pay 6%. That’s the answer to the question of whether Ukrainians will find this interesting or not,” he notes in a comment
"Komersant Ukrainian" .
But there is another option: perhaps this bill will be passed, but they will make it so that few people will be able to register as self-employed. Formally, the opportunity will exist, but it will not be possible to take advantage of it, according to Yuriy Gavrilechko.
The idea is good, but its implementation will be delayed until it becomes politically advantageous.
Author: Alla Dunina
